Distributing Efficiency Gains

gains are not as substantial as promised and expected. As it looks now, investors can expect to harvest profits today or speculate on future profits while the local smallholders’

wealth remains unaffected if it does not decline. This cannot be defended as fair from the standpoint of Varian. Nevertheless, a more detailed analysis of the distribution of efficiency gains is needed to conclusively evaluate LASLA from the perspective of Varian.

community of smallholders. In relation to the costs of preparing the land, such additional efforts are low but can significantly improve the conditions for the smallholders.

Finally, but probably most importantly, LASLA promise to create jobs in host coun-tries from which smallholders benefit directly. First, in the agricultural production itself. Although some parts of it will require sophisticated machinery too complex for the smallholders’ state of knowledge, harvesting will continue to depend on manual labor. Second, once crops are harvested, they also require low-skilled labor in processing, quality control, transportation, packaging, etc. Secondary jobs are likely to emerge once LASLA start to effectuate the agricultural projects held out in prospect.

However, not in one single contract did we find any specific regulations that could be understood as a political tool, oriented to achieve the goals promised to local small-holders either by the host governments or the investors before the signature of such contracts. Moreover, our analysis of LASLA contracts indicates that compensation is not sufficiently specified in the contracts. While infrastructure, technology or knowledge transfer were never mentioned, only ten of the contracts promised to create jobs (ranging from 42 to 4,500 for the largest 150,000Ha project, median 577).¹³ But since timelines are not defined that clearly regulate the starting point of the projects, it is not clear whether or in what way local smallholders are integrated into the projects. Consequently, their job security is not guaranteed.

It is worth to take a closer look at the contracted leasing prices. It is possible that even though land lies idle, smallholders are financially compensated for not cultivating their former land. We can conservatively assume that the monthly Ha-productivity lies at approximately $300. The calculus builds on the estimation that smallholders in Sub-Saharan Africa live with approximately $2 per day and cultivate approximately 1/5Ha.

dykes, roads, towns of 15,000 people. This is phase one. In three years time we will have 300,000 hectares cultivated and maybe 60,000 workers. We could feed a nation here.” A local government officer in Gambella, an Ethiopian region at the center of foreign investment, emphasizes that relocation of smallholders is voluntary: “This year we will relocate 15,000 people to give them better access to water, schools and transport. [But] it is a coincidence that the investors are coming at the same time as the villages are being relocated. [...] We are not relocating people to give land to the investors. The problem is there is no infrastructure where they have lived. It’s all voluntary.” However, affected people complain that they have not been compensated or that they are told to wait: “We were promised a school, a health clinic and fresh water eight months ago. We only have one water pump so far” (The Guardian 2011c).

13In more detail, the numbers of jobs (per respective project size in Ha) were 42 (10,000); 84 (10,000);

300 (10,000); 577 (73,513); 577 (73,513); 628 (21,500); 670 (6,214); 2,200 (6,141); 4,500 (150,000) (one contract for a 30,000 Ha project gave no number for the promised jobs). The relative numbers of jobs per ha are 0.004; 0.008; 0.008; 0.008; 0.029; 0.03; 0.03; 0.108; 0.358 (rounded after the third decimal place).

and Sierra Leone, respectively $9 to $40 (Median $9) for Ethiopia,¹⁴we can conclude that these prices are significantly lower and not sufficient to compensate the smallholders.

When projects do not start, arable land lies idle. If smallholders are not provided with market access and the necessary means to buy food for themselves, this means that not enough food, in the worst-case scenario, is produced locally for the smallholders and that their food security is at risk. Furthermore, it is not guaranteed that the smallholders are sufficiently provided with water, accommodation, and access to education systems, health care, or social services, which are the most attractive promises made mostly by host governments.

A subsequent key problem is food security. As the host countries are amongst the world’s poorest countries, their greatest concern should be to improve food security for their own population, especially the local smallholders. LASLA bears the potential to increase food production and hereby help building food security also for the host popu-lations. However, as investors focus on profits they will only produce when a respective price is paid for their product. It is questionable whether the relatively poor countries can always afford the prices the producers demand. In the worst case, it is possible that even though food is produced and highly needed in the host countries, this food is then exported to buyers willing to pay a higher price. In such a case, global food security might be improved but not the food security of the smallholders of the respective host country.

Instead of correcting the wrongs of an underdeveloped market system, LASLA rather seem to replace the local market for local smallholders with a more functioning world market. However, the transfer result is exactly opposed to increasing food security for the smallholders, as the product is exported elsewhere instead of securing food to the poor local smallholders who might even face increased difficulties accessing food markets (Häberli 2012).

Crucial for the host countries is that the produced food, at least in part, helps the local smallholders. This can be guaranteed in two ways. First, investors commit themselves to sell a certain share of the production to the host countries at an agreed-upon price.

Second, investors can contractually assure that in exchange for the access to land, they provide infrastructure and technology and teach local smallholders how to use both – potentially in exchange for even better leasing conditions. In this case, investors would directly help the capacity building in host countries. What the evidence shows, however,

14The currency in LASLA contracts for Ethiopia was Ethiopian Birr and not $, which is why we separate it from the other countries. For the exchange rate we use here see footnote 5.

Guardian 2011d). Due to the fact that such promises are made verbally only, it is from the legal viewpoint reasonable to think that investors did not have any honest interest in the improvement of local wealth. Even in cases involving well-intentioned investors, the legal framework of such investments does not provide incentives to fulfill such promises;

therefore such promises are in most of the cases unenforceable.

We have to conclude that for the majority of LASLA smallholders obviously do not benefit but are even worse off after the investments are signed. This also cannot be defended as fair from the perspective of Varian.