‘Land grab’ as development strategy? The political economy of agricultural investment in Ethiopia

Abstract

This paper examines the domestic political economy of so-called ‘land-grabbing’ in Ethiopia, assessing the motivations of the Ethiopian government, which has strongly promoted foreign agricultural investment. The paper draws on a unique set of federal and regional databases detailing foreign and domestic investments in Ethiopia to analyse the likely role investment will play in the Ethiopian economy and the areas which have been targeted for investment. The analysis identifies increased foreign exchange earnings as the main likely contribution of investment but in doing so highlights concerns for food security in Ethiopia, as the goal of national self-sufficiency has given way to a risky trade-based food security strategy. The paper also argues that the federal government's attempts to direct investment to sparsely-populated lowlands have important implications for the ethnic self-determination that is a key tenet of Ethiopia's federal system.

Keywords:

• Ethiopia
• development strategy
• land grab
• foreign investment
• ethnic federalism

Notes

This research was carried out as part of a PhD supported by a studentship from the UK's Economic and Social Research Council (ESRC), and this paper was written with financial support from the Land Deal Politics Initiative (LPDI). The support of both organisations is gratefully acknowledged. I would like to thank Shea McClanahan, Ruth Hall, Jun Borras and several anonymous reviewers for comments on past drafts of this paper.

¹These land leases are subject to federal and regional investment proclamations stipulating the rights and responsibilities of what are termed by the government as ‘investors’, distinct from smallholders whose land rights are governed by separate land use and administration proclamations. In this paper I therefore use the term ‘investor’ in line with the government's definition, albeit recognising that in some cases ‘investors’ actually invest very little in their projects.

²To address food insecurity, it would be necessary not only to increase the supply of certain types of foods but also to get this food to food insecure areas (through investment in infrastructure and integrating markets) and to raise entitlements so that those in need could buy the food. This paper considers only the impact of investment on food supply.

³Since the de facto secession of Eritrea in 1991, Ethiopia has been landlocked. In addition, poor relations with neighbouring countries and instability in others means that the vast majority of Ethiopia's international trade passes through the port of Djibouti, with much smaller amounts transported through Berbera in Somaliland or by road through Kenya.

⁴The proclamation actually specifies exemptions from ‘income tax’ which it defines as ‘profits from business’.

⁵According to the EIA, projects are classified as pre-implementation if the investor has been granted an investment licence by the relevant authority but not yet allocated land, and ‘implementation’ or ‘operation’, which I have aggregated to ‘active’, if the investor has been allocated land. Many investors who receive licences never start operations and reports indicate many cases where investors have been allocated less land than requested (Anderson and Belay 2008; Weissleder 2009). Equally, however, due to delays in updating this database, it is probable that some of the investors marked ‘pre-implementation’ have already been allocated land and consequently the ‘active’ category is likely to be an underestimate.

⁶The division between local and foreign investors is not always totally clear as many Ethiopian diaspora have been encouraged to invest money accumulated abroad in their ‘home’ country. Consequently, there are many Ethiopian names among the list of ‘foreign’ investors.

⁷Based on an exchange rate of USD 1 to 16.5 birr in September 2010, this equates to USD 2.6m per foreign investor compared to USD 0.7m for domestic investors. These figures should, however, be viewed with caution as investors have an incentive to overstate the amount that they intend to invest in order to gain government approval. Nonetheless, foreign projects are on average much larger than domestic ones.

⁸The company is apparently exploring the possibility of exporting produce to Uganda and Sudan on the Baro River, a tributary of the Nile (Davison 2010b). Gambella town itself was originally established as a port on the Baro by the British colonial administration in Sudan which was trying to gain commercial and political influence over western Ethiopia in the early twentieth century. At that time, export on the Baro was cheaper for producers in western Ethiopia than the Addis Ababa-Djibouti railway. Nevertheless, the use of the Baro for export came to an end, in part due to the political importance to the Ethiopian state of exports passing through Addis Ababa (Zewde 2008a).

⁹Even if the rice is sold locally, the impact is uncertain as there is very little domestic market in Ethiopia for rice, which is not a traditional staple.

¹⁰Afar, Benishangul-Gumuz, Gambella and Somali are considered to be ‘emerging’ regions, relatively less developed and lacking state capacity, while Amhara, Oromiya, SNNPR and Tigray are ‘established’ regions.