The Land Grabbers: The New Fight over Who Owns the Earth

by Fred Pearce

  So the brothers headed for the Congo, much of which had already been divided up into vast logging concessions by King Leopold II of Belgium. He ran the entire Congo region as his personal fiefdom. It was one of the darkest eras of colonialism, with elephants slaughtered for their ivory, forests of wild rubber trees ransacked, and the forest people brutalized. With international opprobrium at the king’s private enterprise growing, the Belgian government nationalized the operation in 1908. And three years later, Lever Brothers signed an agreement with the colonial authorities that gave them exclusive rights to grow oil palm in the Congolese forests around five trading posts.

  The brothers’ concessions covered a staggering 17 million acres, more than twice the size of Belgium, though in practice the main activity was around the trading post Lusanga, which they renamed Leverville. Lever Brothers merged with Dutch competitor Margarine Unie to form Unilever in 1930. With an ever-widening range of products being made using palm oil, the new company held on to Leverville. The Belgian Congo was for some decades the oil-palm capital of the world. But after the Congo’s independence in 1960—and particularly after its takeover in 1965 by Mobutu Sese Seko, whose tyranny was second only in its ferocity to that of Leopold—most foreign enterprises were nationalized and their assets looted.

  The country—renamed Zaire during Mobutu’s time—rapidly descended into chaos. Factories, railways, and truck fleets were sold for scrap, and many plantations were abandoned. The only survivors were those owned by Unilever and a well-connected American family: James, Elwyn, Daniel, and David Blattner. At Leverville, which reverted to its precolonial name of Lusanga, investment in machinery all but ceased, though harvesting and the nursery continued. Yaligimba lived on.

  The big palm oil boom began in the 1960s, as technological breakthroughs made it easier to use the oil in food products. But this happened just as African production collapsed. Between 1962 and 1990, as international trade increased seventeen-fold, planting shifted to Asia. By some estimates, one in every three products on supermarket shelves today contains the magic oil. And it makes a valuable feedstock for biodiesel, too. Global production is approaching 50 million tons of oil a year, and requires some 35 million acres of land—an area the size of England.

  By the end of the twentieth century, more than 85 percent of the world’s palm oil was grown in two Asian countries: Malaysia and Indonesia—most of it on land cleared of rain forest for the purpose. But the industry’s defenders say that, actually, palm oil is an environmental savior. They say we will always need vegetable oils and the oil yield of the palm is double that of soy, and three times that of jatropha. So, growing anything else would be worse, insisted Darrel Webber, secretary general of the Roundtable on Sustainable Palm Oil, when we met in London between sessions at his 2011 annual meeting.

  He also argued that oil palm is a tropical crop with huge potential to lift some of the world’s poorest people, and economies, out of poverty. “Palm oil is one of the few crops that allows smallholders to come out of poverty. I know rich palm-oil smallholders driving Mercedes.” Palm oil earns Indonesia $12 billion in foreign exchange annually, while employing some 14 million people, including 3 million smallholders. And maintaining that workforce for the twenty-five-year life of a typical plantation requires investment in housing, roads, schools, and other infrastructure.

  But land is running out in Malaysia and Indonesia. Most of the rain forests are gone. The CEO of Sime Darby, Ahmad Zubir Murshid, said in the Malaysian capital Kuala Lumpur in 2009: “It is increasingly difficult to acquire plantation land in Asia, and thus it is imperative that new frontiers be sought to meet increasing demand.” Frayne, in his Piccadilly office, has done the numbers too. He uses them in his pitches to potential City investors for EPO. “At a current yield of about five tons of oil per hectare, the world will need another 4 million hectares of land in six years.” That’s an area the size of Denmark. By 2020, it will need 6 million hectares (about 15 million acres). Even if yields rise, the potential land grab is still huge.

  So now oil palm is returning to its native Africa. Frayne says only Africa has the land that these plantations need. Bayliss boasts that at Palm Bay, he is developing 200,000 acres of palm oil production “all within 40 kilometers of a deep sea port.” There are, he says, “no new sites like that in southeast Asia.”

  Everyone wants a slice of the African oil-palm action. Sime Darby and Golden Agri are in Liberia. Singapore-based Wilmar and Olam are in Cote d’Ivoire. By 2016, Olam also plans to start planting on a 370,000-acre concession in Gabon, where some of the first oil-palm plantations were established by Catholic missionaries in the 1870s. Wilmar also has 25,000 acres in Uganda.

  In December 2010, the government of Congo-Brazzaville announced that it had given a Malaysian company, Atama Plantation, 450,000 acres. It called Atama “one of the world’s leaders in the production of palm oil.” That is not clear. Atama did not turn up on any lists of oil-palm companies I could access, and its website was “under construction.” However, the two executives named by Congolese ministers as having signed the deal in Brazzaville, Chua Seng Yong and Robert Tan, are the joint managing directors of IGB Corporation, Malaysia’s largest owner of commercial properties. Atama is based at IGB’s Mid Valley City complex in Kuala Lumpur. Another director is Reuban Ratnasingam, boss of a long-standing logging and shipping company in Congo-Brazzaville named Asia Congo Industries.

  Zhongxing Telecommunications Equipment, a Chinese state enterprise based in Shenzhen, is branching out into agribusiness—albeit not quite on the scale often claimed. In 2009, its Africa manager, Zhang Peng, was widely reported as claiming to have 2.5 million acres of abandoned plantations in the DRC to grow oil palm, with 7.5 million acres on offer. The real figures are actually only a tenth as much, and the company plans to grow corn and soy as well as oil palm. In late 2011, ZTE was harvesting a 620-acre farm near Kinshasa, but most of the rest of the promised land had not yet been allocated by the DRC government. Meanwhile, in July 2011, a Chinese delegation showed up in Cotonou, the economic capital of Benin, promising to invest a billion dollars in oil palm in return for land.

  European companies are also keen. The French Bollore Group—which, as we shall see later, is a huge economic presence in central Africa—has 100,000 acres of oil palm in Cameroon and more in Sao Tome. Its compatriot, SIFCA, is in Cote d’Ivoire. Italy’s oil giant ENI has 170,000 acres in Congo-Brazzaville and more in Angola. Fellow Italian company Fri-El Green has been awarded 100,000 acres of old state-owned plantations in Congo-Brazzaville, with more in Nigeria. Unilever, Belgium’s SITA, and Norway’s NORPALM are all growing oil palm in Ghana. SITA has another 25,000 acres in Nigeria. No fewer than seven European companies have large concessions in Tanzania. And New York–based Herakles Farms has a ninety-nine-year lease on 150,000 acres of degraded forest adjacent to Cameroon’s Korup National Park.

  But perhaps the oil-palm flame burns brightest in Liberia’s West African neighbor, Sierra Leone. Already engaged there are Portugal’s Quifel group; UK-based Sierra Leone Agriculture, which has a lease to rehabilitate old oil palms on 77,000 acres near Matru on the coast; America’s Gold Tree Holdings, which is doing likewise close to the Liberian border; and Luxembourg-based SOCFIN, which has 75,000 acres to go with its plantations in Nigeria, Cameroon, and Ivory Coast.

  Sierra Leone is not content, however. Like its neighbor Liberia, it is in a rush to create an economic boom in the wake of a brutal civil war. In late 2011, Patrick Caulker, CEO of Sierra Leone’s Investment and Export Promotion Agency, was offering three large sites. He promised to supply land grabbers with workers at twenty-five cents an hour, which he boasted is less than half the rate in Indonesia, a seventh that in Malaysia, and a tenth that in Brazil. Land leases cost as little as two dollars per acre per year, he said. Water was free, and taxes virtually nonexistent. There were “no restrictions of foreign exchange; no limits on expat employees; full
repatriation of profits, dividends and royalties and 100 percent foreign ownership permitted.” Competitors in the “race to the bottom” to play host for palm oil will find Sierra Leone already there.

  The huge areas of forestland in the DRC, along with its good soils and year-round rains, make it another potential honey pot, as it was in the days of Lever Brothers. Elwyn Blattner, the New Jersey inheritor of the Blattner Group’s land assets, is as friendly with the country’s new rulers as he was with Mobutu, and still operates a rubber plantation and thousands of acres of oil palm across the country. But in 2009, after ninety-eight years of operation, Unilever finally sold out. The business had shrunk. Only 45,000 acres along the Congo River continued to grow oil palm. The Yaligimba mill shut down in 2008, though the seed nursery at Yaligimba’s research station was still going strong, supplying, among others, EPO in Liberia.

  Unilever sold to Feronia Inc., a would-be grabber of African land, registered in the Cayman Islands. It was set up in 2008 by Ravi Sood, a Toronto venture capitalist, and James Siggs, a British farmer who, like Bayliss at Equatorial Palm Oil, previously worked for New Britain Palm Oil in Papua New Guinea. The company wants to revive “large-scale plantations in Africa that have fallen into disrepair” and to save the continent from “sustenance farming by families using traditional methods [that] has led to chronic food shortages . . . We select the best lands and utilize the most modern technology and practices in the industry to run highly efficient farming operations, thereby maximizing margins and generating profits.”

  Besides growing oil palm, Feronia is getting into arable farming. It promises to help transform the DRC in particular, by turning 50,000 acres of “prime lands” into “a combination of Brazilian and US style large-scale agricultural systems for the greatest efficiency and economies of scale.” I wonder how compatible this is with the observation from Siggs, which I quoted in my introduction, that “exclusively industrial-scale farming displaces and alienates peoples, creates few jobs and causes social disruption.”

  We shall see. But, judging by its output of press releases to date, profits and corporate structure come first at Feronia. Since the Unilever purchase, the company has been involved in a bewildering range of financial and share transactions involving its initial owner, a Canadian investment company TriNorth Capital, and GTM Capital, an Atlanta-based “private investment company” representing several hedge funds.

  The torch of Western land grabbing in central Africa has been handed on from the most powerful of the old colonial resource exploiters to a new breed of financial whiz kids. What it means for Africans is far from clear. I went back to Europe to find out more about those new investors. I went to London, the world’s biggest financial center for land grabbing.

  Chapter 8. London, England: Pinstripes and Pitchforks

  Redhead Susan Payne is the pinup of the City of London’s pinstriped land grabbers. They hang on her every word. Her investment fund, Emergent Asset Management, has over five years accumulated one of the largest land holdings in southern Africa. But it is her stardust, and that of her former employers at Goldman Sachs, that sets her business apart. She seems set to turn the arcane business of buying land in foreign parts into something we can all join in with—just like Goldman Sachs did with commodities.

  Payne is a regular at investors’ conferences. Her style is a business suit in a smart hotel, not wellies in an African field. She runs Emergent with fellow JP Morgan veteran David Murrin. While CEO Payne is a lawyer from Vancouver, chief investment officer Murrin’s past is more exotic. Before getting into finance, he was a geologist for oil companies. He did seismic surveys in the jungles of Papua New Guinea, where, according to his company biography, he “worked with local tribes in the Sepik Basin, and started to formulate his theories on collective emotional behavioural patterns.”

  Those theories, the pair claim, underpin their investment strategies. Some will think that the world of Goldman Sachs and its weird financial derivatives are probably stranger than anything laid on by the tribes of Papua New Guinea. At any rate, Payne and Murrin are helping bring the glamour and ruthlessness of commodities speculation to the normally more sober world of buying and selling farmland.

  Payne is a persuasive speaker. I have heard her several times. Her pitch is that making money in African land today is easy. The continent’s GDP has been growing by 5 percent a year for a decade now. It was barely hit by the credit crisis. And it is urbanizing faster than Asia, meaning lots more supermarket shelves to fill. Payne can play fast and loose with the stats. She told one African Investment Summit in London that “Africa will have the largest workforce in the world by 2040.” Well, up to a point, Susan. Africa is a continent. If you compare it with individual countries, then it sure will. But if you compare it with another continent, like Asia, it won’t.

  But her bottom line is that the continent has land in abundance: “60 percent of the world’s uncultivated land” is there. Much of it has access to plentiful water supplies. Making big profits requires little more than adding fertilizer. And land prices right now are so low that, according to one of her most-quoted lines, “we could be moronic and not grow anything, and we think we will [still] make money over the next decade.”

  Like all good speculators, she has mastered the skill of buying cheap while talking up the price of what she is investing in. The company predicted in 2010 that in South Africa “land values will increase by 300 percent in the next five years.” And it wants to raise 3 billion euros, so its African Agricultural Land Fund can cash in.

  AgriLand’s money comes mostly from institutional clients, such as pension funds and university endowments, who are attracted by its promise of 25 percent returns. Or that’s the story. But rumors are rife. A competitor for those funds told me: “Susan Payne had one big investor. We think it was a big U.S. university endowment, maybe Harvard. But they pulled back and so she has been looking for money again.” I cannot confirm that story, but I came across many such critics. They grumble that Payne’s crowd are all talk. And Emergent does seem to be everywhere and nowhere. AgriLand is registered in Luxembourg, while its management is in London. Its land buying is done through EmVest, a Pretoria-based joint venture with Grainvest, a subsidiary of the Russell Stone Group, a South African company that combines agricultural investment with selling financial services. It banks in Mauritius, a tax haven.

  The fund’s publicity promises that it is “breaking new ground in Africa” and bringing development. “Local smallholders benefit because we hire and train them in new methods of farming,” Payne says. “Some will want to transfer those methods to their own plots.” Well, maybe in theory. But most of its activity is more prosaic than the PR. Its partners in Pretoria “have a lot of people of Afrikaner descent, people who were brought up on the land, very capable farmers, very tough,” Murrin told Reuters.

  Most of its current holdings are large established commercial farms in South Africa and its neighbors: a loss-making tea, fruit, and vegetable company in Zimbabwe called Ariston Holdings; banana and other plantations on the Kalonga Estate near Victoria Falls in Zambia; a fifty-year lease on land at Matuba in the Limpopo valley in southern Mozambique. The company variously describes this last holding as 2,500, 4,500 or 5,000 acres. But at any rate the land came with rights to unlimited irrigation water from the nearby river, and proximity to a railway line that borders the farm. This is hardly “groundbreaking.” But equally it doesn’t pose the threat to subsistence African farmers that the company’s critics claim.

  Emergent’s pitch to potential investors is spiced up with claimed insight into the great geopolitical forces shaping the world. Murrin in particular warns of a future war between the West and China, triggered by the latter’s ever-rising demand for commodities, particularly in Africa. While that apocalyptic vision might suggest a threat to Emergent’s African assets, Murrin figures that in the run-up to war there will be a lot of profit as commodi
ty scarcity causes prices to soar. He embraces other threats, too. “Climate change means some places in Africa will be drier and others will be wetter. We’ll be looking to take advantage of that,” he says.

  Murrin also claims to keep ahead of the game by exploiting the Elliott Wave theory of long-term cycles in public mood, alternating between optimism and pessimism. This idea took root when he was in Papua New Guinea, and he discusses it at length in his book, Breaking the Code of History. He says: “There is a tradition that history is about the detail, but I have always believed instead that it is determined on a vast scale, by a specific set of dynamics. Moreover, its apparent randomness is only an illusion: once the sequence of events that we call ‘history’ is shown to be governed by certain behavioural algorithms, we can then discern, with clarity, the degree to which our lives are bound up in numerous interrelationships.” Phew.

  Payne’s presentations, meanwhile, often include a scary graph showing something called the Kondratiev Cycle, after Nikolai Kondratiev, the Russian economist who invented it. I’m not clear how the Elliott Wave and the Kondratiev Cycle relate, if at all. But her graph shows U.S. commodity prices since 1800, rising and falling in a long cycle with spikes roughly every fifty years. Some have claimed that the supposed cycle is created by technological innovations. Others suggest credit cycles or demographics. Payne proposes a link to conflicts. Her graph captions the spikes as linked to the Napoleonic wars in Europe, the American Civil War, the First World War, and the Vietnam War. “Commodity prices and wars interact,” she says. I wasn’t sure whether the price spikes caused the conflicts or vice versa. But at any rate her view was that “we are on an up-cycle of commodity prices, and we see resource conflicts around 2020.”