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February 15, 2009

The lessons of Daewoo's failed Madagascar land lease deal

by Chido Makunike

The recent much-publicised plan of South Korean conglomerate Daewoo Logistics to lease a reported 1.9 million hectares of prime land in Madagascar to cultivate maize for export back to South Korea has fallen through. Given the size and audacity of the the proposed deal, its astonishingly generous-to-Daewoo terms and the charges of 'neo-colonialism' from many quarters, it was probably doomed from the beginning.

Now that the heat has died down somewhat, perhaps it is time to examine it more calmly for the lessons that can be gleaned from it. It is one thing to criticise this particular attempted deal but African countries do need foreign investment, and agriculture will for a long time offer the most realistic development options for Africa.

It would be a shame if the perceived take-home lessons of the furore over the Daewoo plan were that African countries are hostile to foreign investment in agriculture. In any case, even as the Daewoo plan was being pilloried, there are many other large-scale commercial farming deals being concluded by foreign investors in many African countries, particularly in the controversial cultivation of biofuel crops.

This suggests that it is the peculiarities of the Daewoo plan that caused the level and ferocity of the objections from so many quarters, rather than necessarily the concept of large-scale foreign involvement in farming in Madagascar per se.

Paying attention to the recent political history of Africa should have warned all parties concerned in this deal that strong opposition to it was not only predictable but almost guaranteed. African prickliness about land dispossession by foreigners dating back to the colonial days still runs deep and strong. Many countries are still battling to find satisfactory post-colonial land tenure systems that meet today's complex political, social justice and economic imperatives. This has been far from easy, partly because these various imperatives often clash against each other.

Zimbabwe, Kenya, South Africa and Namibia are just some of the most obvious examples of African countries with deeply contentious "land issues." But there are many others where the issues exist as well, if not with quite the same intensity as these four countries.

Apart from the basic issue of who has what kind of tenure to what land, what I call 'plantation agriculture' has also had a poor reputation in the many African countries where it existed in one form or another. It has long been associated with being part of the system of extractive colonial plunder, like mining."Cash crops" were introduced, sometimes forcibly, to support the colonial mission, either by growing for consumption in the colonial metropole or for general export with the proceeds repatriated to the colonial power's capital or used to oil the settler economy.

There were situations were forced labor was used on these plantations. And even when they eventually morphed into what were then called large-scale "commercial farms" with paid labor, many of the characteristics of the old plantation remained. The treatment of farm workers was often shabby, and as today, part of the profitability of these farms depended on paying low wages.

The collapse of Zimbabwe's large-scale commercial agriculture may be a special case because of its particular element of political orchestration. But even when the country was lauded as 'regional breadbasket,' it was not a model that was universally regarded with admiration, partly because of the whiffs of the elements of exploitative plantation agriculture. Even if the wholesale takeover of white commercial farms had not been engineered and abetted by the government of President Robert Mugabe, that particular model of commercial agriculture may have still seen its days numbered because of the mix of historical, political, economic and racial pressures. That mix of pressures is building up in South Africa and Namibia, and exists in other variations in many other countries.

The point is that particularly in Africa, it is short-sighted to gauge the appropriateness of a proposed agricultural model in strict agronomical yield or economic output terms, as some development or Africa "experts" suggest. To do that is to risk eventual Zimbabwe-like explosions. South Africa may yet avoid that kind of explosion, but there are many signs of similar pressures causing a lot of friction between the large-scale white farmers' unions on one hand, and government and the representatives of black South Africans clamoring for land "restitution" on the other.

In countries as disparate as Ghana and Tanzania, there is increasingly loud grumbling about the manner in which public land is being ceded to foreign investors eager to grow biofuel crops. Yet governments as well as local communities everywhere are at the same time also eager to welcome foreign investment which offers at least the hope of jobs, infrastructure, export earnings and overall "development." The contentions are therefore not whether foreign agricultural investment is welcome or not, but on how it is done.

Here are what I believe to be just some of the mistakes of the collapsed Daewoo deal: The size of it was simply too big, with the company proposing to lease reportedly up to half the country! It should have been obvious to all that politically that would never fly. Just on the basis of the proportion of Madagascar's land surface Daewoo was proposing to take on, it should have been obvious to the principals on both sides that charges of neo-colonialism would quickly follow.

There were unclear and contradictory reports about the terms, but it seemed generally agreed that Daewoo would get the proposed 99 year lease for little or nothing in rental terms. Even if it had indeed resulted in eventual significant job and infrastructure creation, again it should have been obvious that a lease arrangement without some kind of at least symbolically significant cash payment by Daewoo to Madagascan public coffers would also be politically controversial. It further added to the public feeling of their country being 'given away' to foreigners.

Then there were the statements by Daewoo representatives that made it clear they saw the Madagascans' involvement in the mooted deal as being primarily laborers and support personnel. The impression was given that Daewoo would bring all the key personnel for the operation from South Korea and elsewhere. It made it sound as if the involvement of the Madagascans was seen as being marginal, almost incidental to the deal.

Again, given a merely cursory study of political history and plantation agriculture in Africa, it should have been obvious that right from the beginning this would breed resentment and opposition. It was an amazingly, naively a-historical approach to what could have been structured to be a well-received win-win investment for both Daewoo/South Korea and the Madagascans.

There was also the faux pas of the crop in question to be cultivated on the proposed monster project being maize, an emotive and 'political' crop in Africa, even if it is not the main staple crop in Madagascar itself. Someone should have advised both parties that particularly at a time of widespread talk of a global food crisis that is biting Africans hard, it would be a public relations nightmare for a foreign company to be cultivating a huge chunk of an African country's land mass to grow maize to then export.

Right now even in a relatively prosperous country like Kenya there is talk of a famine-level maize deficit. How would it be seen for millions of Africans to be struggling to find or afford sustenance quantities of the continent's main staple crop when Daewoo was growing and exporting huge quantities of it from Madagascar? The back lash simply would not have been worth it for all concerned.

There are ideologues of various stripes of the raging debate about what type of farming would best serve Africa's pressing food and economic needs. I disagree with those on both sides of this debate who take the position that the choice is a simple and stark one between large-scale, intensive agribusiness-type agriculture and small scale farming. In addition to finding ways for both these models to co-exist, it should also be possible to find situations and to create opportunities where they can actually be combined.

In the case of the Daewoo example, the company could have negotiated for the lease of a far more modest but still large commercial-size parcel or parcels of Madagascan land. On it they could practice variations of the intensive agribusiness type of farming they envisioned. But then they could have contracted thousands of Madagascan farmers to augment what was grown on the nucleus farm(s.) The nucleus farms could have been not just high-yielding production and processing centers, but they could also have been structured to have a teaching/demonstration component to assist the contracted out grower farmers to learn new techniques.

The two farming systems are quite different in their basic nature, so yields and many other parameters would be different. But that is part of what has to be accepted in order to meet the many imperatives that land use in Africa must necessarily take into account because of the continent's history and its present-day economic, political and social realities.

What I am proposing is not anything essentially new. Variations of this kind of model of agribusiness and small-scale farmer collaboration are now popping up in a sort of experimental way in many countries. The model does have its weaknesses and agro-ideologues who are completely opposed to industrial or 'conventional' high-inputs agriculture in any form would oppose the very idea of the collaboration, but the fact is that we live in a reality of nuance and compromise, not of absolutes.

Africa's majority of small scale farmers may practice low-yield agriculture for many reasons, but the solution is to find innovative ways to help them improve their yields, not to ignore or sideline them. For better and for worse, for a long time to come they will predominate in Africa's agriculture, even as more large scale operations take hold in many countries. Yet there is much to be learned and benefited from large scale agriculture as well, despite the bitter opposition to it of various types of activists.

I have simplified the agricultural model described, but some variation of it offers real hope for meeting the disparate needs that are expected of land use in Africa. And if it had been a variation of such a model that Daewoo and the Madagascan government had been negotiating (and perhaps for the cultivation of a crop other than maize) the deal might have well stood a chance, to the benefit of all concerned.

Africa needs foreign agricultural investment to meet its economic needs, and it can benefit from many outside farming innovations. But Africa's small scale farmers also have a wealth of locally-relevant farming expertise they need various kinds of assistance to practice successfully and to improve on.

It is farming investments whose promoters are smart and sensitive enough to study the bigger historical and current picture of African farming who are likely to benefit from what is widely agreed to be the great potential African agriculture offers to help feed the continent and the rest of the world, and to make money for enlightened investors. These elements were largely missing in the way the proposed Daewoo deal was structured and marketed.

African Agriculture

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