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April 06, 2008

China's African investment portfolio moves to agriculture

Chinese investors, who have lately gained a strong presence in Kenya’s telecoms and heavy industry, are now eyeing the country’s farmland as a source of useful raw materials and employment opportunity.

Several thousand acres of land outside Nairobi are unused and could be turned into farms planted with wheat, corn and pineapples, says Liu Jianjun, chairman of the China-Africa Baoding Business Council, an organisation that sets up negotiations with African governments for Chinese investments. He also wants to open a new cornflour processing factory in Kenya and raise donkeys on the grassland to supply donkey hides that can be turned into Chinese medicine.

The plans are far from approval. Kenya is still not open enough to foreign investors, explained Mr Liu in his temporary office in a Beijing hotel room. But he is determined for China to get more than just minerals out of African earth. Chinese farmers can also earn a living off the continent’s farmland, he says.

Widespread industrialisation in China has already encouraged millions of farmers to migrate to cities to take up factory jobs. But there are not enough jobs to go round for the millions more that will lose their land when rapidly developing cities swallow up still more farms.

The solution is an easy one. Chinese farmers should move to Africa where frequent food shortages would reward those with modern farming techniques, says Mr Liu.

“Lots of land in Kenya is not farmed and yet it still receives food aid from the UN. At the same time, China faces a shortage of farmland,” he said.

Chinese farmers have already been successful in Uganda which has leased an area of about 10,000 acres to around 300-400 Chinese. They grow corn and other crops and employ hundreds of local workers.

Now the business council wants to replicate its success in Kenya. It claims that Chinese farms in Africa benefit local communities. A plot of 10,000 acres would require 5,000 local workers. As well as creating jobs, Chinese farmers bring know-how and modern machinery, such as small tractors that can cope with hilly terrain, says Liu, who has visited Kenya five times. “We also have good quality seeds with several times the same output as Kenyan seeds.”

Li Zhu, chief of one of the Chinese ‘villages’ in Uganda, seems sincere when he conveys how China can help local agriculture. “Uganda is similar to the way China was in the 1980s. We can help them by showing them how to avoid the dead ends that China took during its development. We can show them what works.”

But he admits that most Chinese arriving in Africa are driven by a desire to one day return home with hard-earned savings. “The living conditions in Uganda are not as good as China but we can earn more. Chinese people are used to working hard and enduring tough times,” he said, using the Chinese expression that literally translates as ‘eating bitterness.’

For centuries, millions of Chinese have emigrated around the world to search for better opportunities and to improve their children’s prospects. With China’s government repeatedly citing its strong relationship with Africa in recent years, many have been persuaded to try their luck on the continent, despite their nervousness about tropical disease and civil wars.

The head of China’s Export-Import Bank, Li Ruogu, has even publicly pledged his support for Chinese farmers migrating to Africa. In a speech last year in Chongqing, a central Chinese city believed to be one of the fastest growing urban areas in the world, he said that more than 12 million farmers from the surrounding region will have to leave their land by 2020. Finding work in Africa would be easier than finding a new job at home, he suggested.

“The bank will give full support to the farmers in terms of capital investment, project development and product-selling channels,” he said, according to the local South China Morning Post newspaper.

Even without government support, many farmers say they can improve their incomes in Africa. In Uganda, Chinese farmers earn more from their crops than they would at home, says Mr Li. “Chinese prices for crops are not so high because we export but in Uganda they import a lot of food so you can get better prices.”

Tomatoes sell for just 6 yuan (Sh53) per kg in Beijing markets while potatoes and cucumber sell for half that. Prices in Kenya are significantly higher.

Chinese farmers in Africa get other opportunities to increase their earnings too, often finding work with firms set up by compatriot businessmen in value-added processing. Agribusinesses in Africa tend to produce higher profits than those in China.

A bigger Chinese presence in Kenya’s farming community still depends on government policies towards investment however. Mr Liu complains that foreigners leasing land are taxed 50 per cent of their profits made on the land, a prohibitive cost.

It is also more difficult for Chinese to get visas for Kenya than Uganda although some arrive via the Ugandan border. “China is richer than Africa but still welcomes foreign investment. I’d like more African countries to open up to more investment.”

Business Daily Africa

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