Is Stallion Asset the best for investing
That in the financial markets If there is not exactly common sense, there should be a general consensus at the moment. A certain madness also seems to have gripped the agricultural sector: in the summer of the previous year it was said, for example, that the South Korean Daewoo Logistics had leased 1.3 million hectares of land in Madagascar for 99 years, almost half of the arable land of the Island state to produce corn and palm oil. Since the violent change of power in Madagascar in mid-March, partly due to opposition to these plans, the project has been off the table. The new rulers declared the deal invalid. But there is still Varun International: The Indian company wants to lease 465,000 hectares in Madagascar for 50 years to grow rice, maize and dal (red lentils) - but by contract cultivation and without the eviction of farmers, as is emphasized.
Also in the summer of 2008, the former Wall Street banker Phil Heilberg acquired a majority stake in an agro-company in South Sudan through a subcontractor of his company Jarch Capital - and thus rights of use to around 440,000 hectares. What Heilberg paid for it remains a secret; Whether the investment will pay off is in the stars. "There is anarchy in Sudan and it's not a great place to invest," Heilberg admitted to the BBC at the end of January, "but I just see tremendous potential in this war-ravaged country."
Agricultural prices have meanwhile fallen again, but there is still no shortage of spectacular projects. At the beginning of April, the opposition in Zambia was forced to vigorously protest against rumored plans by China to plant two million hectares of the South African country with the oil plant jatropha to produce biodiesel. Just a few days later, the Nigerian Stallion Group signed a letter of intent with the government in Abuja on commercial rice cultivation on one million hectares - with an investment volume of well over a billion US dollars.
These gigantic projects are part of a worldwide phenomenon, the tip of an iceberg. The soaring food prices in the midst of impending supply bottlenecks in the previous year led to a surge in interest in the acquisition, leasing or other control of arable land around the world. Numerous countries, including the Gulf States, Saudi Arabia, Libya, South Korea and China, want to secure the future food of their population through production abroad; private actors such as equity investment funds and investment banks rely on long-term high prices for agricultural products. The investments are made worldwide, but concentrate on regions with unused areas or high potential for increasing earnings. In addition to countries such as Ukraine and Kazakhstan, this primarily includes sub-Saharan Africa.
Africa is not an accidental object of desire. The agricultural sector has been neglected for decades, the infrastructure is extremely inadequate, be it energy supply, roads or ports, and above all the investment financing does not work: Agriculture is the backbone of most countries in the region, but has only received 1% of the loans so far. The result: the hectare yields are mostly well below the global average - for rice in Nigeria, for example, they are only half as high as in India. The massive price increases on the world market in recent years together with the dependence on imports have made many African governments aware of the urgency of increasing agricultural production. This partly explains the willingness to respond to all possible offers from financially strong investors.
At the level of the non-governmental organizations there is often an alarm mood. This new "land grab", fears GRAIN for example, could lead to a process of concentration in agriculture, put an end to smallholder production and deprive the rural population of their livelihoods (see further information). The massive investments made by the Gulf states in Ethiopia and Sudan, among others, prompted FAO Director General Jacques Diouf to warn against the establishment of "neo-colonial" structures last year. In March, the head of the International Food Policy Research Institute (IFPRI) in Washington, Joachim von Braun, called for codes of conduct at the national level for such intergovernmental agreements, which should ensure the sustainable use of resources, the involvement of local producers and the respect for customary property relations .
At the beginning of April, the UN Special Rapporteur on the Right to Food, Olivier de Schutter, also joined the call for a code of conduct and extended it to private agribusiness investors. Governments should be given technical guidelines so that they could negotiate contracts that best promote human development, which "cannot currently be said of them," as de Schutter put it.
In sub-Saharan Africa the interest from outside the region coincides with a parallel, internal development - a general upturn in investment in the agricultural sector. With rapid urbanization and the emergence of a new middle class, the growth of the domestic markets has recently gained momentum and has initiated the commercialization of agricultural production. Driving forces include retail chains such as Pick'n'Pay, Massmart, Shoprite, Woolworths (South Africa) or Nakumatt (Kenya), which are expanding across borders, multinational food companies looking for new markets, but also domestic agribusiness companies, such as Dangote Sugar and in Nigeria Nigerian Breweries.
Apparently a turning point in African agricultural policy is underway. The new interest in the sector may even mark the beginning of an African "green revolution", Jon Maguire, a manager of Africa-Agri Asset Management in Malawi, told the news portal TradeInvest Africa. By the way, Africa-Agri is one of the few "ethical" funds that invest billions in Africa. That this "green revolution" will be more sustainable than its predecessor - in terms of its impact on the environment and society - does not seem to be certain at the moment. The failure of the Daewoo project in Madagascar may give reason to hope that the worst could be prevented.
"Seized! The 2008 land grab for food and financial security", October 2008 (www.grain.org/briefings_files/landgrab-2008-en.pdf)
Investing in Africa: www.tradeinvestafrica.com
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