TAKE the village of Yainkasa, Sierra Leone, which has leased 123,600 acres of land to Addax Bioenergy, part of the privately owned Swiss-based energy firm Addax & Oryx Group. Like the residents of Tunas do Parana, people in Yainkasa would like to ensure the prosperity of future generations – and that may have been their aim when they leased their land. Now, though, villagers say that Addax's sugarcane crop is much bigger than they had imagined and threatens their food harvests. “We were tricked,” rice farmer Alie Bangura, 68, told Reuters late last year. “We feel the way we're being treated is not in line with our agreement. They promised things when we gave up our land that didn't happen.” Addax says it conducted lengthy consultations with locals and that a large share of the $12 per hectare it paid for the land went directly to local farmers. A development program to improve food yields will ensure villagers have enough to eat. Addax social affairs manager Aminata Kamara told Reuters in November that some of the complaints are based on “ignorance”. Whatever the truth in this particular case, many experts worry that the rush for land will hurt poor locals. Africa's vast lands are already the focus of intense attention. From private Western investment funds wanting to farm organic beans in southern Africa to Qatar, which is looking at projects in Sudan, Ethiopia and Eritrea, an eclectic array of investors are lining up to sink hundreds of millions of dollars into the continent. But the World Bank report says countries in Africa with weak governance, including many with the most sought-after land, are unable to cope with the land rush. “As a result, land acquisition often deprived local people, in particular the vulnerable, of their rights without providing appropriate compensation,” its study last year said. Environmental group Friends of the Earth says the rising demand for biofuel is driving a new “land grab” in Africa. Such concerns flared in 2008 when a lease by South Korea's Daewoo for nearly half of the arable land in Madagascar triggered a wave of protests that eventually ousted President Marc Ravalomanana. Last October, a code of principles for “responsible agricultural investment” proposed by the World Bank and UN agencies failed to win widespread backing. As corporations and private funds sink billions into land, the risk of exploitation remains, activists say. “We are demanding ... a moratorium on large transactions (over 50,000 hectares) which involve foreign investments in farmland in developing countries until there's adequate, legally binding regulation,” says Soren Ambrose, international policy manager for ActionAid, a charity. But some in the industry say things are already improving. “Corporate agriculture is lifting management standards on governance and sustainability in agricultural investments,” says Tim Hornibrook, division director at Macquarie Agricultural Funds Management, which manages 3.2 million hectares of Australian farmland on behalf of investors and is considering expanding into other regions. “Corporates cannot afford to do the wrong thing from an environmental and community perspective because of the greater (media) headline risk they carry.” Reputational risk, says HighQuest Partners' de Laperouse, “is very important to funds investing due to their investor base. They're sensitive to being viewed as investors who are transparent and whose activity is a positive development, not a negative one.” That's one reason why some land investment funds sign up to existing sustainability schemes and certification codes including EUREGAP certification, FAO practices and International Finance Corporation (IFC) environmental and social standards. Industry players say better transparency will help local communities and investors alike. “Africa is a large, fragmented market and it's difficult for many investors to grasp what's happening. We believe the more transparency you can get in these markets the more investors will understand the opportunities,” says Neil Crowder, managing partner of private equity firm Chayton Capital, which has recently acquired farmland in Zambia. Done right, the opportunities are huge. Susan Payne, CEO of Emergent Asset Management, a UK-based private equity and hedge fund, runs the largest agricultural fund focused on Africa. The fund targets annual returns of 25 percent from its farmland yields and land appreciation. The continent, Payne says, “will be the most strategic territory on the planet in the near future.” Emergent owns or leases some 100,000 hectares of farmland in five countries – Mozambique, South Africa, Swaziland, Zambia and Zimbabwe – across Southern Africa. It farms more than 20 commodities – grains, livestock, fruits, vegetables, tea, nuts and biofuels – and sells more than 90 percent of the food it grows locally. By modernising farm methods, it says it can treble crop yields on its farms. It also says it tries to make sure locals benefit. On one project in Mozambique, it sponsors an orphanage, has built two boreholes, connected a town to electricity and cleared land so local people can produce their own food. “Our projects are always in partnership with local communities and consensual,” says Payne. “If you're on the ground locally where there are food scarcity issues and you can alleviate these directly and empower local communities in so doing, it is a win-win situation for all involved.” Bar codes on trees That's a mantra that is heard more and more in Africa. James Howard, manager of the Futuregrowth Agri-Fund, is a recent convert. “We realised that good agricultural land, with water rights and everything else, wherever in the world you look, has – over time – outperformed CPI inflation,” he says. “It's a far better return. All of a sudden the world is waking up and saying, ‘Wow, emerging markets, food security... this asset class is going to really perform in the medium term – the next 8-20 years.'” Howard's fund, run by Cape Town-based Futuregrowth Asset Management, itself owned by Anglo-South African insurer Old Mutual, was launched late last year and plans to spend about $900 million – the cash has already been committed by international investors in Britain, China, the Netherlands, and the United States – on land split evenly between South Africa and the rest of the continent. The South Africa part of the fund completed its first deal on Dec. 24 – a large farm 150 km northeast of Johannesburg that will be run by an established agri-business firm looking to sell oranges internationally. It's an increasingly common setup. An investor buys land which is then leased to a large operator – typically a public or private food/agri-business firm – who runs it, processes the produce, and exports it. Part of the reason the model works is that agri-operators are under consumer pressure to account for the provenance of all their fruit, meat and other produce, but don't want the hassle of land assets clogging up their balance sheets. Howard says his fund will maintain tight oversight via a proprietary IT system that monitors every aspect of how the farm is run. “We've got agronomers and guys on the ground, and they look at the budgets and see what is spent and when it is spent,” he explains. The farm has computerised irrigation, and every section of every row is bar-coded so that each orange can be traced from the moment it is picked to the moment it goes on sale in China a couple of weeks later. “You can buy an orange in Beijing, and as long as you can see the box, you can trace it right back to this row of trees here,” says Nelus Potgieter, 38, manager of the farm as he walks through the lush aisles of his citrus plantation. “That's pretty impressive.”
