‘Do your Homework!’ warns Puneet before you adopt Ethiopian Farmlands

Farming in Ethiopia (Eastern Africa) is a new buzzword in Indian agriculture; especially among the farmers of the green revolution states like Punjab, Haryana and Western UP. While this is worth appreciating that Indian farmers have been always enterprising and mobile to capture newer opportunities around the world, it is vital that they acquire a fair idea on how to go about these ventures. 

In last few years Indian investors came to know about invitation for farm investment from African countries such as Ethiopia, Ghana, Mozambique, Sudan, Uganda, Republic of Congo, Tanzania etc. The African High Commissions have actively induced investors to invest in their countries. However, the job is not done merely by visiting and investing the money. One must anticipate what happens when a farm becomes operational to avoid pitfalls in the investment process. 

First and foremost, it is observed that investors are mostly attracted to Africa due to a single fact that ‘land is very cheap or say almost free’ coupled with lot of tax benefits. The moment one hears about large chunks of land, virgin soil and cheap labour; one might impatiently start trying to get land there. However, agronomic conditions and cultivation practices are very different as compared to India, so most of things are just projected on assumptions. Generally, people proceed with the idea to adjust to local practices later, i.e. after getting the land wherever it’s available. This is a big anomaly.

During the investment process, impressions should not dictate the decisions and thorough analysis should be done. 

Most Indians still think of Africa like a country, not like a continent. In fact, for a large section in India, Africa implies South Africa only. There also is a notion that Africa means desert, dangerous, very poor and a land of criminals. However, this cannot describe Africa in general and Ethiopia in particular! For investment purposes, it is believed that Ethiopia like many other African nations is offering thousand hectares of land which they are not able to cultivate and hence it’s very cheap. Similarly, labour is assumed to be very cheap. With this reasoning when we compare Indian farming system of small holdings with opportunities of large scale farming in Africa, it appeals. But in reality, land as well as labour can prove to be neither easily available nor very cheap – if we talk of quality of land and skill of labour. In some media news in Punjab, rumoured reports of having water table at three metres only in Ethiopia which is not a fact. Source of information and first hand co-confirmation become mandatory.

Ethiopia is one of the safest countries for investors and is one among the coolest and green places in Africa. The capital Addis Ababa is the second highest capital location in the world. We personally know the welcoming and cooperative nature of Ethiopians especially for Indians. One reason for this is high numbers of Indian teachers in Ethiopian schools and universities who have been teaching them more than 40 years. 

In Ethiopia, land is available on a lease-basis. It used to be long term leases of 50-99 years or so. Now it is as short as 25 years or so. No one can own the land in Ethiopia. It is owned by the Government only and dealt with a Federal Bank. Rent of land is measured distance wise, location wise and condition wide. It not one-for-all at all locations. When we hear that the rent of land is very low say USD 8-10 per ha per year or so, it’s not everywhere. The land available for foreign investors would be away from the cities. Each District Zone (kebele) has specified land rent as per the conditions such as distance from nearby city, virgin or developed land, all-season or gravel approach land, irrigated land or rain fed etc. 

Most of the places we visited in Ethiopia where land is available for foreign investors, infrastructure like power, roads, telecommunication, medical Facilities, hotels, food etc is not developed at all. Investors must not think they are going to heaven. In most of the cases, investors will get Farm-Land which is virgin and not cultivated ever. They will have to plain the land and till it for farming for the first time. This is a challenge as also expensive. 

Ethiopia government does not provide any financial assistance in farming practices or cultivation. Investors will have to manage everything on their own like import of tractors, implements, seeds, pesticides (if not available in Ethiopia), supervisors, housing facilities etc. There is no MSP or Agriculture Subsidies available for foreign investors in Ethiopia like we get in India. Even diesel and Urea are not subsidised, thus costly. Most of farming in Ethiopia is rainfed. Major crops like maize, paddy, cotton, cereals are dependent on rainfall, which is very good in most of areas. There are not many tube wells but lift-irrigation from rivers is a common practice and is very economical. 

Because lands available would be far away from major cities, there won’t be local market for the crops all the time. There is not much government purchase through buying agencies as in India. Most of trading takes place through local dealers, importer-exporters of Ethiopia Commodity Exchange (ECX). 

In the light of above points, it’s very clear farming in Ethiopia is a very comprehensive to manage. This is suitable for investors/farmers who are educated, adaptable, financially sound and dedicated to this profession. This farming is not for companies/farmers who are merely attracted to it out of some glamour or just because of the fact that land and labor is very cheap there. In Short, cheap land and labor should not be the reason to go there. Secondly, involvement in farm practices is a key to success. By nature farming is an art as well as science, therefore results matters on how all the process is performed. Unlike in factory, human factor contributes more in farming. Therefore, team of quality man-power, supervisors, operators, manager is a must. Men behind the machines matter.

Large scale farming is suitable for investors who can create basic infrastructure, import of machinery, and development of land, cultivation, crop care practices and marketing of their produce. This is for sure, if implemented properly this farming gives huge returns.

Selecting suitable machines and implements is a key factor which must be on the basis of soil conditions, scale of operations, durability. Some investors go by cost wise only and buy substandard stuff which creates problems during ongoing operations. Maintenance of machines and implements is very critical, if not managed properly, this could result in loss of millions and loss of crop as well. These are key factors if managed properly, investors can get settled easily in Ethiopia.