A rush of foreign investment in Ethiopia’s rural farmlands has critics crying foul – including members of the United States government.

The United States embassy in Addis Ababa, Ethiopia, expressed concern over apparent land grabs in a cable sent Feb. 8, 2010, released by WikiLeaks in late January 2011. Most involved key foreign investors picking up farmland to export staples from the food aid-dependent East African nation.

“Despite the benefits of increased foreign investment, political opposition members and international critics remain skeptical about the GoE’s (Government of Ethiopia’s) motives and the land policy’s affect on poor, rural Ethiopians,” the sensitive-level document reads. “Regarding agricultural investment, the GoE views foreign investor involvement as key to the country’s move from subsistence to commercial farming.

“On top of any potential damage to local farmers, international and political opposition party critics cite concerns over exporting food from a country that relies so heavily on imported food aid and the perceived low wages that foreign investors pay its employees.”

The cable, sent to a number of United States government agencies, references the lease of 49,400 acres of land in January 2010 by the Egyptian government, leases by former Nigerian president Olusegun Obasanjo and Djiboutian President Ismael Omar Guelleh and an investment by a South African fund in a fruit company working out of Ethiopia. Each incident involved influential foreigners grabbing Ethiopian land to export food or, in two cases, build a hotel.

“The GoE clearly needed to shift its agricultural policy in order to make effective use of its vast amounts of fertile land, and the agricultural policy mix being implemented is viewed by most experts as a step in the right direction,” the cable reads.

“However, that evolving policy is a long way from proving its worth as a vehicle for achieving the GoE’s stated goals of modernizing the sector, generating foreign exchange reserves, and increasing the domestic food supply.

In the case of Egypt’s sizable lease, then-Egyptian Prime Minister Ahmed Nazif announced his country would invest US$40 million to grow grains for export to Egypt. (Nazif was forced out of power amid anti-government rioting in Egypt in January.)

The leases

Guelleh’s two leases involved a lease of 2.5 lakeside acres in Debre Zeyit, 50 kilometres east of Addis Ababa, to build a hotel, and 7,400 acres of farmland in the Bale province. The farmland, leased in 2009, has harvested wheat and other grains for export to Djibouti.

In the case of Egypt’s lease, the fact that grains would be grown for export was stated explicitly.

“Press reports stated that these cereals would be exported to Egypt despite the GoE’s 2007 ‘temporary’ export ban on all cereals that has never been formally lifted,” the cable reads.

“It appears Saudi, Djiboutian, and now Egyptian investors have somehow bypassed this ban, while other investors informed (the economics office) that they have not been allowed to export cereal grains.”

South African private equity fund Agri-Vie pumped $3.5 million into Dutch and British fruit producer and processor Africa Juice, which bought a 3,000-acre farm–not the land–from Ethiopia’s government. Africa Juice produces yellow passion fruit, mango and papaya, and is planning to sell its juices to markets in Europe and the Middle East, according to the document.

On its website, Africa Juice said it is attempting to secure a second Ethiopian location, and is prospecting locations in Tanzania and Mozambique.

Obasanjo was the only party named by the embassy’s cable not involved in food. The former Nigerian president leased five acres near Debre Zeyit “to develop a hotel and tourist destination,” the cable read.

Egypt’s investment was more loaded than the rest. The cable claims talks between the African nations improved drastically during talks, and ideas for economic partnerships in livestock, pharmaceuticals and hydroelectric power were bandied about.

The state-owned National Bank of Egypt–the arm the government used to fund the farm project – announced shortly after Nazif’s delegation that it would expand into Ethiopia, and offer $14.6 million in credit to six Ethiopian banks, according to domestic media reports.

“The domestic banking sector is closed to foreign banks; however, other foreign banks such as Germany’s Commerzbank do have offices in Ethiopia to facilitate relations with Ethiopian banks,” the cable reads. “It is unclear how the National Bank of Egypt could offer credit in Ethiopia in evident violation of banking and financial regulations.”

The consequences

According to the BBC, numerous protestors who opposed Ethiopia’s policies have been arrested and at least 10 farmers have been killed as Ethiopian Prime Minister Meles Zenawi plans to lease nearly 7.5 million acres, mostly in the west and southwest, in five years.

These moves have hardly gone unnoticed in Ethiopia. “Merara Gudina, Chairman of the Ethiopian Federal Democratic Unity Forum (a coalition of political opposition parties), accused the GoE of using its land ‘giveaway’ policy to hold on to power and to buy diplomatic support,” the cable reads.

“U.S.-based GoE opposition movement Ginbot 7 stated in a January editorial that the GoE needs to change its communist land policy and empower local farmers, who have the potential to produce a marketable surplus. The editorial further noted that any land deal that has not been agreed to by the Ethiopian people will not be honored by future elected governments.”

The problems are somewhat longstanding and not limited to Ethiopia. In 2008, Jacques Diouf, the director-general of the United Nations’ Food and Agriculture Organisation, told the Financial Times he was concerned foreign investment in agricultural markets in Africa and Asia was at risk of falling into a “neo-colonial” system —a tag many critics of Ethiopia’s government would likely agree with.