Have
Emami and Karuturi bitten off more than they can chew in their land quest?
Indian
companies which invested in controversial deals involving hundreds of thousands
of acres of land in Ethiopia have found themselves out of their depth in a
fast-growing African economy that is still in the process of building critical
transport and irrigation networks.
Documents
related to one such transaction reveal how Emami Biotech, a subsidiary of the
Rs.2,200-crore Emami Group, pulled out of a Rs. 400-crore, 40,000-hectare,
bio-fuel plantation only a year after the project was announced.
Indian
companies are the second largest investors in the Ethiopian economy with
approved investments worth nearly $5 billion.
While
a majority of the businesses are small manufacturing and trading enterprises
run by business families long settled in East Africa, the big money has come
with the recent entry of large Indian investors.
A
number of Indian companies have signed agreements to lease more than 4,40,000
hectares of land across Ethiopia, 1,00,000 hectares of which has been granted
to a single Bangalore-based company, Karuturi Global Ltd. International. Rights
organisations and NGOs have characterised the deals as instances of land grab
and have accused the government of forcibly resettling pastoral communities.
The
Ethiopian government has denied these allegations, insisting that large-scale
commercial agriculture is a vital part of an ambitious project to transform the
national economy. Yet, the failure of Emami Biotech’s plantation and the
glacial progress of Karuturi’s 1,00,000-hectare project in Gambella have led
some to question the ability of these companies to manage such large plots of
land.
“We
think [that] before making necessary preparations, they just express interest,
get investment licences, get land and then preparations take more time,” said
Federal Minister for Industries Mekonnen Manyazewal. “Once they start
operations, obviously there will be challenges but we are prepared to solve
their problems.”
A
senior Ethiopian bureaucrat said the government had taken considerable
political risk by embarking on such sensitive projects …involving the
displacement of thousands and felt that the Indian investors had not done their
homework. Emami Biotech’s project in Oromia, he said, was a case in point.
In
August 2009, the company announced it was investing Rs. 400 crore to acquire
100,000 acres to plant Jatropha and other oil seeds and to set up an oil
extraction plant. Mott McDonald, a reputed engineering and development
consultancy, conducted a feasibility study. The Ethiopian government welcomed the
investment and even appointed Emami Director Aditya V. Aggarwal as Honorary
Ethiopian Consul at its newly opened Consular Office in Kolkata.
Pulling
out
The
following year however, Emami was ready to pull out. On December 22, 2010, the
company wrote to the Oromia Investment Commission, claiming that only half the
land initially allotted to Emami was suitable for agriculture, and even that
land didn’t have enough water.
As
per the letter, the company invested $1.5 million in the project, dug several bore
wells, and constructed a check dam. It also tried to grow maize, pulses, soya
bean and sunflower, “but all our hard works becomes in vain [sic],” the letter
said. The other parts of the land, the company claimed, lay along a disputed
border between Oromia and the neighbouring province of Somaliland.
The
letter lists seven additional problems, including crop damage by local
villagers and their cattle and a lack of cooperation from the local
administration. While Oromia officials said there were no clashes between the
company and the local villagers, a researcher acquainted with the project said
the company and the villagers had clashed over scarce water supplies.
The
Ethiopian government is sceptical of the company’s claims. “It is a matter of
due diligence, they must have known [about the water]. I don’t think that has
lead to the withdrawal,” said Mr. Mekonnen, the Minister for Industries, noting
that the company had conducted a feasibility study.
Global
recession
Analysts
said the global recession could have led to a slump in demand for biofuels,
affecting the viability of Emami’s project.
“Since
Jatropha plantation does not require [much] water, the land allocated was arid
and the lease rental was extremely low,” said an analyst, adding Emami realised
that the Jatropha plantation was not lucrative and tried to cultivate other
crops, “This led Emami to request the government to reallocate the land and
give them land that has much better water resources.”
“[In
Ethiopia] the cost of clearing land and making it into a farm is about $1,500
per hectare,” said Bharat Kulkarni, Director, Stalwart Management Consultancy
Services, a firm that advises those looking to invest in Africa.
“Unfortunately, investors land up in Ethiopia without actually realising this
challenge.” Other factors include the high internal cost of transport, the
absence of trained labour, government inefficiencies and the high costs of
equipment.
“We
have returned the 30,000 acres of land handed over to us but are in talks with
the government for alternative land,” said a spokesperson from Emami Biotech,
but refused to share the reasons for this decision. Asked whether the Ethiopian
government would reallocate land to the company, Mr. Mekonnen was
non-committal. “We will think twice,” he said.
Aman Sethi, The Hindu
Published: October 26, 2012 23:58 IST
Updated: October 27,
2012 02:21 IST
Indian firms reap bitter harvest in Africa
Indian companies which invested in controversial deals involving
hundreds of thousands of acres of land in Ethiopia have found themselves out of
their depth in a fast-growing African economy that is still in the process of
building critical transport and irrigation networks.
Documents related to one such transaction reveal how Emami
Biotech, a subsidiary of the Rs.2,200-crore Emami Group, pulled out of a Rs.
400-crore, 40,000-hectare, bio-fuel plantation only a year after the project
was announced.
Indian companies are the second largest investors in the
Ethiopian economy with approved investments worth nearly $5 billion.
While a majority of the businesses are small manufacturing and
trading enterprises run by business families long settled in East Africa, the
big money has come with the recent entry of large Indian investors.
A number of Indian companies have signed agreements to lease more
than 4,40,000 hectares of land across Ethiopia, 1,00,000 hectares of which has
been granted to a single Bangalore-based company, Karuturi Global Ltd.
International. Rights organisations and NGOs have characterised the deals as
instances of land grab and have accused the government of forcibly resettling
pastoral communities.
The Ethiopian government has denied these allegations, insisting
that large-scale commercial agriculture is a vital part of an ambitious project
to transform the national economy. Yet, the failure of Emami Biotech’s
plantation and the glacial progress of Karuturi’s 1,00,000-hectare project in
Gambella have led some to question the ability of these companies to manage
such large plots of land.
“We think [that] before making necessary preparations, they just
express interest, get investment licences, get land and then preparations take
more time,” said Federal Minister for Industries Mekonnen Manyazewal. “Once
they start operations, obviously there will be challenges but we are prepared
to solve their problems.”
A senior Ethiopian bureaucrat said the government had taken
considerable political risk by embarking on such sensitive projects… …involving
the displacement of thousands and felt that the Indian investors had not done
their homework. Emami Biotech’s project in Oromia, he said, was a case in
point.
In August 2009, the company announced it was investing Rs. 400
crore to acquire 100,000 acres to plant Jatropha and other oil seeds and to set
up an oil extraction plant. Mott McDonald, a reputed engineering and
development consultancy, conducted a feasibility study. The Ethiopian
government welcomed the investment and even appointed Emami Director Aditya V.
Aggarwal as Honorary Ethiopian Consul at its newly opened Consular Office in
Kolkata.
Pulling out
The following year however, Emami was ready to pull out. On
December 22, 2010, the company wrote to the Oromia Investment Commission,
claiming that only half the land initially allotted to Emami was suitable for
agriculture, and even that land didn’t have enough water.
As per the letter, the company invested $1.5 million in the
project, dug several bore wells, and constructed a check dam. It also tried to
grow maize, pulses, soya bean and sunflower, “but all our hard works becomes in
vain [sic],” the letter said. The other parts of the land, the company claimed,
lay along a disputed border between Oromia and the neighbouring province of
Somaliland.
The letter lists seven additional problems, including crop damage
by local villagers and their cattle and a lack of cooperation from the local
administration. While Oromia officials said there were no clashes between the
company and the local villagers, a researcher acquainted with the project said
the company and the villagers had clashed over scarce water supplies.
The Ethiopian government is sceptical of the company’s claims.
“It is a matter of due diligence, they must have known [about the water]. I
don’t think that has lead to the withdrawal,” said Mr. Mekonnen, the Minister
for Industries, noting that the company had conducted a feasibility study.
Global recession
Analysts said the global recession could have led to a slump in
demand for biofuels, affecting the viability of Emami’s project.
“Since Jatropha plantation does not require [much] water, the
land allocated was arid and the lease rental was extremely low,” said an
analyst, adding Emami realised that the Jatropha plantation was not lucrative
and tried to cultivate other crops, “This led Emami to request the government
to reallocate the land and give them land that has much better water
resources.”
“[In Ethiopia] the cost of clearing land and making it into a
farm is about $1,500 per hectare,” said Bharat Kulkarni, Director, Stalwart
Management Consultancy Services, a firm that advises those looking to invest in
Africa. “Unfortunately, investors land up in Ethiopia without actually
realising this challenge.” Other factors include the high internal cost of
transport, the absence of trained labour, government inefficiencies and the
high costs of equipment.
“We have returned the 30,000 acres of land handed over to us but
are in talks with the government for alternative land,” said a spokesperson
from Emami Biotech, but refused to share the reasons for this decision. Asked
whether the Ethiopian government would reallocate land to the company, Mr.
Mekonnen was non-committal. “We will think twice,” he said.
ADDIS ABABA, October
27, 2012
Comments:
Emami Biotech
should have taken up Pongamia (karaj / Indian beech)
instead of Jatropha, as Pongamia is more drought resistant than
Jatropha. Added to this, Jatropha poses several other problems such as
very high frequency of male flowers which bring down the seed yield
under conditions of high temperature, drought and low soil fertility.
Jatropha is also attacked by a wide range of pests and diseases which
cause considerable yield losses. The improved grafted strains of
Pongamia have all the desirable attributes that render them suitable
to be grown on drylands of Africa and India with scanty moisture. The
elite grafted strains of Pongamia are available with VAYUGRID.
instead of Jatropha, as Pongamia is more drought resistant than
Jatropha. Added to this, Jatropha poses several other problems such as
very high frequency of male flowers which bring down the seed yield
under conditions of high temperature, drought and low soil fertility.
Jatropha is also attacked by a wide range of pests and diseases which
cause considerable yield losses. The improved grafted strains of
Pongamia have all the desirable attributes that render them suitable
to be grown on drylands of Africa and India with scanty moisture. The
elite grafted strains of Pongamia are available with VAYUGRID.
from:
Dr M.V.R. Prasad
Posted
on: Oct 27, 2012 at 11:56 IST
These two firms have
bruoght bad name to India in the ASfrican
continent. The question now is whether the MEA and Ministry of
Commerce and Industry have been watching the developments; iof so
could they not ahve averted this development. And lastly, more
improtantly, what do our various minsitries do to avert such bad names
to the comapneis that may be rushing in to Myanmar. Our public and
private sector have bolth their obligations to ensure timely
compeltikon of propjects and theya re requirede to follow all canons
of jsutice and fiarplay ande standards fo good and ethical governance.
continent. The question now is whether the MEA and Ministry of
Commerce and Industry have been watching the developments; iof so
could they not ahve averted this development. And lastly, more
improtantly, what do our various minsitries do to avert such bad names
to the comapneis that may be rushing in to Myanmar. Our public and
private sector have bolth their obligations to ensure timely
compeltikon of propjects and theya re requirede to follow all canons
of jsutice and fiarplay ande standards fo good and ethical governance.
from:
s subramanyan
Posted
on: Oct 27, 2012 at 12:37 IST
It only proves
that Indian enterprises are more trade oriented happy living on
margins - fair or unfair - than creating value by due diligence and persistence
in Project execution - only recently seen in the sloppy corruption ridden
Commonwealth games. There is I fear also an undeniable
colonising attitude in Indian investment in Africa.
Par for the course - ask any African student in Delhi U !!
margins - fair or unfair - than creating value by due diligence and persistence
in Project execution - only recently seen in the sloppy corruption ridden
Commonwealth games. There is I fear also an undeniable
colonising attitude in Indian investment in Africa.
Par for the course - ask any African student in Delhi U !!
from:
rsrinivasan
Posted
on: Oct 27, 2012 at 13:16 IST
Companies from US,
UK eat into Indians, we in turn do this to
Ethiopians. Its a cycle.
Ethiopians. Its a cycle.
from:
Raja
Posted
on: Oct 27, 2012 at 13:45 IST
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