SPECIAL REPORTS AND PROJECTS

Conservationists want Bugoma Forest made national park

Published

2 years ago

August 23, 2022

Tropical forests could fetch Uganda Shs 2bn in annual tourism revenues.

A study recently undertaken to identify the tourism potential of Bugoma Central Forest Reserve in mid-western Uganda has found that converting the forest into a national park could fetch Uganda at least US$547,500 (Approx. Shs2 billion) in tourism revenues every year.

The researchers identified chimpanzee and mangabey trekking, bird watching and nature walks as the top tourist attractions in and around this tropical rain forest found in both Hoima and Kikuube districts.

The study titled, “Tourism Opportunities of Bugoma Forest” was conducted between April and June this year by the Inclusive Green Economy Network-East Africa (IGEN-EA), a regional consultancy firm, and it sought to understand what tourism opportunities exist around Bugoma Forest.

Over the last six years, Bugoma Central Forest has found itself at the centre of controversy between the government, sugar manufacturers, Bunyoro Kingdom, and conservationists with the latter insisting that the forest should remain intact given its rich plant and animal life but also the emerging oil industry in the region.

Bugoma Central Forest Reserve which is one of the most biodiverse in Uganda was first gazetted by Legal Notice No. 87 of 1932. The forest was gazetted as an undemarcated reserve of 35,840 hectares. Under Legal Notice 251 of 1944, the forest area was increased to 41,144 hectares. But it has recently been encroached upon by sugar barons, loggers and even cultivators.

In 2016, President Yoweri Museveni officially launched Hoima Sugar, the second major sugar factory in the Bunyoro sub-region which was given a big chunk of acreage out of Bugoma Forest to expand its sugarcane estate.

The company which is found in Kikuube District is owned by Rai Holdings Group. It is valued at about US$42 million and currently produces 1,500 tonnes of sugar per day. It also employs about 2000 workers on its nucleus estate and supports more than 150 sugarcane out-growers.

However, in the new report’s recommendations, the researchers want the government to upgrade Bugoma Forest Reserve to a national park to protect it, especially its biodiversity and promote tourism. The researchers also want the Uganda Wildlife Authority (UWA), the national agency in charge of wildlife conservation, to take over its management. The forest, like all other forest reserves in the country falls under the ambit of the National Forestry Authority (NFA).

“The forest should be put under UWA’s management after being turned into a national park; the Ministry of Tourism, Wildlife and Antiquities, UWA and the Uganda Tourism Board (UTB) should in consultation with all other tourism stakeholders develop a tourism development strategy for Bugoma forest,” the report reads in part.

In 2018, government statistics showed Uganda attracted about 1.5 million visitors into the country and about US$ 1.6 billion went into the national treasury in form of tourism revenues. The government later came out with an ambitious plan to increase the tourism sector’s earnings to US$1.862 billion; and maintain the contribution of tourism to total employment at 667,600 people.

The government said it would also embark on a promotional campaign of domestic and inbound tourism by increasing the stock and quality of tourism infrastructure; as well as developing, conserving and diversifying tourism products and services.

Bugoma’s tourism potential

According to research done by Birdlife International, an international conservation organization, of the “65 forested Protected Areas that were surveyed for biodiversity in Uganda, Bugoma ranked eleventh in overall biodiversity value and fifteenth in terms of rarity value.”

The study, “Biodiversity surveys of Bugoma forest reserve, smaller central forest reserves and forest corridors south of Bugoma,” noted that the reserve is home to primates, elephants and other vertebrate fauna. The forest is home to 570 chimpanzees, 225 bird species, the Ugandan mangabey (which can only be seen in Uganda), bush elephants, butterflies and others.

Robert Akugizibwe, the executive secretary of the Association for the Conservation of Bugoma Forest, a local conservation pressure group, is one of the leading supporters of converting Bugoma forest into a national park. His association has over the last five years been taking visitors on exclusive nature walks inside the forest.

He says although the forest has plenty of attractions such as butterflies, insects, birds like Black and White Casqued Hornbill, Black-billed Turaco and the Olive Sunbird, Bugoma’s main attraction is the encounter with the primates, especially groups of the Ugandan Mangabey (Lophocebus Ugandae), which are endemic to this forest. The other primates which are also a common sight are the red tailed monkeys and black and white colobus monkeys.

Indeed, there are already ongoing efforts to habituate chimpanzee families to support tourism and this exercise is expected to be concluded by the Jane Goodall Institute in 2023. But, seeing the encroachment that is happening on the edges of the forest by the sugarcane growers frustrates Akugizibwe.

“For the last two years, we have been trying to promote tourism but we have been abandoned. No one helps us; even the NFA neglected us. We could not tell exactly where the boundary of the forest ends,” he told The Independent. “Let Bugoma be promoted to a national park and change its management to Uganda Wildlife Authority,” he said.

According to Section 25 of the Uganda Wildlife Act, 2019, which deals with the procedure for the declaration of a wildlife conservation area, the minister may, by statutory instrument, after consultation with the Local Government Council in whose area a proposed wildlife conservation area falls and with the approval of Parliament signified by its resolution declare an area of land or water to be a wildlife conservation area.

“Before making a declaration under sub-section (1), the minister shall ensure that an environmental impact study and any other study that may be required have been conducted in accordance with the National Environment Act, 2019,” the Act reads in part.

Bashir Hangi, the communications manager at UWA told The Independent on Aug.18 that there are no ongoing discussions between UWA and NFA to make Bugoma forest a wildlife reserve.

Economic viability of tourism opportunities

However, the Inclusive Green Economy Network-East Africa (IGEN-EA) study shows the best case scenario of the economic viability of the identified tourism opportunities in Bugoma Forest as well as the anticipated income from the activities and the most preferred tourist attractions as identified by the tour operators who were interviewed for the study.

Borrowing from current chimpanzee trekking practices in already established parks like Kibaale National Park, Kyambura and Kalinzu Gorges where permits cost between US$ 50-200, the researchers say it is possible to organise ape trekking in Bugoma Forest.

For instance, the researchers say, while two groups consisting of eight tourists each are ordinarily permitted to trek chimpanzees in national parks such as Kibaale per day, scientists advise that for newly habituated chimpanzees such as those in Bugoma, only four people per group could trek chimpanzees per day.

They argue that being a new destination that would not be as popular as the older trekking sites, chimpanzee trekking permits in Bugoma forest should be charged at US$50. The study further notes that two trekking sessions with four tourists each would be organised per day.

The study also sets the bird watching activities to one session per day with five tourists paying US$80 each. “Bird watching in forests requires patience and is usually a whole day experience and this means only one session a day can be arranged,” the report reads in part.

The bird watching rate per tourist in Uganda is currently set at US$100. However, given the fact that bird watching in Bugoma Forest is new, if the activity is allowed in the forest as recommended by this study, it would be prudent to offer a cheaper price of US$80 to attract tourists.

For the other activity, the forest walks, the researchers say it is possible to organize two sessions in the mornings and evenings at the current rates of up to US$30. According to the study, the number of people going for bird watching and forest walks would be limited to five and ten respectively because few tourists should be engaged in the activities to maintain quiet in the forest. This would enable the tourists to listen to the rhythm of the forest, the researchers say.

They add that Bugoma Forest can also be harnessed for cultural tourism purposes. For instance, one of the research respondents interviewed notes that: “A section of Bugoma Forest was once the capital of Bunyoro Kingdom.”

“Two Bunyoro kings had palaces in that section. In 1830, the Omukama (King) Nyamutukura Kyebambe III moved his palace from Buyaga to Kyangwali, where Bugoma forest is partly located. It is unfortunate that a small section of the kingdom selfishly let this part be destroyed. If conserved, the forest can form part of the cultural heritage of Bunyoro, which could be harnessed for tourism.”

The respondent added: “The forest is also taken in very high regard as a traditional pharmacy with all sorts of herbs extracted from leaves, tree bark, vines and roots. There are other spiritual and/or traditional rituals that indigenous communities perform under the canopy of the forest. This part has the potential of being elevated to a Bunyoro cultural site.”

George Owoyesigire, the Acting Commissioner in charge of wildlife conservation in the Ministry of Tourism, Wildlife and Antiquities told The Independent that he would support the upgrade of Bugoma into a national park.

In any case, Owoyesigire said, there is already a joint report done in 2018 by both the Uganda Wildlife Authority and the National Forestry Authority that recommended Bugoma’s protected area status be upgraded to national park status.

He told The Independent that in the past, the government has upgraded former Central Forest Reserves such as Elgon, Kibaale, Mgahinga, Bwindi, Semliki and Rwenzori to national park status.

These, he said, were all converted into national parks and their protection levels were increased; the species have since increased and benefits to the adjacent communities have also been enhanced thanks to the revenue generation from the parks.

“Bugoma should be generating similar revenues,” he said. Owoyesigire added that Bugoma Forest is about half a kilometre from Kabaale Industrial Area where the proposed oil refinery will be based. It is also quite close to Kabaale International Airport which is about to be opened to international air traffic.

“The combination of emissions from the refinery and the aero planes makes Bugoma Forest’s enhanced protection even more important,” Owoyesigire told The Independent.

Going forward, the researchers say, while developing the strategy and tourism activities in Bugoma forest, the Ministry of Tourism, UTB, UWA and other stakeholders should maintain effective community outreach services around the forest.

“Communities should be trained in tour guiding, crafts-making, beekeeping, catering and other services to enable them to participate in tourism activities in Bugoma forest,” the report notes.

“The government and development partners should also support institutions such as the Jane Goodall Institute to habituate more groups of chimpanzees for tourism purposes in Bugoma Forest. This will create more tourism opportunities.”

“The government should also support communities to establish community-private venture partnerships such as that of the Clouds Mountain Gorilla Lodge model in Kisoro (southwestern Uganda) to support community participation in tourism.”

Source: independent.co.ug

DEFENDING LAND AND ENVIRONMENTAL RIGHTS

Statement: The Energy Sector Strategy 2024–2028 Must Mark the End of the EBRD’s Support to Fossil Fuels

Published

12 months ago

September 27, 2023

witnessradio.org

The European Bank for Reconstruction and Development (EBRD) is due to publish a new Energy Sector Strategy before the end of 2023. A total of 130 civil society organizations from over 40 countries have released a statement calling on the EBRD to end finance for all fossil fuels, including gas.

From 2018 to 2021, the EBRD invested EUR 2.9 billion in the fossil energy sector, with the majority of this support going to gas. This makes it the third biggest funder of fossil fuels among all multilateral development banks, behind the World Bank Group and the Islamic Development Bank.

The EBRD has already excluded coal and upstream oil and gas fields from its financing. The draft Energy Sector Strategy further excludes oil transportation and oil-fired electricity generation. However, the draft strategy would continue to allow some investment in new fossil gas pipelines and other transportation infrastructure, as well as gas power generation and heating.

In the statement, the civil society organizations point out that any new support to gas risks locking in outdated energy infrastructure in places that need investments in clean energy the most. At the same time, they highlight, ending support to fossil gas is necessary, not only for climate security, but also for ensuring energy security, since continued investment in gas exposes countries of operation to high and volatile energy prices that can have a severe impact on their ability to reach development targets. Moreover, they underscore that supporting new gas transportation infrastructure is not a solution to the current energy crisis, given that new infrastructure would not come online for several years, well after the crisis has passed.

The signatories of the statement call on the EBRD to amend the Energy Sector Strategy to

fully exclude new investments in midstream and downstream gas projects;
avoid loopholes involving the use of unproven or uneconomic technologies, as well as aspirational but meaningless mitigation measures such as “CCS-readiness”; and
strengthen the requirements for financial intermediaries where the intended nature of the sub-transactions is not known to exclude fossil fuel finance across the entire value chain.

Source: iisd.org

Download the statement: https://www.iisd.org/system/files/2023-09/ngo-statement-on-energy-sector-strategy-2024-2028.pdf

SPECIAL REPORTS AND PROJECTS

Will more sovereign wealth funds mean less food sovereignty?

Published

1 year ago

April 13, 2023

witnessradio.org

In November 2022, word got out that Ferdinand Marcos Jr, the freshly minted president of the Philippines, wanted to set up a sovereign wealth fund. People scratched their heads. What wealth? The Philippines is mired in debt! It was quickly understood that this was a kind of vanity project, meant to improve the image of a man who came to power because of his family name.

Marcos’ father ruled the Philippines from the mid-1960s to the mid-1980s with an iron fist. Known more for kleptocracy and the brutality of martial law, the Marcos name needed a face-lift, local media put it. Marcos boasted that a sovereign wealth fund would boost investor confidence and attract resources to fund big projects in infrastructure or agriculture. He even dubbed it “Maharlika Fund”, a nod to the mythical warrior figure that his father claimed to personify during World War II.

Vanity aside, Marcos’ proposal raised fears of graft and corruption. After all, not long ago, Malaysia’s sovereign wealth fund (known as 1MDB) was exposed as a multi-billion dollar money laundering scheme for the personal benefit of Prime Minister Najib Razak, who now sits in jail. Yet, Marcos managed to get his proposal onto his country’s legislative agenda in a matter of weeks, and brought it to international investors in Davos and Tokyo for their approval as well.

What are these “sovereign wealth funds”? How are they being used? What link, if any, do they have with people’s struggles around food sovereignty, land grabbing and today’s deepening climate crisis?

Rise of sovereign wealth funds

The first sovereign wealth funds were set up in the 19th century, and grew slowly throughout the 20th. The idea, at first, was rather simple. If a state has excess resources – perhaps mineral wealth or a sudden boom in foreign exchange from exports – these should be tucked away for future use for the benefit of society.

Norway is the classic example. In the late 1960s, oil was discovered off its coast. Overnight, the country become unfathomably rich. After much debate, the government decided to set up a wealth fund – basically a piggy-bank belonging to all Norwegians. It is fed by a tax levied on the oil and gas extracted from Norway’s seabed, plus the revenues of Norway’s state-owned oil and gas companies.

This wealth is meant to be used “for present and future generations”. To ensure this, no one is allowed to touch the underlying pot of money itself, but the interest it earns each year goes into the national budget to pay for things like public health care, generous parental leaves, retirement pensions and public infrastructure. In concrete terms, Norway’s wealth fund contains $1.1 trillion. That money is invested in 9,000 publicly-listed companies across 70 countries around the world. The investments generate a return of about 3% a year, which is what goes into the national budget to provide everyone in Norway with those public services. It has become a source of national pride and unity across the political spectrum.

Many sovereign wealth funds were set up with a similar logic. The “wealth” may come from diamonds (Botswana) or copper (Chile), foreign currency reserves (China) or export earnings (Saudi Arabia). Even the state of Texas in the United States wrote into its constitution back in the 1850s that “available public lands” should be used to finance public schools. To do this, lands were either sold outright or were leased with the proceeds feeding a Permanent School Fund (a sovereign wealth fund) run by a trio of local civil servants. In all of these cases, the funds are created with resources that arguably belong to everyone and serve a public interest objective such as guaranteeing social rights (e.g. retirement for all in Norway) or covering national budget deficits in times of crisis (e.g. as happened with Covid-19 in Peru) or providing children with access to education (Texas).

Recently, however, governments have started diverging from this logic. Increasingly, sovereign wealth funds are being set up with no resources or wealth or sovereign character to speak of. Indonesia’s sovereign wealth fund, which was set up in 2021, is more like a “development” fund. It aims to secure foreign investment from companies, banks and funds in order to build local infrastructure and energy projects. Not much different from what the government already does. The Philippines’ proposal is more like a “public-private partnership” fund, as foreign investors will be asked to do joint ventures with the state or with local businesses. At one point, the government was proposing that the fund should be handed over to the private sector and listed on the stock market! Quite a number of small countries with no surpluses to speak of have set up sovereign wealth funds by offering citizenship to wealthy individuals (leading to corruption scandals as well).

Over the past two decades, the number of sovereign wealth funds has surged (see graph) and there are now more than 100 sovereign wealth funds around the world.[1] Collectively, they hold $10 trillion – which makes them the third largest economy, after the US and China, if they were a country. That figure is expected to reach $17 trillion by 2030. While most sovereign funds are national in scope, some are sub-national. The state of Queensland, in Australia, has one. Palestine has one. Even the city of Milan has one.

Some of these funds invest only abroad, some invest only at home and some do both. Key sectors they put their money in, to capture earnings, include energy, technology, health, finance and real estate. All told, sovereign funds are so massive that most people have probably had some connection to them, as they own bits of Alibaba, Flipkart, Uber, Slack, Grab, major airports, the world’s top football teams and social media like Twitter. Anyone paying for these is actually helping sovereign wealth funds take money home.

And while it seems to be a trend among political elites these days to think that setting up such structures can bring funds into the global South, 80% of sovereign wealth fund assets is currently parked in Europe and North America. In fact, one-third is in the US alone.

Agriculture: a critical concern

In dollar terms, food and agriculture represent just 2-3% of all sovereign wealth fund investments. While that sounds small, it is a politically sensitive and strategic sector for many governments. Contributing to national food security has been a historic role for sovereign funds, and it is a vital one for those of Singapore and the Gulf states.

At least 42 sovereign funds are currently invested in food and agriculture (see table). Some are major players, but many are less visible (see box). Their investments may be in largescale farmland acquisitions and production, such as orange groves in Brazil, cattle ranches in Australia or vertical pig farms in China. Some take the form of ownership stakes in global food commodity traders that ship grains, oilseeds and coffee across our oceans, like Bunge, COFCO or Louis Dreyfus. Yet others are positions in food retail systems like supermarket chains or delivery services, and the digital technologies that these operations increasingly rely on.

A handful of actors form the centre of gravity of global agricultural investing by sovereign funds. They are Temasek and GIC in Singapore; PIF in Saudi Arabia; Mubadala and ADQ in UAE; QIA in Qatar; RDIF in Russia; and COFIDES in Spain (see map). The Singaporeans and the Gulf states invest with their own food needs as a priority. RDIF brings big investors into Russia to help finance its export-oriented agribusiness sector. And COFIDES funds food projects around the world with one catch: a Spanish company must be directly involved in and profit from it, such as Borges with almond production in Europe or Pescanova with fish farming in Latin America. (Actually, there is a second catch: all of COFIDES’ overseas food and agriculture investments are loans.[2])

Quite a number of sovereign wealth fund ventures in agriculture are linked to concerns about land and water grabbing, whether directly and indirectly. In December 2022, Abu Dhabi’s government-owned ADQ, which has $110 billion in assets, got hold of 167,00 hectares of farmland in northeast Sudan.[3] It plans to grow sesame, wheat, cotton and alfalfa there, while it builds a massive new port nearby to ship the goods out. ADQ already owns:

45% of Louis Dreyfus Company, with its massive land holdings in Latin America, growing sugarcane, citrus, rice and coffee;
a majority stake in Unifrutti, with 15,000 ha of fruit farms in Chile, Ecuador, Argentina, Philippines, Spain, Italy and South Africa; and
Al Dahra, a large agribusiness conglomerate controlling and cultivating 118,315 ha of farmland in Romania, Spain, Serbia, Morocco, Egypt, Namibia and the US.

Therefore, the concerns are quite serious. Al Dahra stands accused of draining aquifers in Arizona, just so that it can produce hay to transport back to UAE to feed local dairy herds.[4]

Saudi Arabia’s Public Investment Fund (PIF), one of the world’s top ten sovereign wealth funds in terms of assets, has $13.7 billion invested in agriculture. It owns several massive agribusiness conglomerates focused on livestock, dairy and fisheries. In 2021, it took 100% control of the Saudi Agricultural and Livestock Company (SALIC) which is engaged in meat and cereal production in Canada, Ukraine, India, Brazil, Australia and the UK.[5] The scale is enormous. In India, PIF produces its staple, basmati rice.

From Brazil, it gets its beef. In Australia, it operates 200,000 ha for sheep grazing and also buys lamb and mutton directly from producers. In Ukraine, it has 195,000 ha growing wheat, barley, maize and rice. PIF also owns 35% of Olam Agri, a major palm oil producer, and is building the largest vertical farm in the entire Middle East and North Africa region.[6] It is very strange, then, to learn that PIF’s new green financing instrument will explicitly exclude funding for any projects or expenditures associated with industrial agriculture or livestock![7] It shows the doublespeak of investors that expand intensive industrial food systems while needing to flash climate credentials.

Another very big player is Qatar. Its sovereign wealth fund has massive land holdings in Australia, through a stake in the 4.4 million ha Paraway Pastoral Company dedicated to livestock production. The fund allows Qatar to source its organic food supplies through Canada’s Sunrise Foods, which operates in Turkey, Netherlands, Russia, Ukraine and US. It owns poultry and seafood companies in Oman, and is now developing agriculture supply chains in East Africa. The Qatari wealth fund is connected to a Russian oil company which owns 50% of Agrokultura, which operates 200,000 ha of farmland in Russia. It also owns 14% of AdecoAgro with its 472,862 ha hectares under production in Argentina, Brazil and Uruguay. It is now going into Kazakhstan for the same purposes – and in direct competition with the UAE.[8]

It is important to note that many of these arrangements between sovereign wealth funds and global agribusiness involve political guarantees. Qatar is one of the biggest investors in Glencore, with whom it has a deal to ensure its access to grains and shipping services in case of need. The same is true with Qatar and Turkey’s Tiryaki Agro Group. The fund’s agricultural arm, Hassad Food, has its own agreement with Sunrise Foods which ensures that in the event of any shortage in the Qatari market, the country’s need for grain, oilseeds and wheat will be met on a priority basis.[9] Similarly, when Abu Dhabi’s ADQ bought 45% of Louis Dreyfus – the world’s third largest commodity trader – it signed a side deal giving it priority access to food shipments in times of global crisis, as the world experienced recently during both Covid-19 and the Russian invasion of Ukraine.[10]

It is fair to say that the political strategy of leveraging sovereign wealth to get access to global food supplies works. What is never mentioned is at what cost. For many of these big investment projects expand and entrench largescale corporate agribusiness, with its contingent slew of land conflicts, water pollution, indigenous rights abuses, labour violations and spiralling climate emissions. And when it comes to the Gulf states or Singapore, these are very small populations draining the resources of much bigger ones. With sovereign funds, scale is baked in. Even when they do try to reckon with social and environmental contingencies, as in the case of PIF, their attempts at making investments green or socially responsible are shallow at best. Only Norway’s stands out as making strong commitments to scrutinise and withdraw from agribusiness companies associated with social and ecological crimes, as it has done with meat packers and soy producers in Brazil (Minerva, Marfrig, SLC Agricola and JBS) as well as rubber giant Halcyon Agri.[11]

So, to answer the question: what do these funds have to do with food sovereignty? The answer is: it’s twisted. They do provide food security for a few countries. And political elites increasingly like to use the term food sovereignty to characterise these missions, as it serves their nationalist, territorial and militarist frameworks.[12] But sovereign wealth funds crush real visions of food sovereignty as they take resources away from local communities and push a capitalist, industrialist food system – be it green or not.

Putting the public interest first

Sovereign wealth funds can be a good idea if they really are sovereign (run by the people), if the resources they harness are democratically sourced and organised, and if they have a genuine public welfare mandate. We actually need more commitment to public approaches to reverse the growing inequality and privatisation that is undermining people’s rights to healthcare, housing, transportation, food, education and retirement in most countries around the world.

But there is a danger. There are increasing calls to set up sovereign wealth funds to solve government problems – from building a new capital city in Indonesia to plugging an alleged deficit in France’s pension system. But these newer funds are just tools to channel money into government coffers or private enterprises. They are not built on any collective resource or aimed at protecting a public wealth for the benefit of future generations. They seem to have little to do with traditional sovereign wealth funds, apart from the name. For that reason, they should be scrutinised and if they don’t genuinely serve the public interest they should be stopped. Similarly, those that contribute to land or water grabbing should be challenged and stopped, too.

Agriculture may not be the number one sector that these funds gravitate towards to generate wealth. But politically, geopolitically and strategically, food security is a core concern of theirs and will continue to be, requiring our critical scrutiny as well.

We need good public services that provide for public well-being. Sovereign wealth funds – despite their name – need to be put to a more scrupulous test to see if they have a role to play in that agenda.

Less visible players: Big players aside, many sovereign wealth funds participate in financing the direction of food and agriculture.[13]

• Angola’s sovereign wealth fund is investing in food and agriculture in Africa through a private equity fund that is targetting the production of maize, beans, soybeans, rice and cattle.

• Australia’s sovereign wealth fund has a Future Drought Fund since 2019. Currently holding A$4.5 billion, its sole aim is to “provide secure, continuous funding to support initiatives that enhance the drought resilience of Australian farms and communities.” Its investments must deliver returns of 2-3% above the consumer price index.

• Bolivia has a sovereign wealth fund that was set up in 2012 with state surplus funds and a loan from the central bank. It invests domestically in both public and private enterprises involved in honey production, fruit processing, aquaculture, dairy, quinoa and stevia.

• Brunei’s new sovereign wealth fund is considering investing in agriculture, in partnership with the Malaysian Investment Development Authority.

• Not much is known about how China’s sovereign wealth funds invest. The China Investment Corporation has $1.3 trillion, making it the largest in the world. It invests in agriculture overseas and reported a remarkable return of 14.27% on its overseas holdings in 2021. Equally remarkable, alternative investments, which include private equity and farmland, are said to account for 47% of its overseas portfolio. China’s National Social Security Fund is also a sovereign wealth fund and is invested domestically in agriculture through its private equity portfolio.

• France’s sovereign fund is known to be a big investor in agriculture and food, both domestically and abroad. One very controversial foreign project it is connected to is led by Arise IIP, a subsidiary of Olam, in Chad.[14]

• Gabon’s sovereign wealth fund, built from oil revenues, runs a private equity fund that invests in the food and agriculture sector. It also invests directly in agriculture and farmland projects at home.

• The National Development Fund of Iran has some $24 billion, most of it from oil and gas revenues and all of it invested domestically. According to some sources, 1% is invested in water and agriculture, including farmland ownership, a sector the fund wants to invest more in.

• Ithmar Capital, a state investment company, serves as Morocco’s sovereign wealth fund. Details are lacking but their strategy is to co-invest in Moroccan agribusiness operations with foreigners such as Spain’s COFIDES or Gulf state investors.

• Nigeria, like Abu Dabhi and Spain, has its sovereign wealth fund investing in fertiliser production. This is a very strategic concern.

• Palestine’s sovereign wealth fund is a public company that does local impact investing. Its initial funds came from the Palestinian Authority. It is invested in a 50 hectares seedless grape farm, looking into investing in animal feed production and helping set up a National Agriculture Investment Company.

• Türkiye Wealth Fund has 2% of its investments in food and agriculture, as of 2019.

• In the US, the states of Texas, New Mexico and Alaska have sovereign wealth funds that are heavily invested in farmland, whether directly or through private equity funds. The agribusiness operations they fund are in some cases domestic and in others overseas (usually in the Southern Cone of Latin America or Australia).

• Vietnam’s State Capital Investment Corporation is invested in agriculture/farmland through a joint venture with the State General Reserve Fund of Oman, showing how co-investing is a common strategy of sovereign funds.

Sovereign wealth funds invested in farmland/food/agriculture (2023)
Country	Fund	Est.	AUM (US$bn)
China	CIC	2007	1351
Norway	NBIM	1997	1145
UAE – Abu Dhabi	ADIA	1967	993
Kuwait	KIA	1953	769
Saudi Arabia	PIF	1971	620
China	NSSF	2000	474
Qatar	QIA	2005	450
UAE – Dubai	ICD	2006	300
Singapore	Temasek	1974	298
UAE – Abu Dhabi	Mubadala	2002	284
UAE – Abu Dhabi	ADQ	2018	157
Australia	Future Fund	2006	157
Iran	NDFI	2011	139
UAE	EIA	2007	91
USA – AK	Alaska PFC	1976	73
Australia – QLD	QIC	1991	67
USA – TX	UTIMCO	1876	64
USA – TX	Texas PSF	1854	56
Brunei	BIA	1983	55
France	Bpifrance	2008	50
UAE – Dubai	Dubai World	2005	42
Oman	OIA	2020	42
USA – NM	New Mexico SIC	1958	37
Malaysia	Khazanah	1993	31
Russia	RDIF	2011	28
Turkey	TVF	2017	22
Bahrain	Mumtalakat	2006	19
Ireland	ISIF	2014	16
Canada – SK	SK CIC	1947	16
Italy	CDP Equity	2011	13
China	CADF	2007	10
Indonesia	INA	2020	6
India	NIIF	2015	4
Spain	COFIDES	1988	4
Nigeria	NSIA	2011	3
Angola	FSDEA	2012	3
Egypt	TSFE	2018	2
Vietnam	SCIC	2006	2
Gabon	FGIS	2012	2
Morocco	Ithmar Capital	2011	2
Palestine	PIF	2003	1
Bolivia	FINPRO	2015	0,4

AUM (assets under management) figures from Global SWF, January 2023
Engagement in food/farmland/agriculture assessed by GRAIN

[1] Important sources used for this report include: Javier Capapé (ed), “Sovereign wealth funds 2021”, IE University, Madrid, Oct 2022, https://docs.ie.edu/cgc/SWF%202021%20IE%20SWR%20CGC%20-%20ICEX-Invest%20in%20Spain.pdf; Global SWF, “2023 Annual report”, New York, Jan 2023, https://globalswf.com/reports/2023annual; the websites of Global SWF (https://globalswf.com) and SWF Institute (https://www.swfinstitute.org/) as well as Preqin Ltd.

[2] See the COFIDES database, sector “Agri-food”, https://www.cofides.es/en/projects?field_direccion_country_code=All&field_sector_target_id=2

[3] Reuters, “Sudan to develop Red Sea port in $6-bln initial pact with Emirati group”, 13 Dec 2022, https://www.farmlandgrab.org/31347.

[4] Ella Nilsen, “Wells are running dry in drought-weary Southwest as foreign-owned farms guzzle water to feed cattle overseas“, CNN, 27 Nov 2022, https://edition.cnn.com/2022/11/05/us/arizona-water-foreign-owned-farms-climate/index.html

[5] See SALIC website: https://salic.com/

[6] AeroFarms, “PIF and AeroFarms sign joint venture agreement to build indoor vertical farms in Saudi Arabia and the wider MENA region”, 1 Feb 2023, https://www.aerofarms.com/2023/02/01/pif-and-aerofarms-sign-joint-venture-agreement-to-build-indoor-vertical-farms-in-saudi-arabia-and-the-wider-mena-region/

[7] Public Investment Fund, “Public Investment Fund Green Finance Framework”, February 2022, https://www.pif.gov.sa/Investors%20Files%20EN/PIF%20Green%20Finance%20Framework.pdf

[8] See Hassad Food, “Hassad signs MoU with Baiterek to discuss investment projects that supports food security”, 12 Oct 2022, https://www.hassad.com/2022/10/12/hassad-signs-mou-with-baiterek-to-discuss-investment-projects-that-supports-food-security/ and Global Sovereign Wealth Fund, “Gulf funds drawn into soft power battle over Kazakhstan”, 25 Aug 2021, https://globalswf.com/news/gulf-funds-drawn-into-soft-power-battle-over-kazakhstan

[9] See Hassad Food, “Strategic local and international investments along with global partnerships to satisfy the market needs from grains and wheat”, 28 Mar 2022, https://www.hassad.com/2022/03/28/strategic-local-and-international-investments-along-with-global-partnerships-to-satisfy-the-market-needs-from-grains-and-wheat/

[10] Reuters, “Commodity group Louis Dreyfus completes stake sale to ADQ”, 10 Sep 2021, https://www.reuters.com/world/middle-east/commodity-group-louis-dreyfus-completes-stake-sale-adq-2021-09-10/.

[11] See Fabiano Maisonnave, “Norway oil fund omits meatpacker JBS from deforestation watch list “, Climate Fund News, 4 Apr 2018, https://www.climatechangenews.com/2018/04/04/norway-oil-fund-omits-meatpacker-jbs-deforestation-watch-list/, Earthsight, “World’s largest pension fund dumps shares in beef firm in wake of corruption scandal”, 24 July 2018, https://www.earthsight.org.uk/news/idm/worlds-largest-pension-fund-dumps-shares-beef-firm-wake-corruption-scandal and Paulina Pielichata, “Norway sovereign wealth fund divests Halcyon over environmental concerns”, Pensions & Investments, 27 Mar 2019, https://www.pionline.com/article/20190327/ONLINE/190329915/norway-sovereign-wealth-fund-divests-halcyon-over-environmental-concerns

[12] “L’Afrique sur le chemin de l’autosuffisance alimentaire”, Seneplus, 27 Feb 2023, https://www.seneplus.com/developpement/lafrique-sur-le-chemin-de-lautosuffisance-alimentaire

[13] Main sources for this box are each fund’s respective website, news clippings and Preqin Ltd.

[14] Arise, “Bpifrance and Arise IIP establish a partnership to foster agricultural materials processing and co-industrialisation projects on a pan-African scale”, 15 February 2023, https://www.ariseiip.com/bpifrance-and-arise-iip-establish-pan-african-partnership/ , and Benjamin König, “Arise IIP, la firme qui dépouille les paysans africains”, L’Humanité, 4 April 2023, https://www.humanite.fr/monde/tchad/arise-iip-la-firme-qui-depouille-les-paysans-africains-789407

Source: Grain

SPECIAL REPORTS AND PROJECTS

Farmland values hit record highs, pricing out farmers

Published

2 years ago

November 21, 2022

witnessradio.org

Joel Gindo thought he could finally own and operate the farm of his dreams when a neighbor put up 160 acres of cropland for sale in Brookings County, S.D., two years ago. Five thousand or six thousand dollars an acre should do the trick, Mr. Gindo estimated.

But at auction, Mr. Gindo watched helplessly as the price continued to climb until it hit $11,000 an acre, double what he had budgeted for.

“I just couldn’t compete with how much people are paying, with people paying 10 grand,” he said. “And for someone like me who doesn’t have an inheritance somewhere sitting around, a lump sum of money sitting around, everything has to be financed.”

What is happening in South Dakota is playing out in farming communities across the nation as the value of farmland soars, hitting record highs this year and often pricing out small or beginning farmers. In the state, farmland values surged by 18.7 percent from 2021 to 2022, one of the highest increases in the country, according to the most recent figures from the Agriculture Department. Nationwide, values increased by 12.4 percent and reached $3,800 an acre, the highest on record since 1970, with cropland at $5,050 an acre and pastureland at $1,650 an acre.

A series of economic forces — high prices for commodity crops like corn, soybeans and wheat; a robust housing market; low interest rates until recently; and an abundance of government subsidies — have converged to create a “perfect storm” for farmland values, said Jason Henderson, a dean at the College of Agriculture at Purdue University and a former official at the Federal Reserve Bank of Kansas City.

As a result, small farmers like Mr. Gindo are now going up against deep-pocketed investors, including private equity firms and real estate developers, prompting some experts to warn of far-reaching consequences for the farming sector.

Young farmers named finding affordable land for purchase the top challenge in 2022 in a September survey by the National Young Farmers Coalition, a nonprofit group.

Already, the supply of land is limited. About 40 percent of farmland in the United States is rented, most of it owned by landlords who are not actively involved in farming. And the amount of land available for purchase is extremely scant, with less than 1 percent of farmland sold on the open market annually.

The booming housing market, among a number of factors, has bolstered the value of farmland, particularly in areas close to growing city centers.

“What we have seen over the past year or two was, when housing starts to go up with new building construction, that puts pressure on farmland, especially on those urban fringes,” Professor Henderson explained. “And that leads to a cascading ripple effect into land values even farther and farther away.”

Government subsidies to farmers have also soared in recent years, amounting to nearly 39 percent of net farm income in 2020. On top of traditional programs like crop insurance payments, the Agriculture Department distributed $23 billion to farmers hurt by President Donald J. Trump’s trade war from 2018 to 2020 and $45.3 billion in pandemic-related assistance in 2020 and 2021. (The government’s contribution to farm income decreased to 20 percent in 2021 and is forecast to be about 8 percent in 2022.)

Those payments, or even the very promise of additional assistance, increase farmland values as they create a safety net and signal that agricultural land is a safe bet, research shows.

“There’s an expectation in the market that the government’s going to play a role when farm incomes drop, so that definitely affects investment behavior,” said Jennifer Ifft, a professor of agricultural economics at Kansas State University.

Eager investors are increasingly turning to farmland in the face of volatility in the stock and real estate markets. Bill Gates, the Microsoft co-founder and a billionaire, is the biggest private farmland owner in the country and recently won approval to buy 2,100 acres in North Dakota for $13.5 million.

The number of private equity funds seeking to buy stakes in farmland has ticked higher, said Tim Koch, a vice president at an agricultural financial cooperative in the Midwest, Farm Credit Services of America. Pension funds also consider farmland a stable investment, Professor Ifft said.

Farmers, too, have witnessed an influx of outside interest. Nathaniel Bankhead, who runs a farm and garden consulting business in Chattanooga, Tenn., has banded with a group of other agricultural workers to save up to $500,000 to buy about 60 acres of land. For months, the collective has been repeatedly outbid by real estate developers, investors looking to diversify their portfolios and urban transplants with “delusional agrarian dreams,” he said.

“Places that I have looked at as potential farmland are being bought up in cash before I can even go through the process that a working-class person has to do to access land,” he said. “And the ironic thing is, those are my clients, like I get hired by them to do as a hobby what I’m trying to do as a livelihood. So it’s tough to watch.”

Mr. Bankhead characterized the current landscape as a form of “digital feudalism” for aspiring working farmers. Wealthy landowners drive up land prices, contract with agricultural designers like himself to enact their vision and then hire a caretaker to work the land — pricing out those very employees from becoming owners themselves.

“They kind of lock that person to this new flavor of serfdom where it’s, you might be decently paid, you’ve got access to it, but it will never be yours,” he said.

Unable to afford land in her native Florida, Tasha Trujillo recently moved her flower farm to South Carolina. Ms. Trujillo had grown cut flowers and kept bees on a parcel of her brother-in-law’s five-acre plant nursery in Redland, a historically agricultural region in the Miami area, about 20 miles south of downtown.

When she sought to expand her farm and buy her own land, she quickly found that prices were out of reach, with real estate developers driving up land values and pushing out agriculture producers.

A five-acre property in the Redlands now costs $500,000 to $700,000, Ms. Trujillo said. “So I essentially didn’t have a choice but to leave Miami and Florida as a whole.”

“Farming is a very stressful profession,” she added. “When you throw in land insecurity, it makes it 20 times worse. So there were many, many times where I thought: ‘Oh my God. I’m not going to be able to do this. This isn’t feasible.’”

As small and beginning farmers are shut out — the latest agricultural census said that the average age of farmers inched up to 57.5 — the prohibitively high land values may have ripple effects on the sector at large.

Brian Philpot, the chief executive of AgAmerica, an agricultural lending institution, said his firm’s average loan size had increased as farms consolidated, squeezing out family farms. This, he argued, could lead to a farm crisis.

“Do we have the skills and the next generation of people to farm it? And two, if the answer is going to be, we’re going to have passive owners own this land and lease it out, is that very sustainable?” he said.

Professor Henderson also warned that current farmers may face increased financial risk as they seek to leverage their high farmland values, essentially betting the farm to expand it.

“They’ll buy more land but they’ll use debt to do it,” he said. “They’ll stretch themselves out.”

Economists and lenders said farmland values appeared to have plateaued in recent months, as the Federal Reserve raised interest rates and the cost of fertilizer and diesel soared. But with high commodity prices forecast for next year, some believe values will remain high.

A native of Tanzania who moved to South Dakota about a decade ago, Mr. Gindo bought seven acres of land to raise livestock in 2019 and currently rents an additional 40 acres to grow corn and soybeans — all the while working full time as a comptroller to make ends meet.

For now, he has cooled off his search for a farm of his own even as he dreams of passing on that land to his son. The more immediate concern, he said, was whether his landlord would raise his rent. So far, the landlord has refrained because Mr. Gindo helps him out around the farm.

“He really doesn’t have to lend me his land,” Mr. Gindo said. “He can make double that with someone else.”

In Florida, Ms. Trujillo said, the owner of the land where her brother-in-law’s nursery sits has spoken of selling the plot while prices remain high, so he too has begun looking for his own property.

“That’s a big fear for a lot of these farmers and nursery owners who are renting land, because you just never know when the owner’s just going to say: ‘You know what? This year, I’m selling and you’ve got to go,’” she said.

In Tennessee, Mr. Bankhead said he considered giving up on owning a farm “multiple times a day” as friends who have been longtime farmers leave the profession.

But so far, he remains committed to staying in the field and doing “the work of trying to keep land in families’ hands and showing there’s more to do with this land than to sell it to real estate developers,” he said. “But the pain of not having my own garden and not being able to have my animals where I live, it never stings any less.”

Original Source: Farmlandgrab