Land Deals & Water

'Increasingly, it is being recognised that land acquisition often equates to de facto water acquisition and FDI is driven as much or even more by the need for water to produce food than by the need for land ’  

- (Bossio et al. 2012, 224)

In the past decade, foreign land acquisitions in Africa have considerably increased – the resource of water being a strong driver in the rise of investments (Bossio et al. 2012). Four broad motivators can be identified that drove this development: The food crisis of 2008, agricultural investment being perceived as ‘safe’ in times of financial instability, limited domestic resources faced by countries such as China, India, Saudi Arabia and South Korea as well as the increasing demand for biofuels (Bossio et al. 2012, 224).

In the following we will look at the situation in Ethiopia, a country in which FDI has acquired up to 3.6 million ha (according to estimations)  (Mousseau and Sosnoff 2011). Investments from the EU, India and Israel have focused on the horticultural sector from 2000-2005, sharply growing in rice, cotton and biofuels production from 2006 onwards (Bues 2011). The perception that Ethiopia is a country with abundant and underutilised water resources - and therefore in need of FDI to realise its potential - has made investment attractive for foreigners.

It is important to mention that foreign investors cannot buy, bot only lease land in Ethiopia - land rents being  among the cheapest in the world: investors pay 1 – 40 USD per year for 1 ha of land. Most land leases are acquired for irrigable land, and in principle there are regulations and legislations in place to ensure sustainable use and to avoid ‘water grabbing’, saying that domestic users have priority over water use. However in reality, the implementation of these regulations is very weak (Bossio et al. 2012, 231 -232).

The leased land can be irrigated in two different ways – either growing one rain-fed crop per year during the rainy season (Scenario 1) or growing one irrigated crop during the off-season in addition to the rain fed crop (Scenario 2), agricultural activities ranging from crop production, oil seeds, vegetables and fruits, forestry, special seeds, livestock and animal feed production, to horticulture and cotton production (Bossio et al. 2012, 228). Depending on which scenario occurs on these leased lands, the impact on water consumption will differ.

In an analysis provided by Bossio et al. (2012) the additional consumptive water use by FDI licenses in Ethiopia (in 7 different regions) was estimated using the Crop Water Requirement (CWR). 

The results show the additional amount of water lost in future agricultural intensification scenarios. First, a considerable difference between scenario 1 and 2 can be observed, and secondly a significant increase in evapotranspiration is predicted in all 7 cases (Bossio et al. 2012, 233). Even though the analysis provided is limited in accuracy and the potential impacts of these FDI activities on water are subject to uncertainty, one can conclude that a ‘non trivial proportion of the country’s water resources will be effectively utilised by foreign entities’ (Bossio et al. 2012, 223).

References:

Bues, A. 2011. Agricultural foreign direct investment and water rights: An institutional analysis from Ethiopia. Conference paper. International Conference on Global Land Grabbing, 6-8 April, 2011, Institute of Development Studies, University of Sussex.

Bossio, D.; Erkossa, T.; Dile, Y.; McCartney, M.; Killiches, F.
and Hoff, H. 2012. Water implications of foreign direct
investment in Ethiopia’s agricultural sector. Water Alternatives 5(2): 223-242

Mousseau, F. and Sosnoff, G. 2011. Understanding land investment deals in Africa. Country Report: Ethiopia. CA, US: Oakland Institute.