Download Why Foreign investment in agriculture

FOREIGN INVESTMENTS IN FARMLAND
IN EAST AFRICA
Sue Mbaya
Consultant, Land Policy Initiative
MAKING AGRICULTURAL INVESTMENTS WORK FOR AFRICA:
a parliamentarian’s response to the land rush
Kigali, 26-27 April, 2013
CONTRIBUTION OF LAND TO GDP
Contribution to GDP in East Africa (%)
8.00%
14.90%
45.10%
Services
Agriculture
Industry (Mining, Quarrying & Construction)
32.00%
Manufacturing
WHY FOREIGN INVESTMENT IN AGRICULTURE
• Historic under-investment in agriculture
• Regional commitments not achieved:
– 2003Maputo Declaration – 10% of budgets
– CAADP – 6% annual growth in agriculture
• Resulting gap between required investment and
domestic allocations
INVESTOR MOTIVES
• To address food insecurity concerns
• In search of renewable sources of energy
• Expansion of industries (mining, timber)
• Maximizing investments (low land rentals, cheap
labour, attractive incentives)
OVERVIEW OF INVESTMENTS
OVERVIEW OF INVESTMENT PROJECTS
Burundi
Kenya
Rwanda
Tanzania
Uganda
Number of
deals
15
3
15
4
Total area
705,388
15,150
576,024
80,000
Uses
• Mining
• Agriculture
• Agriculture
(biofuels and
food)
• Agriculture
• Forestry
• Agriculture
• Forestry
Distribution of Land Based Investments in
East Africa (hectares)
14, 39%
15, 42%
Kenya
4, 11%
3, 8%
Rwanda
Uganda
Tanzania
WHO IS INVESTING? HOW?
Pvt foreign investor → government
Pvt foreign partnership → government
Pvt/local partnership → government
Local investors → government
HOW IS THE LAND USED
99%
}
1%
POLICY BASIS FOR INVESTMENTS
Burundi
Institutions
Kenya
•
•
•
Relevant
Law/Policy
Kenya
Investment
Authority
Land Control
Board
Export
Processing
Zone
Authority
2005
Constitution
Rwanda
•
•
•
Export
processing Zone
•
Export
Processing
Zone
•
•
•
Zones
Rwanda
Development
Board
Tanzania
Investment
Law
2005 Land
Law
2005 Organic
Land Law
Tanzania
Investment
Center
Export
processing
Zone
Authority
•
Kalimo
Kwanza
(Agriculture
First Policy)
•
Southern
Agricultural
Growth
Corridor
Uganda
•
•
Uganda
Investment
Authority
Uganda
Carbon
Bureau
INCENTIVES FOR INVESTORS
Burundi
Taxes
Income,
property and
construction
taxes exempt
for up to 8
years
Remittance of
proceeds
Other
exemptions
Kenya
•EPZ investors
•10 yr tax
holiday
•Reduced taxes
for 10 yrs
•Exempt for oil
related
investments
Rwanda
VAT and
income tax
breaks
Permits to
investors to
remit
Protection
from
acquisition
No exchange
controls
Tanzania
• Tax holidays
• Exempt from
Corporate tax
on profits
Uganda
•Tax holidays
up to 10-20
years
•Withholding
tax on plant
and
machinery
Repatriation
permitted
Protection
from
acquisition
Duties for
diesel and
agricultural
equipment
•Duty on plant,
machinery
and other
inputs
•Stamp duty
•Duty draw
back (refund
of duty on
BENEFITS OF INVESTMENTS
Marginal gains:
• Employment – generally low paying, seasonal jobs
• Little evidence of foreign currency earnings and
technology transfer
IMPACTS OF INVESTMENTS (1)
Human rights considerations of investments
highlighted by United Nations Human Rights Council:
•
•
•
•
•
rights of land users
right to food
right to development
right to self determination
human rights of agricultural workers
need a clear set of foundational principles which guide
investments and define accountabilities for parties
involved
IMPACTS OF INVESTMENTS (2)
Alienation of landholdings from communities:
• Losses extend beyond land (livelihoods, way of life)
• Rights of women and pastoralists v. vulnerable
• De facto changes in tenure
• Communities not compensated fully
IMPACTS OF INVESTMENTS (3)
• Incentives to investors accompanied by revenue losses
Case Study: The AgriSol Deal
325,000 ha
• exemption from customs duties on all agricultural inputs
• exemption from value-added tax (VAT) on all imported inputs
• Exemption from value added tax on unprocessed agricultural produce
• guaranteed transfer of net profits or dividends of the investment
• Guaranteed remittance of net proceeds
• ?Strategic Investor Status? – then exemption from the corporate tax (30%
of net profits)
Investment: $100 million over a 10 year period
Net protfis from corn ONLY on 200,000 ha - $272 million a year
» Incentives may imply substantial unattained revenue for the government
Source Oakland Institute, 2011
IMPACTS OF INVESTMENTS (4)
• Smallholder farmers are marginalized
• Risks for the environment
–
–
–
–
EIA often not conducted
soil degradation, deforestation, loss of biodiversity
water depletion
use of marshlands for investments (Kenya, Rwanda)
to achieve positive agricultural investment, provisions and
incentives to protect the environment and to encourage
sustainable agriculture are required
PRIORITY ACTIONS FOR PARLIAMENTARIANS
Priorities for lawmaking:
• alignment of laws and policies to the F& G
principles: democratization, transparency, good
governance, popular participation, equity, poverty
eradication, subsidiarity, gender equity and
sustainability
• alignment to continental land processes
– F&G
– Nairobi Action Plan
– ADB
PRIORITY ACTIONS FOR PARLIAMENTARIANS (2)
Priorities for oversight:
• Access to timely, accurate information
• Improved governance of investments
– scrutiny of contracts
– legally binding social and environmental commitments and
accountabilities for all parties
• Implementation of global, regional and national human
rights conventions
• Political will for addressing underlying issues
• Compliance with practices that ensure sustainability
PRIORITY ACTIONS FOR PARLIAMENTARIANS (3)
Priorities for representation:
• Protection of community interests
– facilitate empowerment of communities (to negotiate, to
represent own interests, to monitor)
– advocate for marginalized groups
• protect from unlawful evictions
• provide ‘voice’
– monitor implementation of investments for compliance
with contracts and regulations