Saudi Agro-Investors Leave Ethiopia

This article on AL Monitor is very important and highlights some of the issues I have dealt with in Oil for Food (ch. 8): Why there has been such a gap between announced agro-investments that have been reported in the media and their actual implementation.

The Saudi government has been reluctant to divulge funds as it fears another agricultural subsidy binge, this time abroad. Investors complain that they cannot meet conditionalities tied to investments and say that they have decided to leave Ethiopia.

Saudis have also become less popular in Ethiopia. There is a political backlash of the ongoing crackdown on migrant workers in Saudi Arabia that has targeted Ethiopians in particular. Ethiopian maids have been accused of practicing witchcraft, a capital crime in Saudi Arabia, and were asked to provide mental health certificates, a stipulation that Ethiopians have regarded as an insult.

Like on the Philippines or in Indonesia, Saudi Arabia’s labor policies do not buy it goodwill abroad which can affect its investment plans. Other problems include lack of infrastructure and overlapping bureaucratic responsibilities in targeted countries.

I am not sure whether the Saudi Agriculture Investors Association in Ethiopia that is mentioned in the article is a very important organization. It does not have a website and a Google search does not reveal any institutional history. The size of the Saudi agro-investment in Ethiopia that its head Mohammed bin Abdul Rahman Al Shahri mentions — $3.47 billion — is almost certainly too high.

A database of the Ethiopian government about foreign agro-investments in the country only mentioned the Saudi Star investment in Gambela of Saudi billionaire Al-Amoudi before it was taken offline in 2012 (see Oil for Food p. 202).

Even this investment has run into trouble as an Ethiopian farm executive told me recently. He said Carterpillars are sitting idle on the parking lot and Pakistani foremen of the project complained to him in a bar that they had not been paid for months.

Al-Amoudi recently acknowledged the problems of Saudi Star to Bloomberg, but said  that “Now we are getting in deeply and I’m going to follow it up myself.”

Let’s wait and see. In 2011 I argued that announced Gulf agro-investments were a “land grab that wasn’t.” If anything the implementation gap has grown. When Gulf countries have put money on the table it has been rather in developed agro markets with the necessary infrastructure like Australia or Argentina.

Government financing for Saudi agro-projects finally on its way?

The Saudi Cabinet has greenlighted projects under the King Abdullah Initiative for Agricultural Investments Abroad (KAISAIA), which means that projects financed by the initiative may finally get on their way. Up to 60 percent of the financing will be provided by the government. Target countries need to agree to allow export of at least 50 percent of the crops.

Saudi Arabia upgrades SCAIAP’s Role in Agro-FDI

According to the Saudi Minister of Agriculture Fahd Balghunaim, the Saudi Ministry of Agriculture wants to hand over the file of foreign agricultural investments to the Saudi Company for Agriculture Investment and Animal Production (SCAIAP).

Currently the file is handled by the Minister of Commerce and Industry in the lead (chairman) and the Minister of Agriculture as his deputy. The undersecretaries of the Ministries of Agriculture, Commerce, Finance and Foreign Affairs are also part of the team.

The decision would mean a considerable upgrade of SCAIAP, which is held by the Public Investment Fund, which is in turn run by the Ministry of Finance. So far there have not been disbursements of SCAIAP funds even it has been launched in 2009 already.

This has led to complaints by the private agro-business community of Saudi Arabia in the past, which is supposed the primary beneficiary of SCAIAP funds.