Land grabbing

In 2008, the non-governmental organization GRAIN coined the term 'land grabbing' and used it to describe the acquisition of land by international agricultural companies, private investors and state actors by means of long-term lease or purchase contracts for large areas of agricultural land. In the meantime, the term has also come to be used for areas similarly affected for mining, tourism or also forestry.

The negative connotation of the term arises due to the negative impact on the inhabitants of the areas affected which accompanies a land grab. Often, small farmers’ livelihoods are destroyed by newly established plantations, frequently without any compensation. Due to the low pay for local workers, the promised economic stimulation never happens. The influx of foreign workers can even lead to an increase in unemployment levels among the local population. Also, the establishment of monocultures that make intensive use of pesticides and mineral fertilisers can lead to severe and damaging interference in the environment.

What brought about this development?

Between 2006 and 2008, the number of land investments in 44 countries doubled. Since the year 2000, the prices of basic foodstuffs (set out in the FAO Food Price Index) have been rising and in 2011 reached a new high. The factors driving this rapid development can be found in the three interacting areas of food, fuel, and finance. First, the need for food increases due to a growing population and changing dietary habits, while at the same time usable agricultural land is becoming scarcer due to population growth and urban growth. Also, erosion and desertification are aggravating development in some areas.

The production of biomass for generating energy is also gaining more and more importance and is accompanied by a reduction in the amount of land available for the production of food. This process is promoted in Germany too, for example, through the Law on Biofuel Quotas (“Biokraftstoffquotengesetz”), which implemented the European Union biofuels directive in 2006. This law determined that oil companies would have to make available a set and annually rising portion of biofuels. This regulation is intending to ensure a reduction of the amount of mineral fuels burned and thus contribute to climate protection. Consequently, the demand for biofuels on the world market rose. Growing biofuel material is more lucrative and is often subsidized. And so, we have the situation that land for foodstuffs is becoming more and more scarce due to this rising demand for animal feed and biofuel materials.

The rate at which land ownership is gaining in financial importance means that investments in land have become attractive for investors. Arable land is viewed as a secure financial investment, a point of view that is facilitated by the real estate crisis in the United States and the uncertainty in global financial markets. Moreover, speculation in foodstuffs pushes prices up.

Besides the investors, private investment funds and financial institutions which are purely interested in a financial profit, some countries initiate government land purchases. These investors are, above all, Asian countries (e.g. China, Malaysia, South Korea) or countries from the Arabian region (Saudi Arabia, Kuwait). These regions record sharp increases in food requirements, fodder plants and other agricultural commodities. At the same time, they have little agricultural production land of their own and are therefore dependent on food imports. In this respect, the extreme price fluctuations in the course of the food crisis in 2007/2008 also played a role, as did the temporarily imposed restrictions on the export of basic foodstuffs from some countries. Investors want to be less dependent on the world market and its price fluctuations.

At the same time, investments in agriculture are promoted by the FAO, the World Bank and the African Union as one of the most important instruments for economic growth and reducing poverty. Countries are thereby supported in opening themselves up to foreign direct investment in the agricultural area, as there is considered to be a vast potential for development in rural areas in particular.

How much land is affected?

Although the phenomenon of land grabbing has been familiar since 2008, there is little reliable global data on the distribution and size of the land area in question or on the planned or actual use of this land. This is because, first, due to a lack of transparency in the negotiations on these land deals, only a small amount of data is actually disclosed. And second, institutions which gather this type of data use different definitions of land grabbing. This makes it more difficult to compare and verify the information available.

The definition used by the German Federal Ministry for Development and Economic Cooperation (“Bundesministerium für Entwicklung und wirtschaftliche Zusammenarbeit” - BMZ) in 2012 describes land grabbing as a process in which international but also domestic investors secure large tracts of land in developing and emerging countries using long-term leasing or purchase contracts. In the BMZ strategy paper, the “land coalition” is cited that estimates that in the years 2000 to 2010 approx. 200 million hectares of land were given over to investment about 130 million hectares of which were in Africa. According to a World Bank study published in 2011, however, only 20 per cent of the investment plans looked at in the study are actually productively used.

Where does Germany invest?

In 2015, German agricultural companies were actively producing in Ethiopia, Ghana, Lithuania, Madagascar, Romania, Uganda, Tanzania, Zambia and Zimbabwe, according to the independent land monitoring initiative “LandMatrix”. The largest number of investments took place in Romania, the investment in the biggest area of land was in Zambia. While the investment goal aspired to in eastern Europe is primarily the food and animal feed sector, tropical countries are particularly attractive for biofuel materials.

Who invests in Germany?

According to various media reports, areas in Brandenburg, Germany, are a popular investment target. The five largest agricultural investors are, with one exception, German companies. They own on average areas of 13,500 hectares, while the average farm size in Brandenburg is 238 hectares.

What impact does investment in large areas of land have?

While land grabbing occurs globally and can also be observed in industrial countries, the impacts on rural communities and small farmers in the countries of the Global South are far more direct. The World Bank and the FAO promote the investments as an urgently needed way to fight poverty and support economic development and view the impacts as unequivocally positive. Think Tanks, such as the Oakland Institute, for example, international NGOs like FIAN or the Land Matrix, university and non-university research institutions, however, attribute a significant potential for criticism to the investments.

In the target countries in the Global South, agriculture takes in a large proportion (often 30 to 40 per cent) of the gross domestic product and is the most significant sector for employment and income for the population. The losers are the small farmers. They often do not have registered usage or access regulations for the land. They have little or no capital to buy land with. They are under threat of displacement when land grabbing occurs but have nowhere to go. There are no alternative employment or income opportunities for them. If they remain, the employment situation often gets worse, as the leased land is worked intensively with the help of machines, fertilisers and pesticides. Fewer people are needed for each area worked, the employment effects of the investments fall short of expectations and can only reach about half of the small farmers.

Sources and further information:

  • Oakland Institute
  • FIAN International (German)
  • Landmatrix
  • German Federal Ministry for Economic Cooperation and Development (2012). Investitionen in Land und das Phänomen „Land Grabbing“. (Strategiepapier 2). (German)
  • Deininger, K., & Byerlee, B. (2011). Rising Global Interest in Farmland, Can it yield sustainable and equitable benefits?. World Bank.

BICC 12/2015

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