The conundrum of agricultural investment: is jatropha the problem?

18 November 2011
Comment
Once again, the media has accused a biofuels project of harming local communities, and a non-governmental organisation – in this case ActionAid – has taken up arms against biofuels. This time the focus of attention is on Sun Biofuels growing jatropha in Tanzania.

According to these reports, communities no longer have the same access to land and water since the company took over land in the area. Many people used the land to gather wood and make charcoal, earning much-needed money for their children’s school fees and other needs. They now have to travel further to get water and wood, and there is not as much available as there used to be.

Communities talk angrily about the lack of compensation from the company – in terms of money for land originally under local community or individual ownership, badly paid jobs and lack of protection from toxic agro-chemicals – and a litany of broken promises about what Sun Biofuels would provide regarding schools, health clinics and roads. People speak about a lack of respect for cultural norms, denying access to graveyards where families are buried.

This is not the first time that such concerns have been raised. Discussion often centres on the profit motives of the companies involved and collusion with corrupt governments, which open the way for projects without a future that damage local communities. Debates in the media have flip-flopped between hailing biofuels as a miracle and demonising them as the source of all evil, often lumping biofuels into a single category.

So, is this a simple case of greedy corporates in cahoots with incompetent, corrupt governments sinking an unviable crop into communities’ land driven by biofuels mandates (e.g. from Europe and the US) in developed countries? Well, yes and no.

Yes, there are many badly designed biofuels (and other agricultural) projects, where large tracts of land are requested and granted without proper groundwork being done by companies or governments. Yes, there are companies that request large areas of land without the technical and financial capacity to implement a project at that scale. Yes, there are many doubts about the viability of jatropha at a commercial scale with wild guesses often being made about the possible levels of yields. Yes, there are companies looking to make a quick return that ride roughshod over communities, sometimes working with governments that do not protect their citizens adequately. Yes, biofuels policies have played their part in launching a rush for land.

However, phrasing biofuels investments purely in these terms does not provide any real understanding of the issues nor does it offer any basis for credible policy responses. Without underestimating the real problems that some of these investments are causing to local communities that see their livelihoods undermined and to countries that see their resources put to inappropriate uses, we need to ask why these things are happening. My experience working with biofuels and other agricultural investments in Mozambique (where Sun Biofuels also has a jatropha project) highlights the set of incentives, pressures and loopholes that allow this to happen, not only for biofuels but other large-scale agricultural projects. 

Among the incentives is the fact that land simply does not cost very much in many ‘land-rich’ African countries such as Tanzania and Mozambique, due to exceedingly low land rentals and taxes, which do not adequately reflect the true value of the land to the users. This means that companies can hold onto large areas of land without having to think too closely about the cost of doing so. Land is allocated on a first-come, first-served basis in many countries, prompting a rush by investors to get to the head of the queue and get as much land as possible. This also means that companies often try to secure larger areas of land than they can manage initially in order to guarantee taking the project to scale or for future expansion, or to get hold of an asset that they can sell on in the future.

Despite the above, cheap land and labour are often the cornerstones of governments' investment policies. This has been encouraged by some of the international donor agencies and is seen by governments as a way to compensate for often difficult business environments with high costs in other areas. But how can this be squared with the rights of communities and local citizens to adequate compensation for their land and decent work conditions?

A further consideration is whether policies in developed countries are the only thing driving investment in biofuels. While biofuels may initially need a set of policy measures to create secure markets for investors, once oil hits a certain price production incentives exist outside policies, particularly when production is directed at local markets.

And what about the pressure for companies to rush into land-based projects that may not have a credible foundation? While pressure certainly exists within companies to maximise profit from such projects, the private capital that finances them also brings with it expectations of quick turnarounds and returns to investments that do not match the pace of agricultural development in low-income countries. The increasing involvement of hedge funds in agricultural investment has intensified this pressure.

Add to this the existence of loopholes in land tenure systems in some countries, which fail to safeguard the rights of communities adequately or are not implemented correctly, undermining the protection that may exist in land laws. Mix in a severe lack of capacity within governments in developing countries to assess business plans and the robustness of investors themselves, and you get a recipe for disaster: companies that are overextended cutting corners in both project design and their discussions with local communities and governments.

So, what can be done to promote responsible, fair and sustainable investment to ensure that people’s lives are enhanced rather than jeopardised by investment in agriculture in developing countries? A meeting in Rome next week organised by the Food and Agriculture Organization (FAO) to bring together experts on agricultural investment hopes to look at precisely this question. Several initiatives are trying to set down things in a concrete way – will these make a difference? Are fora such as the Roundtable on Sustainable Biofuels, and international principles or codes of conduct such as the Responsible Agricultural Investment (RAI) the way forward? Or even Corporate Social Responsibility (CSR) initiatives? What else might need to be done?

Can we find companies and organisations that are, in fact, working slowly and quietly in the background, laying the groundwork for sustainable projects and investing time with local communities to try to ensure that they fully understand the implications of the projects and the timeframe involved? Looking more closely at these and showcasing the best practices of such companies could be another way forward.

We certainly need to work on strengthening different elements of land governance so that the rights of local users are respected and they are empowered to negotiate from a position of strength with governments and those who wish to acquire land.

In the meantime, pointing the finger in an over-simplistic way doesn’t help anyone find a way forward, least of all those communities who need help the most.

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