UK Aid Brings Hardship and Displacement for Tanzanian Farmers

OI_Report_Irresponsible_Investment.pdf

Norfund, the UK aid department, and Capricorn are funding the British company Agrica’s industrial rice plantation in Mngeta, Tanzania, which is destroying the livelihoods of smallholder farmers, driving them into debt, and impacting the local environment, according to new research by The Oakland Institute released today in collaboration with Greenpeace Africa and Global Justice Now.
  - See more at: http://farmlandgrab.org/post/view/25045#sthash.0K6h3scG.dpuf

Agrica’s rice plantation in Tanzania has been used as a showcase project of the G8’s New Alliance for Food Security and Nutrition [1] and the Southern Agriculture Growth Corridor of Tanzania [2]. But the new report, Irresponsible Investment: Agrica’s Broken Development Model in Tanzania, documents a catalogue of devastating impacts on local communities.

Norfund, the UK aid department, and the US investment firm Capricorn Investments (co-founded by eBay philanthropist Jeff Skoll) have all invested several million US dollars in Agrica, a British company registered in the tax haven of Guernsey.

“Although Agrica is portrayed as a responsible investment venture, its takover of fertile land has brought misery to local communities. Labelled ‘squatters,' smallholders were forced off the land, lost their livelihoods, received a meagre compensation for their losses, and have had to face debts resulting from doing business with Agrica,” said Anuradha Mittal, Executive Director of the Oakland Institute.

Local farmers who planted rice for Agrica were required to purchase chemical fertilizers manufactured by the Norwegian fertilizer company Yara. They also had to sell the rice at a price determined by the company. “Agrica peddled chemical inputs to smallholders, leaving many in debt. In an area known as Tanzania’s food basket due to its fertile soil, this uncovers the real agenda of Agrica. They have opened up new markets for the products of international agribusiness that are damaging for both people and the environment,” explained Glen Tyler, agriculture campaigner for Greenpeace Africa.

The research findings raise concerns about the environmental impacts of Agrica’s industrial rice plantation. The prolonged use of agro-chemicals as well as the expansion of irrigation from 215 hectares to 3,000 hectares - resulting in up to one-third of the nearby Mngeta River’s dry season water flow being diverted - threatens the Ramsar-protected wetlands, within which the plantation is located [3].

“This project undermines the rhetoric of aid-sponsored large-scale agricultural investments and exposes the true beneficiaries to be agribusiness multinationals rather than small-scale farmers and local communities,” said Heidi Chow, food campaigner for Global Justice Now.

Despite claims that this is the only possible model for agricultural development, the approach is deeply flawed. More effective avenues would focus on meeting the needs of the smallholder farmers and assisting them to develop appropriate farming practices. Providing support to agroecological methods would boost yields and improve food security while preventing the debt cycle that comes with the regime of intensive chemical inputs.

The Oakland Institute, Greenpeace Africa, and Global Justice Now are demanding that all of Agrica’s investors cease funding and review their other agriculture investment schemes in Africa for similar abuses against African farmers. A global campaign is being prepared to mobilize against such wrongdoings by international donors in coming days.

from here

The G8 New Alliance for Food Security and Nutrition in Africa
The G8 launched the New Alliance for Food Security and Nutrition in Africa in 2012. Its aim is to lift people out of poverty by bringing African governments and the private sector together, primarily international corporations. This public-private partnership has been criticized by over a hundred African and international civil society organisations and farmers groups on process and its policies, which dictate major legislative changes in African countries, enabling private corporations to exploit the best agricultural resources.

SAGCOT
The government of Tanzania started the programme Kilimo Kwanza (Agriculture First) to support industrial agriculture, and created the public-private partnership Southern Agricultural Growth Corridor of Tanzania (SAGCOT) within a designated region of high agricultural potential as a showcase to attract agribusiness.

The Ramsar Convention on Wetlands
The Ramsar Convention’s mission is “the conservation and wise use of all wetlands through local and national actions and international cooperation, as a contribution towards achieving sustainable development throughout the world.”

Wetlands are among the most diverse and productive ecosystems in the world. They provide essential services and supply all our fresh water. However, they continue to be degraded and converted to other uses. See www.ramsar.org for more information. 

Contract Farming, Market-Oriented African Agriculture

NGO accuses EU company of illegal African land grabs
 
European food companies are illegally grabbing land from smallhold farmers in Africa as part of the G8 New Alliance project, says an Action Aid report published this month.
Funded by the EU, European and US governments, the New Alliance for Food Security and Nutrition promotes public-private agricultural partnerships with the aim of improving food security. An estimated €7.57bn will be invested in 10 African partner countries as part of the project.
Yet Action Aid conducted an investigation into one of New Alliance flagship projects - Swedish company EcoEnergy’s plans to develop a sugarcane plantation in Tanzania – and has condemned it as an illegal land grab.
The NGO said  that similar land grabs have also happened in Nigeria and Mozambique to make way for rice and sugarcane plantations.

EcoEnergy has secured a 99-year lease of more than 20,000 hectares of land for a sugar cane plantation in the Bagamoyo area of Tanzania. In the first phase of the project around 1,300 people will lose all or some of their land, while some will also lose their homes.
Although the company conducted consultations with affected villagers, Action Aid claims that the majority of people were not offered a choice of whether to be resettled or not.
The NGO also claims that during the consultations EcoEnergy withheld crucial information about how the project will change farmers’ livelihoods.

“By failing to obtain the free, prior and informed consent of the communities in the area affected by the project, EcoEnergy is grabbing the land of these communities,” said the report.

The report also condemned the risky outgrowers scheme that farmers are expected to buy into, requiring them to borrow around €15,000, roughly 30 times their annual salary.
In a response to Action Aid, EcoEnergy said that locals were given the chance to negotiate terms but confirmed that they had no choice but to accept resettlement.
“This is involuntary resettlement and choices provided are not ‘whether they should stay or go’, but through a consultative process and a negotiated agreement of how they resettle.”

The company also claimed that the project will inject US$45 to $50 million a year into the local economy, although Action Aid said this estimate is inflated and that the company has on previous occasions given “misleading information” about the project’s finances.
While a 2009 OECD report stated that “contract farming appears to be the main road towards making African agriculture more market-oriented”, for Action Aid director Yaekob Matena it means discrimination and less food security.
Metena called for governments to stop supporting the initiative.

“Despite the positive noises from Brussels, the early indications suggest that [New Alliance is] on course for an EU development policy mismatch that pits the interests of large multinational agribusinesses against those of the small regional farmer they aim to help,” he said.
“EU governments and other donor agencies must practice what they preach when it comes to joined-up, coherent development. This means taking a far more hands-on approach to ensuring projects involving the private sector are genuinely fair and inclusive. It also means attaching stringent conditions to funding, including criteria for safeguards, accountability and transparency.”
   
Action Aid’s report echoes concerns voiced in an Oxfam review last September which also condemned   agricultural public–private partnerships (PPPs).
“PPPs are by and large unproven and risky, and are likely to skew the benefits of investments towards the privileged and more powerful, while the risks fall on the most vulnerable,” it said.

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Bank wealth before people's health

"Debt, corruption and tax evasion are part of why people die in West Africa," stated Eric LeCompte, Executive Director of Jubilee USA, a religious development coalition. "The money was there to contain Ebola and save more people from preventable diseases." 

Guinea, where the outbreak began, spent more on debt payments in 2012 than it spent on public health. Guinea spent $207 million on debt payments in 2013 and 2012.

The Ebola-affected countries of Liberia, Guinea and Sierra Leone lose an average of $1.4 billion each year to corruption, debt payments and tax evasion. New World Bank data indicates the countries spent over $80 million on debt payments in 2013, the year the outbreak began. According to the World Bank, the countries spent a total of $270 million on public health in 2012.

According to the Financial Times, the three countries owe the International Monetary Fund (IMF) nearly $480 million. Sierra Leone spent $2.3 million paying off debts since the IMF announced a debt relief plan in November and will spend nearly $2 million more before the end of the year. The three countries accrued much of their current debt burden during civil wars, dictatorships and one-party rule.

Developing countries lose nearly $1 trillion each year to illicit flows. From 2003 - 2012, Liberia lost more than $900 million annually on average, while Guinea lost more than $300 million.

Why Poor? Why Africa?

"Debt is an efficient tool. It ensures access to other peoples’ raw materials and infrastructure on the cheapest possible terms. Dozens of countries must compete for shrinking export markets and can export only a limited range of products because of Northern protectionism and their lack of cash to invest in diversification. Market saturation ensues, reducing exporters’ income to a bare minimum while the North enjoys huge savings. The IMF cannot seem to understand that investing in … [a] healthy, well-fed, literate population … is the most intelligent economic choice a country can make."

         Susan George, A Fate Worse Than Debt,


Following an ideology known as neoliberalism, and spearheaded by these and other institutions known as the “Washington Consensus” (for being based in Washington D.C.), Structural Adjustment Policies (SAPs) have been imposed to ensure debt repayment and economic restructuring. But the way it has happened has required poor countries to reduce spending on things like health, education and development, while debt repayment and other economic policies have been made the priority. In effect, the IMF and World Bank have demanded that poor nations lower the standard of living of their people.

"Competition between companies involved in manufacturing in developing countries is often ruthless. We are seeing what Korten described as “a race to the bottom. With each passing day it becomes more difficult to obtain contracts from one of the mega-retailers without hiring child labor, cheating workers on overtime pay, imposing merciless quotas, and operating unsafe practices.”

John Madeley, Big Business Poor Peoples

"If a society spends one hundred dollars to manufacture a product within its borders, the money that is used to pay for materials, labor and, other costs moves through the economy as each recipient spends it. Due to this multiplier effect, a hundred dollars worth of primary production can add several hundred dollars to the Gross National Product (GNP) of that country. If money is spent in another country, circulation of that money is within the exporting country. This is the reason an industrialized product-exporting/commodity-importing country is wealthy and an undeveloped product-importing/commodity-exporting country is poor.
…Developed countries grow rich by selling capital-intensive (thus cheap) products for a high price and buying labor-intensive (thus expensive) products for a low price. This imbalance of trade expands the gap between rich and poor. The wealthy sell products to be consumed, not tools to produce. This maintains the monopolization of the tools of production, and assures a continued market for the product. [Such control of tools of production is a strategy of a mercantilist process. That control often requires military might."

        J.W. Smith, The World’s Wasted Wealth 2

"At first glance it may seem that the growth in development of export goods such as coffee, cotton, sugar, and lumber, would be beneficial to the exporting country, since it brings in revenue. In fact, it represents a type of exploitation called unequal exchange. A country that exports raw or unprocessed materials may gain currency for their sale, but they lose it if they import processed goods. The reason is that processed goods—goods that require additional labor—are more costly. Thus a country that exports lumber but does not have the capacity to process it must then re-import it in the form of finished lumber products, at a cost that is greater than the price it received for the raw product. The country that processes the materials gets the added revenue contributed by its laborers."

        Richard Robbins, Global Problems and the Culture of Capitalism

"More than 50 developing countries depend on three or fewer commodities for over half of their export earnings. Twenty countries are dependent on commodities for over 90 percent of their total foreign exchange earnings, says the World Bank."

Ken Laidlaw, Market Cure Proposed For Third World’s Battered Farmers, Gemini News Service, December 4, 2001 

 Almost four years after the above was written, Oxfam reveals that things have not changed for the better: more than 50 per cent of Africa’s export earnings is derived from a single commodity; numerous countries are dependent on two commodities for the vast majority of their export earnings; and there are a number of other countries in Africa heavily dependent on very few commodities.



              



 
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Micro-debt slavery

Lending by microfinance organisations is pushing the poor deeper into the poverty, a new study says.

Hailed as the saviour to the poor, the microfinance model works in simple way – it gathers many low-income earners, gets them to form a group, and then loans them small amounts of money payable over flexible periods. It supposedly works for the poor in that it does away with the need for the collateral needed to secure normal commercial loans. The small loans are meant to help them set up income-generating projects to enable them to earn and pull themselves out of poverty. Acceptance by a group is said to deter entry to those deep in poverty. The oft-cited loan repayment rates of about 90 to 100 per cent – much higher than repayment rates at commercial banks – hide the blood, sweat and tears of microfinance borrowers. And the fact that they are unregulated means the microfinance institutions operate under their own rules, and some border on being shylocks.

The study by the University of Nairobi economics lecturer Joy Kiiru in collaboration with similar research done in Uganda by Flavian Zeija dismisses the notion that lending small amounts normally co-secured by a group is “a positive poverty eradication tool and potentially powerful engine of growth for the economy.” Instead, they say, the practice may be condemning millions to abject poverty.

The problem, the studies say, is lack of understanding by borrowers on what the loan contract entails and exploitation by microfinance of this ignorance.

“In fact, many clients only ask where to sign because they urgently need the money. Even those who can read and write do not bother to read the documents. They never question anything,” a Uganda microfinance credit officer is quoted saying in the report. Multiple borrowing pushing the repayment beyond the borrower’s ability to repay has also been cited as major problem. Multiple borrowing kicks in when a borrower has difficulty repaying a loan and borrows to avoid default. The loan then balloons, and by the time the credit bubble bursts, the borrower will have nothing left when the group decides to sell the property for default. In some instances, borrowers are forced to sell their household goods to repay loans, and as it recently happened in Makueni, others are forced to surrender their children to the group as a form of blackmail to bring in relatives to help repay the loan.

“Peers in a group will not allow very poor people to join them because the poor are likely to use their loans for consumption and therefore risk default,” said Ms Kiiru. This is so because unlike the normal commercial loan given to an individual, a microfinance loan given to a group is jointly guaranteed by all members, and default by one member has consequences for the entire group. “This finding implies that microfinance may be useful for the better-off poor, but it is simply not an option to the poorest,” she said.

The other problem cited is that the funds really poor people borrow are usually diverted to purposes other than what they were meant for. The money is used to meet domestic needs like food, clothing, rent, and school fees with very little left over to invest in their small businesses. Then there is the question of insufficient loans, either because the borrower underestimated the money needed or simply that the lender declined to lend the amount requested. The intended project ends up failing, and the borrower has to turn to the little she had to repay for failed business.

Only 17 per cent were able to repay their loans from their business returns. The majority, 62 per cent of borrowers, repaid their loans under duress – repayment due to excessive peer pressure. Another 17 per cent had to sell their pre-existing assets, while four per cent had their property confiscated by their peers.

World Bank Woes

According to Christian Aid the World Bank risks doing more harm than good, if it is allowed to continue attaching harmful economic conditions to its development loans.

At issue is the Bank's practice of requiring countries to modify their economic policies in exchange for loans and debt relief. These changes often benefit European and US investors much more than the people living in developing countries.

The European Network on Debt and Development (a network of 51 non-governmental organisations from 16 European countries ) has found that more than two thirds of International Development Association loans and grants (71%) remain conditional on economic reforms that can adversely affect the poor.

Olivia McDonald, Christian Aid's World Bank expert, said: "European governments should not be taken in by the Bank's assurances that the imposition of harmful economic conditions has stopped. Using the Bank's own figures we've found that the evidence quite clearly states the opposite. And stories from poor communities around the world demonstrate the continued impoverishment that dictating inappropriate economic policies to poor countries causes."

Christian Aid calls on the UK government to withhold funds until the Bank stops demanding that recipient countries implement economic reforms such as privatisation and trade liberalisation.