Canada’s Development Finance Institution and Land Grabbing in Africa
On Wednesday, April 27th, 2022, we caught up with Devlin Kuyek, a researcher at GRAIN, a small international non-profit organization that works to support small farmers and social movements in their struggles for community-controlled and biodiversity-based food systems, and Geoffrey Wokulira Ssebaggala, the Director of Witness Radio Uganda, a not-for-profit national organization which combines both media approaches and legal aid support to mobilize, connect and empower small holder farmers to speak with one voice against land injustices and push for equitable access to opportunities and resources.
This interview is part of a series with the Blended Finance Project a group of unions, non-governmental organizations and academics who are concerned about the Canadian government’s embrace of what is called “blended finance.” We argue that blended finance is merely the latest iteration of the privatization and financialization of foreign aid and seek to engage others in Canada and around the world to propose more equitable public alternatives.
Adrian Murray (AM) and Susan Spronk (SS): In the Blended Finance Project, we have documented how blending uses public money to leverage private money and to shift the risk of investment from the private to the public sector by subsidizing commercial actors. Witness Radio and GRAIN have been supporting communities negatively affected by the very harmful role that unaccountable private equity firms are playing in land grabbing throughout the world, a process which is often facilitated by public development banks and development finance institutions (DFIs). How are blending and other so-called innovative finance mechanisms implicated in these land grabbing deals?
Devlin Kuyek (DK): GRAIN’s focus is on food and agriculture, but blending is a common trend unfolding in multiple sectors. In many countries in the global South, food systems are still largely in the hands of small-scale food producers: farmers, pastoralists, fisher folk. Markets are managed and controlled by small vendors. These food systems do a great job of providing people with nutritious food. They’re sustainable and they’re low emission. But they do not serve the interest of corporations because there’s no room there for corporations to profit. These are the kinds of growth areas where multinational food and agribusiness corporations and financial firms are looking to grow, that is, ‘frontier markets’. Some corporations call this initiative ‘digging into the pyramid;’ the bottom of the pyramid, where most people are.
Now in these areas investment is not so easy: there are difficulties with infrastructure, land conflicts, etc. Expanding agribusiness there involves dispossessing people from their land. It’s risky from a corporate point of view, and they have more difficulties attracting finance to move into these areas. The development banks play a key role in providing that kind of investment, which is where they come in. They’ll provide loans or even equity investments in some of these companies that are operating in these ‘frontier areas’, that provides a bit of a guarantee to other investors who might come in via pension funds or other institutional investors. So, development banks actually play a major role in expanding agribusiness into these areas and that’s why they’re so involved in land grabbing, in the destruction of local markets and all kinds of other conflicts that we see.
Geoffrey Wokulira Ssebaggala (GWS): This kind of development creates a lot of conflict. I’ve just returned from court in the countryside, Kiryandongo in Uganda. For the last two years we’ve been pushing and supporting civil court cases that were filed by communities that are being forcefully evicted by multinational agribusiness companies – American, Indian and many others. We are happy that the cases are finally being heard. It’s been a long struggle.
AM and SS: Canada established a development finance institution called FinDev in 2017 headquartered in Montreal, Quebec. What has been the track record of FinDev thus far?
DK: I’ve looked mainly at their investments in Africa in the food sector. This sort of ‘new’, innovative financing institution is, interestingly enough, involved in old colonial style projects: several of their investments are involved in plantations on large areas of land.
One of FinDev’s investments is in a company called Miro Forestry, which has large-scale industrial tree plantations on 21,000 hectares in Sierra Leone and 10,000 hectares in Ghana. In both instances there are land conflicts with local communities. In Sierra Leone, the contracts that they signed for the leases over the lands stipulate that the company pays the communities only two dollars per hectare, per year for this loss of their lands. With these deals, communities lose their ability to gain livelihoods from these areas. Miro Forestry establishes tree plantations, so there’s very little job creation. The communities are saying that the company has not lived up to even the meager promises they made: to build schools, to provide social services, decent jobs, etc. These areas are now fenced off so that communities have trouble accessing the water sources and other resources that they used to have access to. They have difficulty even accessing the road that cuts through the area. In Ghana, there are similar complaints: lack of consultation; people’s crops were destroyed when the company moved in and took over the lands, etc.
By building these tree plantations, the company is also selling carbon credits. These deals allow some of the worst polluters on the planet to purchase carbon credits so they can keep on polluting. It is part of their business model. This form of ‘development’ thus involves taking away the land and resources that people could have for local food production in countries that will be hardest hit by the climate crisis. The local communities become dependent on food imports. And the profits go mainly to foreign investors that are involved.
DFIs are also investing in private equity funds. This is a growing trend in Africa and elsewhere where you see private equity companies established through offshore structures, operating through tax havens, who charge huge management fees. One particular fund that FinDev is invested in is managed by Phatisa, a company based in Mauritius. They have these fee structures whereby a large portion of whatever profits come out of this end up with the fund managers. They also seek very high returns so the investments that are being made by these development banks through them are seeking high returns in food and agriculture in Africa, meaning they’re extracting a lot of the wealth that could be generated from food and agriculture on the continent and taking it out of the countries and the continent. They’re also invested in some large, multinational food and agribusiness corporations like the Export Trading Group. It’s hard to understand why the Canadian government is providing a subsidized form of finance to a multinational corporation in order for it to expand into Africa in this way.
AM and SS: Turning to the effects of blending on local communities, can you tell us why it’s been so difficult for communities that you work with and others to hold these development finance institutions accountable?
GWS: We have been trying to establish whether FinDev is active in Uganda, but we do not know.
It is difficult to get information about who is funding what never mind holding the companies and institutions involved accountable. Our experience is that neither the development finance institutions, nor the companies and private equity firms that they finance, engage with local communities from the word ‘go’. Local communities don’t decide which projects they should have. These institutions do not seek community consent regarding what projects take place on their land. It is a very violent process. People lose everything from their livelihoods to social well-being because of these investment projects.
In the Ugandan context, the field of investment is marred with a high level of corruption. Information about investment is hidden from communities until organizations like Witness Radio, GRAIN and a few others do background checks to establish where the money is coming from to evict these communities. And, of course, the journey to get a remedy, is not an easy journey. Internal accountability mechanisms, take a lot of time. Resorting to domestic courts is another horrible experience one can talk about. So, yeah, there is a lot that really needs to be done.
DK: Development banks like to portray themselves as being held to a higher level of environmental and social governance standards. Some of them even have grievance mechanisms in place. Our experience is that these do nothing to address the huge power imbalance that exists between the companies they invest in, who are very often closely aligned with local elites, and the marginalized communities where they operate and are taking land.
Take the case of Feronia. It’s a Canadian-based company traded on the public stock exchange – now bankrupt – but operating oil palm plantations on over 100,000 hectares of land in the Democratic Republic of the Congo. For years and years, communities issued statements and memorandums, documented human rights abuses, environmental violations and egregious labor violations, thereby exposing many illegalities when it came to the land occupation. And the development banks, who actually had majority control of this corporation for several years, did nothing but parrot the words of the executives who were not even based locally. There was no serious effort to investigate the actual allegations that were being made.
It came to a point where a grievance was filed for a mediation process by 11 of the affected communities, which was accepted by the international complaints mechanism of the German and Dutch development banks (the French development bank is also now part of it). That process has dragged on for three years now. In the midst of that process the development banks exited entirely, handing the company over to a private equity fund. It was just completely unaccountable to anyone. The reports coming out of human rights abuses remain as egregious as ever, but this complaint mechanism now has very little teeth. So even in a best-case scenario where there is a grievance process, there is almost no accountability.
AM and SS: Given what you’ve told us about DFIs, including FinDev Canada, what would you argue: should these institutions be reformed or just abolished. And if abolished, what would you like to see in their place? What do we need?
DK: Well, our focus is on food and agriculture. Development finance is fundamentally about providing more investment and finance. It’s about channeling money, more money. A lot of it going toward the expansion of corporate agribusiness. It’s structured in a way that makes it impossible to imagine how that money could go towards funding agroecology, land redistribution, the functioning of smallholder markets and local food systems, farmer seed systems. FinDev is about creating the sort of corporate profit structures and industrial agricultural models of production that have nothing to do with the needs and interests of local communities, which is supposed to be what these funds are set up to do.
Development finance institutions like FinDev are, in a sense, a colonial holdover, and that’s why they fund things like plantations. After 300 years of experience with plantations, it’s very difficult to imagine how any institution concerned with development could think that that would be an appropriate investment and yet that’s what they’re committed to and doing. So, in our view, we don’t need more of these development banks. They should be abolished. That’s not where public money should be going.
If Canada and other countries are interested in supporting different systems that that are able to deal with the climate crisis, that are able to get over some of the systemic and structural issues that are the cause of poverty and that are plaguing local communities, so that their needs are actually met, we need a totally different mechanism. And those mechanisms should be in some way accountable to the people that they are supposed to be serving. At a minimum, such a mechanism requires a governance structure with a very strong voice and representation within the decision-making for the communities that they’re supposed to be serving. We are very far from that now.
GWS: I don’t know how best we can reverse this. First, we need development finance institutions and banks to accept the mistakes that they’ve made and then they need to come up with clear, straightforward plans on how they are going to fix these problems.
Second, there must be close supervision and monitoring of where the money has been pumped into, and what it’s doing. Institutions and investors must follow due process. Because they seem to claim that they follow environmental protections, human rights protections and many other things, they do not have a clear plan for monitoring where the money goes. Monitoring and enforcement needs to happen from day one.
Third, we need development banks to bring real development. If the majority of local communities continue to lose their land to investors, people will target those international investments with demonstrations and strikes. And therefore, there’s no sustainable future for these kinds of investments that operate in countries like Uganda. Doing meaningful, responsible business should be the starting point if they want to protect their investments and also their profits.
AM and SS: A statement that was signed by over 80 civil society organizations issued in October of 2021 in advance of the Finance in Common Conference on Agriculture that was being organized by the public development banks states the following: “we call for the creation of a fully public and accountable funding mechanisms that support people’s efforts to build food sovereignty realize the human rights of food, protect and restore ecosystems and address the climate emergency.” What does this funding mechanism look like? Can you provide an example?
GWS: It’s very difficult right now to determine or define how best this should be done. Right now we are strategizing on how best to make the current financial actors accountable to communities. In Uganda we in communities can’t rely on the government. They have disappointed us. But nor can we trust the financiers, because they’ve taken away our land our livelihoods. It’s a mess.
DK: I don’t think there’s one existing case that would match with the ideal articulated in the statement. But, it is still a vision worth striving for. As Geoffrey notes, most governments do not seem interested.
Instead, governments are involved in the current push towards blended finance. Blended finance is all about ensuring that any state project is ultimately backed by people, so we have the final responsibility for it. But it’s our money. The risk is all taken by the government and the people. And the private sector has control and makes the profits.
With blended finance, development finance is making an already atrociously corrupt situation even worse. More money is not going to resolve this problem. So, there is certainly a need for international solidarity. Right now, the context is so toxic and corrupt that the real thing that we need to do as Canadians right now is to make sure that there is no way that any public money in our name goes to make matters worse for people on the ground.
There’s a great photo that Witness Radio took in Kiryandongo that captures what the development finance model is accomplishing right now. You see a tractor from the company which has received money from a development bank, after a forceful eviction of the people, plowing up their cassava crop, which is a very sustainable, important local crop. They’re destroying it in order to be able to plant corn or maize or soybeans for export.
Whatever shape this new, public, accountable finance mechanism takes, whether a government program, bilateral aid or some kind of small grant fund that is able to support communities, the fund needs to be accountable to the local people, be respectful of their control over their land, resources and territories. We need to build from these principles and demand that our governments create such mechanisms. •