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FOREIGN INVESTMENTS IN FARMLAND
MAKING AGRICULTURAL INVESTMENTS WORK FOR AFRICA:a parliamentarian’s response to the land rush
Kigali, 26-27 April, 2013
IN EAST AFRICA
Sue Mbaya Consultant, Land Policy Initiative
CONTRIBUTION OF LAND TO GDP
45.10%
32.00%
14.90% 8.00%
Contribution to GDP in East Africa (%)
ServicesAgricultureIndustry (Mining, Quarrying & Construction)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 Where
Kenya
Tanzania
Uganda
Rwanda
Burundi
What
Forestry
Biofuels
Food
WhoBelgium
Canada, Germany, Japan, Netherlands,
Norway, Switzerland,
Sweden, United Kingdom, the USA
Bangladesh, India, Qatar, Korea,
Singapore
Local investors
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
(biofuels and food)
•Agriculture •Agriculture • Forestry
•Agriculture• Forestry
15; 42%
3; 8%4; 11%
14; 39%
Distribution of Land Based Investments in East Africa (hectares)
Kenya Rwanda
Uganda Tanzania
WHO IS INVESTING? HOW?
BelgiumCanada, Germany,
Japan, Netherlands, Norway, Switzerland,
Sweden, United Kingdom, the USA
Bangladesh, India, Qatar, Korea, Singapore
Local investors
Pvt foreign investor → government
Pvt foreign partnership → government
Pvt/local partnership → government
Local investors → government
HOW IS THE LAND USED
What
What
Forestry
Biofuels
Food99%
1%
}}
Burundi Kenya Rwanda Tanzania Uganda
Institutions • Kenya Investment Authority
• Land Control Board
• Export Processing Zone Authority
• Rwanda Development Board
• Tanzania Investment Center
• Export processing Zone Authority
• Uganda Investment Authority
• Uganda Carbon Bureau
Relevant Law/Policy
2005 Constitution
• Investment Law
• 2005 Land Law
• 2005 Organic Land Law
• Kalimo Kwanza (Agriculture First Policy)
Zones Export processing Zone
• Export Processing Zone
• Southern Agricultural Growth Corridor
POLICY BASIS FOR INVESTMENTS
INCENTIVES FOR INVESTORS Burundi Kenya Rwanda Tanzania Uganda
Taxes Income, property and construction taxes exempt for up to 8 years
•EPZ investors•10 yr tax holiday•Reduced taxes for 10 yrs•Exempt for oil related investments
VAT and income tax breaks
• Tax holidays• Exempt from
Corporate tax on profits
•Tax holidays up to 10-20 years•Withholding tax on plant and machinery
Remittance of proceeds
Permits to investors to remit
Repatriation permitted
Other exemptions
Protection from acquisition
No exchange controls
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 materials)
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 periodNet 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
• 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
IMPACTS OF INVESTMENTS (4)
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
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 (2)
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
PRIORITY ACTIONS FOR PARLIAMENTARIANS (3)