The rationale for Saudi Arabia’s inclusion in the EM10 is clear - acute shortages of water and rising demand for food necessitate outward agricultural investments. With vast potential, Africa has absorbed much of this external focus - with countries along the Nile River Basin clearly prioritised. To be sure, Saudi Arabia is not the only foreign entity pursuing African farmland: it is estimated that a total of over 3m ha of land has been leased out in Ethiopia, 5.6m ha in Sudan, and 2.6m ha in South Sudan. However, the fact that Saudi Arabia’s programme has accelerated rapidly, emboldened by coherent government support, deserves attention.
For African countries courted by Saudi agribusiness firms, a clear appreciation of the value of the asset on which they rest is necessary. Under-selling of agricultural assets (both land and, perhaps more critically, water) remains a profound threat. Meanwhile, as large tracts of land are sold or leased off to foreign investors, the social strains brought about by the relocation of local inhabitants has the potential to be deeply destabilising. Attention focused on the negative ramifications, whether real or perceived, of foreign land acquisitions must be heeded.
Yet, an acknowledgement of the acute need for investment in the sector must be a balancing force. Ensuring commensurate skills transfer to local communities, as well as that a generous portion of crops produced by foreign-owned firms in Africa are guaranteed for the local market, would aid. Meanwhile, transparency in the manner in which land deals are struck, and adequate consultation with affected local communities, must be compulsory. Channelling investment into agricultural infrastructure, particularly storage and trans-port, would provide tremendous support.
Meanwhile, as the advance on African farmland intensifies, policymakers should principally focus on ensuring domestic food security, rather than viewing agriculture (as has traditionally been the case throughout much of the continent) as a means to generate export revenue. For those countries with sufficiently established agricultural sectors, and thus able to expand on exports of select products, Saudi Arabia, and indeed the wider Gulf region’s, rising demand should provide clear new opportunities.
- Conclusion to: EM10 and Africa: Saudi Arabia - Africa's food potential draws attention, by Simon Freemantle and Jeremy Stevens, Standard Bank, 18 June 2012. The eight page report can be accessed here.
Some key points from the report:
• Saudi Arabia is one of the world’s most water scarce countries; just 1% of its land mass is suitable for agriculture. Meanwile, per capita income is the highest in the EM10—twelve times greater than India’s. This, coupled with population growth and altering dietary patterns is placing immense strain on domestic food security.
• Local production is buckling, forcing reliance on often volatile global agricultural trade markets. Poultry consumption in 2012 is likely to be 800,000 tonnes higher than local production, while wheat production will be deficient by 1.8 million (m) tonnes. Saudi Arabia’s barley imports account for around 40% of global barley trade. To protect renewable water reserves, the Saudi government is phasing out local wheat production—necessitating elevated imports. Meanwhile, volatile global soft commodity prices—especially since 2008—exemplify the threat for food importing nations.
• The Saudi government is seeking external sources of food production. Under the King Abdullah Initiative for Saudi Agricultural Investment Abroad, Saudi agribusiness investors are provided with credit and strategic support to invest in foreign farmland. A core principle of the initiative is that the investor must have the right to export at least half of the farmed produce to Saudi Arabia.
• Geographical proximity and the abundance of under-utilised farmland has focused Saudi Arabia’s attention on Africa. Saudi investors have reportedly planned or concluded investments covering 800,000 hectares (ha) of land in Africa (accounting for almost 70% of all large deals struck by Saudi firms globally). Countries in the Nile River Basin, primarily Egypt and Sudan, have been prioritised. In one deal, Saudi Star is looking to expand its current 10,000ha farming operation in Ethiopia to incorporate a further 290,000ha in the country’s fertile Gambela region.
• For African countries courted by Saudi agribusiness firms, a clear appreciation of the value of the asset on which they rest is essential. Under-selling of agricultural assets (both land and water) remains a profound threat. Meanwhile, the social strains brought about by the relocation of local inhabitants has the potential to be deeply destabilising.
• Yet, leveraged effectively, Saudi capital could provide critical support in the elevation of African agricultural productivity. Meanwhile, for African exporters of agricultural goods, Saudi Arabia, and indeed the wider Gulf region, will be an increasingly key market. In 2011, Egypt exported almost USD450m worth of fruit, nuts, vegetables and dairy products to Saudi Arabia. In the same year Saudi Arabia imported USD120m worth of coffee from Ethiopia, and, in 2010, imported roughly USD230m and USD125m worth of live animals from Sudan and Somalia, respectively.