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Foreign Investment in Tanzania: The Agrisol Proposal

Agrisol Presentation to the Prime Minister of Tanzania

Third in a series. Begin at the Introduction, then Wants & Needs.

Agrisol Energy is the most prominent name of an international consortium attached to this controversial deal. Businesses from three continents include the Iowa-based agricultural company, the Dubai financier Pharos Financial Group and the Tanzanian investment firm Serengeti Advisers. Each brings to the table seasoned veterans of business, agriculture and energy, sparking either assurance or suspicion depending who you ask.

The roots of Agrisol itself stem from Summit Group, started by serial agricultural entrepreneur Bruce Rastetter and built on the foundation of his Heartland Pork (once the 13th largest American pork supplier, 4th since being sold in 2004) and his biofuels company Hawkeye Energy Holdings, since sold to KOCH Industries. Summit, also of Alden, Iowa, is a technologically intensive, integrated, high-density agribusiness powerhouse.

Pharos Financial Group began during the lucrative, post-Soviet privatization free-for-all of the 1990’s, and controls the contributing Pharos Global Agriculture Fund. Rastetter is CEO and Tim Callahan, Managing Director of Summit Group and formerly the CFO of Hawkeye Energy Holdings, is CFO. Callahan also once worked for Credit Suisse, where Pharos Financial Group CEO Peter Halloran was once employed. 1, 2

On the domestic front is Serengeti Advisers, who hold a quarter stake in this multinational endeavor. The Director, Iddi Simba, was formerly a minister of trade and industry. He is also currently facing fraud charges for his role on the board of another Tanzanian company, and was asked to resign his government post after a commodities scandal.

Iowa State University was originally presented to the Prime Minister of Tanzania as a partner, entrusted with educating farmers to maximize their productivity and determining the best horticultural approach to the project. After rancorous media coverage Wendy Wintersteen, Dean of the College of Agriculture and Life Sciences at ISU, was finally forced to publicly distance the school from Agrisol. Local heavyweight Rastettter was appointed to the Board of Regents by governor Terry Branstad, recipient of re-election contributions, and has donated millions to the school. That the proposed sites in Tanzania continued to house Burundi refugees pushed things over the edge.

The Agrisol Proposal

The plan is two-pronged: Improve food stability for Tanzanians and turn Tanzania into a regional agricultural power. The first half is to entice the government to allow foreign companies in for pennies on the hectare and considerable tax incentives. The latter allows Agrisol and its affiliates to turn a profit.

Large plantations are slated for each of the three allotted parcels. Each will begin with corn cultivation and poultry production, then graduate to cattle, sorghum, soy and sugarcane. Corn appears to be a cornerstone of the entire project as presented to the Prime Minister and illustrated with horrible Powerpoint slides. Years of scientific research and manipulation have engineered strains of corn which are worthless for people but are excellent raw ingredients for other goods. The germ produces cooking oil and filler for processed foods; ethanol, distilling grain and grits result from endosperm fracturing; animal feed and more filler for processed foods are extracted from the fiber.3

Poultry production serves two immediate purposes: Eggs and chicken are an easy source of protein for market and chicken shit can fertilize corn. Rows and rows of corn. It’s going to take a lot of chickens.

Taking cures from the enclosed loop model of Summit Group each plantation will almost certainly include a corn processing plant, and probably an ethanol distillery. According to Pharos Global Agriculture Fund protein bars and beer will eventually contribute to Tanzanian food security, while germ protein and whey can carry on to further processed food production. Teams are also looking into the acquisition of existing slaughterhouses for the cattle which will originally be reared.

An Agrarian Economy

Henry Akona, Agrisol’s Director of Communications, phoned into the Iowa community radio program The Fallon Forum (February 22nd, 20124) to discuss food security in relationship to the Tanzanian project. He relates a personal story shopping for eggs in Dar es Salaam and finding their prices exorbitantly high. Locals buy one or two at a time, unable to shell out for a complete dozen. The answer is to produce vast quantities of eggs from vast quantities of chickens.

America has vast amounts of chickens, overwhelmingly reared in close quarters by large farms. They are fed scientifically formulated feed to maximize weight gain, carted off to slaughter as quickly as they are fattened, then shipped to your plate or favorite bucket. Cattle are also commonly housed in close quarters and provided with enriched meal, often of corn which, as ruminants, they cannot digest. The solution has been to mix antibiotics into their food to keep the cows healthy enough to grow fat enough for be slaughtered.

Feeding livestock of all stripes has taken a toll on the amount of vegetables grown for people. It takes a lot to grow a cow into hamburger, and so as a commodity the price of crops soar, made affordable by subsidies, and produce cheap meat.

Americans work in factories or offices, hospitals or restaurants, pay their bills and go out for a Friday night surf n’ turf experience. Not many generations ago this was not the land of hamburgers but after a couple of good wars, mechanization and a consumer goods revolution we are geared for mass produced crap. Tanzanians have not benefited from wars or mass produced crap. They lack the economy or resources to sustain a McDonald’s every ten blocks. Few people will be able to afford more eggs or a steak dinner because most eke out a living on their land with enough surplus to sell for batteries.

Protein deficiency in Tanzania could be combated by utilizing food enrichment. Every supermarket in America sells enriched rice, enriched bread, enriched pasta, salt with added iodine, milk with added vitamins—all to spare us the challenge of a nutritionally balanced diet. Agrisol could operate their plantations and create a localized source for food enrichment, undercutting the typical delivery of prepackaged rations by charity and aid organizations.

Poor crop yields could be combated by expertise. The introduction of modern farm equipment to people who lack tractors or even beasts of burden would allow them to cultivate more of their land while improved seeds and a better understanding of soil and irrigation would produce more food. More surplus crops would hit local markets, more chickens would be raised to produce more eggs on existing farms, children would then be more free to pursue an education in lieu of pitching in for diminished returns on the farm.

It takes time to build an economy ready for massive egg farms and cattle factories, time which would allow other foreign companies to swoop in an acquire land at cut-rate prices. There’s no money in supplanting charity organizations. You see the difficulties.

Career Opportunities

The United Nations, World Bank, United States Agency for International Development, government ministers and community groups want private investment. What has raised the suspicion of land rights activists, including The Oakland Institute, is that agricultural businesses are striking deal that could exploit cheap land and labor at the expense of the local population.

Subsistence farming is a hard life, a labor intensive, all-consuming affair. Modern farming capitalizes on mechanization which plants seeds, irrigates an harvests row crops faster than people. While establishing a new plantation would require furnish temporary work for laborers, and while peak harvest might require season hands, an established farm like those Agrisol has in mind are almost entirely worker free. One of the many riders attached to the Memorandum of Understanding5 craft during talks between Agrisol and the government of Tanzania is that the company provides training and resources for neighboring communities. Existing law restricts the number of visas granted to skill workers specifically to ensure the training and employment of citizens. Even if each parcel acquired by Agrisol comes equipped with a processing plant and ethanol distillery the amount of jobs resulting would be less than the number of people who could be working their own farms on the same amount of land. Land that those people cannot currently afford, even at the depressed hectare rate Agrisol can easily cough up.

Many companies currently operating, or hoping to operate, in Tanzania are experimenting with an outgrower program. Neighboring farmers could use portions of their land, presumably portions not being farmed due to a lack of equipment, to raise crops on behalf of the company. Seeds and fertilizer would be provided and the goods purchased back at a fixed rate. It sounds like sharecropping. It sounds like a company store. It sounds like international law over patented seed might become an issue. But most fundamentally it sounds like bullshit. What can half an acre of fallow land produce for a large plantation?

Further from the fields more work may become available. Enterprising companies can purchase some of the plantation spoils for the manufacturing of candy bars and boxed cake in nearby towns which lie alongside roads and railways. When chickens and cows flood the market abattoirs will need roustabouts and butchers. These jobs may present the rural community with opportunity, although the balance between the wages earned and the lower productivity of family farms might present a problem for the already precarious food security issue.

But before market towns can become factory towns infrastructure needs to be built, and there will be plenty of construction jobs to go around. Companies negotiate guarantees that what they produce can be shipped from the farms to where it needs to go.

Work is already underway. Chinese firms have long been a fixture building rail links. The port of Dar es Salaam will be modernized, funded by World Bank funds and overseen by the lowest bidder. Where will the corn powder and poultry Agrisol wants to produce go? Where will the distilling grain, protein bars, beer and beef go? Currently 80% of employment in Tanzania is agriculture, predominately subsistence farming. If ten percent shifts into construction and manufacturing will a local market with purchasing power begin buying dozens of eggs and hamburger and ethanol? Or will the crops grown on cheap land roll down railways funded by World Bank money built by cheap labor overseen by foreign contractors to the port, destined for points across the Arabian Sea where wealthy emirates and oil kingdoms are rich in coin but poor in arable land?

Next in the series: Impacts Past & Perceived

Image from the pdf Agrisol Presentation to the Tanzanian Prime Minister, and purports to depict the Prime Minister in a combine during a trip to Iowa. No photographer credited. I call it fair use.

1 General information from The Oakland Institute’s pdf Presentation on Africa Projects, Pharos Global Agriculture Fund (back)
2 General information from The Oakland Institute’s pdf Overview of Summit Farms, Agrisol Energy (back)
3 General information from The Oakland Institute’s pdf Agrisol Presentation to the Tanzanian Prime Minister (back)
4 Additional episodes of The Fallon Forum regarding Agrisol and Tanzania can be found on February 1st (with The Oakland Institute Executive Director Anuradha Mittal and Akona), and February 27th (with Dan Rather Reports producer Adam Bolt). Dan Rather Reports dedicated half an episode to the controversy surrounding Agrisol’s investment in Tanzania called Trouble on the Land, the transcript of which can be downloaded as a pdf here. (back)
5 The entire Memorandum of Understanding is available for download as a pdf from The Oakland Institute (back)

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