Corporations from Gulf countries are working with Egypt to reclaim such desert land for agricultural production
In Egypt, corporations from arid Gulf countries facing an impending water crisis have capitalized on the country’s strategy to “reclaim” desert land for agricultural production to boost their own imports.
In the Western Desert, rapid changes are in full swing to make green what was mostly sandy desert two decades ago.
Vast expanses of green extend across the horizon, tended by the advanced machinery that has replaced hundreds of agricultural workers. The land is watered using center-pivot irrigation systems, connected to one another in a series of canals through which water is driven by one of the biggest water pump stations in the world.
A number of engineers oversee the expansion works to cultivate new fields of alfalfa on land run by one of several Gulf investment companies in the Toshka project.
The desert’s greening is part of an agricultural development and investment initiative framed as aid to the Egyptian people. But in fact, Gulf corporations acquired most of the land as part of the oil-rich countries’ plan to ensure their food security by cultivating land outside their borders.
Area allocated per company / organisation
In January 2009, the Kingdom of Saudi Arabia launched the King Abdullah bin Abdulazizinitiative for agricultural investment abroad, outlining plans to achieve food security by investing in countries with agricultural potential.
This initiative included offering financial support to Saudi investors, with the government covering up to 60 percent of construction and production costs. The government also committed to negotiating bilateral agreements with other governments to facilitate business for investors abroad and secure the export of at least 50 percent of their produce to the kingdom.
This long-term agricultural strategy evolved with one ministerial decision after the other, starting from limiting wheat cultivation in 2005. A 30-year program of wheat production and cultivation in the kingdom then decreased gradually until it was completely halted in 2008 due to concern over the depletion of water resources. Last year, while the Saudi government lifted the ban on wheat farming under certain conditions, the cultivation of green feed was completely banned as it consumes up to six times more water than wheat.
Saudi Arabia wasn’t the only Gulf country with an impending water crisis. The United Arab Emirates was also facing diminishing water resources and turned to importing about 90 percent of its food. The UAE thus also began to push for investment in farming ventures abroad.
Facing similar challenges, the two countries jointly announced “The Strategy of Resolve” last year to strengthen economic, political and military cooperation. This includes establishing a unified strategy for food security, with plans to harness the full potential of agricultural and livestock production and to work together on joint projects.
In the last few years alone, the Emirates has managed to gain control over almost 4.25 million feddans of land spread out over 60 countries, while Saudi Arabia now controls about 4 million feddans around the globe. (1 square kilometer is equal to 238.09 feddans)
Some define the rush by richer countries to buy or lease large expanses of land in countries with agricultural potential as a form of neocolonialism, which achieves food security for the investing countries while exploiting non-renewable resources, including water, in the farming countries.
Gulf investors found their panacea in Egypt, which is increasingly adopting a capitalist agricultural production model that prioritizes investment in large-scale, modernized farming to export crops over pursuing strategic crop cultivation and traditional farming methods in the Nile Valley and Delta.
In Egypt, the Land Matrix has tracked 14 land acquisitions making up 185,000 hectares – almost all in the agricultural sector – with another 151,000 hectares in negotiations.
Land Deals in Egypt
“Come along with me around Egypt to see what has become of our country, a different picture than two years ago, or three. Between two reigns, I do not compare, or despair, or shout in glee. It’s my children’s right to see Egypt, my country, in the millennium, shining new as can be.”
So went the anthem played on all state-run Egyptian TV channels in early 1997 during the visit of former President Hosni Mubarak to Egypt’s Western Desert, just 225 kilometers south of Aswan. In what became an iconic photograph of the Mubarak era, he can be seen raising his hands in salute to the engineers to inaugurate the Toshka project.
The project’s plan was designed to start construction in 1997 through to 2017. The main objectives were to erect a new Delta south of the Western Desert, add up to 1 million feddans of farmland, create new industrial and residential communities, and generate 45,000 new jobs every year to accommodate 4-6 million Egyptians in 10 years.
Toshka Project Development
But years have gone by, and Egypt has not noticeably benefited from the Toshka project. The crisis of overpopulation in the Nile Valley and the issue of food security remain unresolved. The project has, however, achieved considerable success for some foreign investment companies.
The Emirates gained a foothold in the project as early as 1997, with a $100 million donation made through the Abu Dhabi Fund for Development. The money went toward constructing and lining the project’s main water canal. Extending for about 51 kilometers, it has since been renamed the “Sheikh Zayed Canal” after the ruler of Abu Dhabi.
The concerned authorities earmarked one-tenth of Egypt’s total quota from the Nile’s water (5.5 billion cubic feet out of 55.5 billion cubic feet) for the project. A 250 MW pumping station was built to pull the water from Toshka valley, which is linked to Lake Nasser and filled from flood water, to the Sheikh Zayed Canal, which then feeds four branches extending along the areas to be “reclaimed.”
After water was pumped into Sheikh Zayed Canal in 2003 for the first time, it brought with it an influx of Gulf investors into the Toshka area. The Toshka project currently spans about 405,000 feddans, 49.4 percent of which are owned by the Saudi-based Al Rajhi International for Investment company and the Emirates-based Al Dahra for Agricultural Development company. The Egyptian government and state-owned agricultural reclamation companies also own shares in the project.
The contracts between the Egyptian government and Gulf investors, particularly in Toshka, are rife with violations, according to information released in previously published media reports, as well as copies of the official documents obtained by Mada Masr.
In 2011, the Egyptian Center for Social and Economic Rights filed a lawsuit against Al Dahra calling for the annulment of the contract. The lawsuit stipulated that the sale of 100,000 feddans of land in Toshka to the company involved gross squandering of public funds and the sale of state land at a lower price than the estimated market price, since the land was sold at LE50 (US$3) per feddan at a time when the average land price was LE11,000 EGP (US$637) per feddan.
Price paid for land
A handful of lawyers have filed lawsuits against some of the Gulf companies intertwined in Egypt’s network of agricultural investment, contesting that some of the contractual terms had violated Egypt’s Constitution and squandered the country’s resources.
According to a lawyer who worked on one of these lawsuits, major corporations often operate under a web of entangled investment interests as a strategy in order to gain complete monopoly over the market under the guise of multiple companies.
The lawyer, who spoke on condition of anonymity, said that this strategy also helps cover up how much control a certain investor exerts over the market, because the share is distributed over several companies, which also makes tax evasion easier.
This arrangement ensures benefits for all entities involved. For example, the Saudi company Al Rajhi, which grows alfalfa, a grain cultivated to feed livestock, is an affiliate of Almarai, a dairy production company. It’s also an affiliate of Alkhorayef, which works in irrigation systems. All of these companies operate under the Saudi agricultural investment conglomerate Jannat, which helps them expand their market share and meet their supply demands. It also facilitates indirect deals with other companies like Wafrah, a Saudi food products company that makes grains and pasta, and Marina, an Egyptian company that works in animal feed production.
This investment strategy aims to control the entire food supply chain, starting from the production materials to the production and industrial processing and, lastly, the market in order to exert complete monopoly over food commodities.
We’re buying water, not alfalfa
In official statements about agricultural acquisitions, investors stress their concern with preserving water resources and the long-term sustainability of their projects through producing crops for local consumption. But the reality is quite different.
In Egypt’s case, the government has pressured the companies to cultivate wheat as one of the strategic crops that sustains most Egyptians. However, the government has failed to supervise the companies to ensure uptake of wheat. According to a source working at one of the Gulf companies in Toshka, who spoke on condition of anonymity, the total wheat produced by the company was only 15,000 tons, meaning that the total area cultivated with wheat was only about 6,000 feddans.
In water-scarce Egypt, the investors acquired a huge amount of water at an extremely low cost. In an economic feasibility study he prepared, Seyam explained how the total area cultivated by both companies was about 29,000 feddans. The average amount of water consumed is about 210 million cubic meters annually, while the companies pay the Ministry of Irrigation about LE20 million (US$1.2 million) annually. If we estimate that the market price for a cubic meter of water is LE2 (US$0.12), this means that the investor purchased water worth LE420 million (US$24.3 million) for just LE20 million (US$1.2 million).
Price paid for water by foreign investors
This “water grab” is not limited to the 29,000 feddans which make up the currently cultivated area of land, but extends well into the future when the two companies will own 200,000 feddans between them.
Seyam’s analysis was confirmed by a source working at one of the two Gulf-owned companies in Toshka, who quoted one of the Emirati alfalfa importers as saying: “We’re buying water, not alfalfa.”
Average Water Consumed by Crops
The same amount of water, around 210 million cubic meters, said Seyam, would be sufficient to cultivate 84,000 feddans of wheat, thus raising Egypt’s production of a strategic crop by about 62,000 tons. Egypt consumes about 16,000 tons of wheat annually and is the world’s largest wheat importer. Last year, it imported about 6 million tons of wheat.
Amount of alfalfa and wheat grown using 210 million cubic meters of water
Hamdy Abdel Dayem, the official spokesperson for the Egypt’s Ministry of Agriculture, said most contracts limit investors to cultivate only 5 percent of land with alfalfa in order to protect water resources. But MP Raef Temraz, the former deputy for the parliamentary committee on agriculture and irrigation, did not believe this.
He said alfalfa cultivation takes up 25 percent of the total cultivated land in Toshka and the New Valley governorate. Temraz noted how alfalfa is exported in huge quantities to a number of Arab countries, chiefly Saudi Arabia and the United Arab Emirates.
Gamal Seyam, a professor of agricultural economy at Cairo University, stated that this type of foreign investment gives zero return to the state because it allows investors to buy the water for cheap, acquire land at a low cost and export most of their produce. Furthermore, the capital for these corporations is not based in Egypt. Thus, there is no real benefit to the national economy.