8 May 2017

Africa: World Bank Financing Land Grabs

analysis

Editor's Note

"The World Bank Group has indirectly financed some of Africa's most notorious land grabs, according to a report by a group of international development watchdogs. The World Bank's private-sector arm, the International Finance Corporation (IFC), is enabling and profiting from these projects by outsourcing its development funds to the financial sector." - Oakland Institute

This new investigative report, from five international development watchdog organizations, focuses particularly on the role of the World Bank in fueling land grabs in Africa through its financing of private sector investments, for both mining and agriculture. While the problem of appropriation of land by both national elites and financial interests around the world is pervasive in many African countries, these particular projects are notable because they are promoted by a global organization ostensibly dedicated to addressing poverty. The evidence is that the result is the opposite.

This AfricaFocus Bulletin contains a press release from the Oakland Institute and excerpts from the full report, which has references to additional case studies and additional documentation.

In addition to the organizations involved in this report, cited below, other international organizations actively involved in these issues include ActionAid International (see http://www.actionaid.org/land-for for case studies and for campaign materials); Oxfam International (https://www.oxfam.org/en/tags/land-grabs and Global Witness (http://tinyurl.com/k39spqg).

For previous AfricaFocus Bulletins on agriculture and related issues, see http://www.africafocus.org/intro-ag.php

On land grabbing in particular, see particularly http://www.africafocus.org/docs12/wb1205.php, http://www.africafocus.org/docs12/sl1205.php, http://www.africafocus.org/docs10/ag1010a.php, http://www.africafocus.org/docs10/ag1010b.php, and http://www.africafocus.org/docs10/ag1010c.php

World Bank Fuels Land Grabs in Africa Through Shadowy Financial Sector Investments

Oakland Institute

May 1, 2017

http://www.oaklandinstitute.org - direct URL: http://tinyurl.com/l3dz69p

[full report available at http://tinyurl.com/n2g9b7r ]

Oakland, CA -- The World Bank Group has indirectly financed some of Africa's most notorious land grabs, according to a report by a group of international development watchdogs. The World Bank's private-sector arm, the International Finance Corporation (IFC), is enabling and profiting from these projects by outsourcing its development funds to the financial sector.

AngloGold Ashanti mine in Siguiri in eastern Guinea. The mine produces about 300,000 ounces of gold each year.

The report, Unjust Enrichment: How the IFC Profits from Land Grabbing in Africa, was released today by Inclusive Development International, Bank Information Center, Accountability Counsel, Urgewald and the Oakland Institute.

"Pouring money into commercial banks that are driven only by profit motivations is not the way to foster sustainable development," said Marc Ona Essangui, Executive Director of Brainforest and winner of the Goldman environmental prize in 2009. "In Gabon, this development model has instead enabled a massive expansion of industrial palm oil, which threatens our food security and the ecological balance of Congo Basin's ancient rainforests."

"Tens of millions of hectares of land on the African continent have been grabbed by foreign investors in recent years. This has led to loss of life, land, and livelihoods for millions, and threatened the very survival of entire communities and indigenous groups," commented Anuradha Mittal, Executive Director of the Oakland Institute. "The World Bank must acknowledge that this is not development. It is not poverty reduction. These are investments for corporate profits that exploit and displace people."

The report is based on a yearlong investigation conducted by Inclusive Development International, which found that IFC-supported commercial banks and private equity funds have financed projects across the world that have forcibly displaced hundreds of thousands of people and caused widespread deforestation and environmental damage. In Africa, the investigation uncovered 11 projects backed by IFC clients that have transferred approximately 700,000 hectares of land to foreign investors.

The projects include agribusiness concessions in the Gambela region of Ethiopia that were cleared of their indigenous inhabitants during a massive forcible population transfer campaign in the area; oil palm plantations in Gabon that have destroyed 19,000 hectares of rainforest and infringed on the customary land rights of local communities; and a gold mine in Guinea that led to the violent forced eviction of 380 families.

"These projects are antithetical to the World Bank's mission of fighting poverty through sustainable development," said David Pred, Managing Director of Inclusive Development International. "They also make a mockery of the IFC's social and environmental Performance Standards, which are supposed to be the rules of the road for the private sector activities that the IFC's intermediaries support."

The report is the fourth of the investigative series Outsourcing Development: Lifting the Veil on the World Bank's Lending Through Financial Intermediaries, which follows the trail of IFC money and examines at how it impacts communities around the world.

Inclusive Development International's yearlong investigation uncovered 134 harmful or risky projects financed by 29 IFC financial-sector clients. These projects are found in 28 countries and on every continent except Antarctica. A database of the findings can be found here (https://goo.gl/UZ90PI).

In response to the concerns raised in the Outsourcing Development investigation and by the IFC's Compliance Advisor Ombudsman, IFC Executive Vice President Philippe Le Houérou recently acknowledged the need for the World Bank Group member to re-examine its work with financial institutions. In a blog post from April 10, Le Houérou wrote that the IFC would make "some important additional improvements to the way we work," by scaling back the IFC's high-risk investments in financial institutions, increasing its oversight of financial intermediary clients and bringing more transparency to these investments, among other commitments.

The IFC has also exited investments in banks highlighted by the Outsourcing Development investigation, including ICICI and Kotak Mahindra in India and BDO Unibank in the Philippines.

"We welcome the IFC's new commitments to encourage a more responsible banking system by increasing its oversight and capacity building of financial sector-clients moving forward," said Pred. "However, rather than simply divest, we want to see the IFC work with its clients to redress the serious harms that communities have suffered as a result of the irresponsible investments that we have brought to light."

"IFC's collusion in land-grabbing in Africa is deeply shocking, so its pledge to reduce high risk lending to banks is welcome, said Kate Geary, Forest Campaign Manager for Bank Information Centre Europe. "But how can we be sure when there is no disclosure of where over 90 per cent of IFC's money invested through third parties ends up? The IFC's financial sector clients must come clean about projects they are financing so they can be held accountable to their commitments to invest responsibly."

Financial-sector lending represents a dramatic shift in how the IFC does business. After decades of lending directly to companies and projects, the World Bank Group member now provides the bulk of its funds to for-profit financial institutions, which invest the money as they see fit, with little apparent oversight. Between 2011 and 2015, the IFC provided $40 billion to financial intermediaries such as commercial banks and private equity funds. Other development finance institutions have followed suit.

The Outsourcing Development series is available at: http://www.inclusivedevelopment.net/outsourcing-development

A database of IFC Financial Intermediary sub-Investments with serious social, environmental and human rights risks and impacts is available at:

https://goo.gl/UZ90PI

Unjust Enrichment: How the IFC Profits from Land Grabbing in Africa

[Excerpts from full report. Full report available at http://tinyurl.com/n2g9b7r ]

On November 7, 2015, Sira Bérété was walking home from high school. It was a hot, dry after- noon in remote northeastern Guinea, one of West Africa's poorest countries.

As Bérété approached her village, she heard soldiers shouting. The situation in her community, Kintinian, had been tense for a while, and government security and defense forces had become a regular presence. The commotion alarmed the ninth grader, but she needed to get home. So she kept walking.

Bérété heard gunshots. She didn't have time to react. She felt an immense force slam into her from behind. Her body hurled forward. A bullet entered her back, to the left of her spine, just below her shoulders. It tore through her and exited through the front of her neck.

She remembers the pain. She remembers starting to run. Then she lost consciousness. She doesn't remember much else.

She found out later that a bystander had rushed her to the hospital. The medical staff saved her life. She spent three months recovering — nearly 90 days of agony and trauma — before being discharged. Her life has not been the same since.

Bérété has dropped out of school. She has lost functional use of her left arm. She is in constant pain. It grips her head, neck and arm, and moves down to her hand and fingers.

She carries more than the pain from that day. She worries that the terror will never leave. "I'm still afraid," said Bérété, her eyes pooling with tears. " Those soldiers came to brutalize us. They came to take our land."

Before the shooting, Bérété had lived with her father, who maintained a small plum orchard. Their lives were modest. "We always had enough to eat," she said. But they and approximately 380 other families lived on valuable land.

There was gold under that land, and a mining company wanted it. The firm, called Societe Anglo- Gold Ashanti de Guinee, or SAG, has held a concession since 1998 to mine a 1,500-square-kilometer area that encompassed Bérété's village. In 2015, SAG announced that its existing mines in the concession had been depleted. The company needed new land to mine.

According to numerous community members interviewed for this report, the company moved in with government security and defense forces and compelled the families to sign inventories of their possessions, often at gunpoint. The mixed forces included members of the notorious Presidential Guard, known as the Red Berets, an elite unit that massacred and raped hundreds at a political rally in the capital in 2009.

"I signed over my land with a soldier pointing a gun at me. I had no choice," said Bassy Camara, 42, a small-scale gold buyer who lost his home and his business. "If you had a man standing over you with a gun, what would you do?"

SAG is a subsidiary of AngloGold Ashanti, a South African gold mining company with operations on three continents. The sole purpose of SAG, a joint venture with the Guinean government, is to mine the concession in Guinea.

AngloGold Ashanti is the world's third-largest gold mining company. The company generated $4.25 billion in revenue in 2016.

In 2015, the year before Bérété and her neighbors were evicted, AngloGold Ashanti received a loan worth 1.4 billion South African rand (approximately $102 million) from two commercial banks located in South Africa. The loan was general in nature, meaning the company could use the money as it chose, including funding its mining operations around the world.

One of those lenders, Nedbank, is a financial-intermediary client of the International Finance Corporation (IFC). The World Bank's private-sector arm provided Nedbank with $140 million for "cross-border lending across Africa, including capital-intensive projects." An IFC press release announcing the deal noted that the funding was designed to increase lending for "resource-extraction projects" in Africa, among other goals. Support for AngloGold Ashanti's gold mine in Guinea falls squarely within the purpose of the IFC's loan to Nedbank.

Through this financial relationship, IFC money could be used by AngloGold Ashanti to operate and expand the mine in Guinea. Moreover, profits from AngloGold Ashanti and the mine have moved up through Nedbank and on to the IFC, in the form of interest from the loans.

In other words, the IFC, whose mission is to fight poverty and support sustainable private-sector-led development, is both indirectly financing and profiting from a project that is harming and further impoverishing the poor.

The IFC's exposure to the mine fits a pattern. An ongoing investigation by Inclusive Development International has found that the IFC is indirectly funding some of the most harmful invest- ment projects in the world. The World Bank Group member is doing this by channeling the bulk of its funding through shadowy investments in financial intermediaries, such as commercial banks and private equity funds. The IFC poured over $50 billion between 2010 and 2015 into the financial sector, where it has little control over or even knowledge of how that money is used.

Although the IFC's financial-sector clients are required to implement the institution's social and environmental Per formance Standards, the evidence suggests that this is not happening in practice, contributing to headline-grabbing abuses. And since the IFC does not publicly disclose the end use of such funds, the World Bank Group can frame the deals in terms of job creation and poverty reduction — when in fact the funds often flow to projects that undermine these goals.

When the Nedbank loan was announced, IFC official James Scriven praised the deal. "IFC, the [Af- rican Development Bank] and Nedbank share the objective of increasing social and environmental awareness in the financial sector, helping to contribute to more sustainable economic development across Africa," Scriven said. (The African Development Bank provided a concurrent $140 million loan to Nedbank.)

Yet in Guinea, the IFC's support for Nedbank has created anything but sustainable development. Deprived of their land and livelihoods, and given paltry compensation by AngloGold Ashanti, the relocated families have spiraled into destitution. "We don't have enough food for our children," said Lala Condé, a mother who lost her home.

The mine's impacts extend far beyond those evicted. Approximately 150,000 people are believed to be living in AngloGold Ashanti's concession area. They are in danger of being forcibly evicted in the future.

The mine has also caused serious environmental damage. AngloGold Ashanti uses cyanide, a deadly toxin, to wash the gold in preparation for refining. During rainstorms, which occur frequently in tropical Guinea, residual cyanide has flowed into the area's water sources, killing fish and livestock and poisoning drinking water, according to community members.

AngloGold Ashanti has made a number of promises to the people whose lives it has upended. It has pledged to provide jobs, irrigation, drinking water and electricity to those it evicted. Yet community members say that the company has kept few of those promises.

" The company took everything from us. We've been left with nothing. No trees. No water. No jobs," said Balla Camara, an elected representative of the affected community.

"At this moment, we prefer death to life," he said.

...

Africa is in the grips of a land-grabbing epidemic. Nearly a decade ago, in the wake of the global financial crisis, food and commodity prices soared, creating an unprecedented money- making opportunity for investors.

Large multinationals, in search of cheap land to grow crops and extract minerals, rushed to Africa to make deals. Huge swaths of land have been granted to these firms, mainly in the form of long-term leases for mining and agro-industrial projects.

Between 2008 and 2010 alone, investors acquired between 53 million and 61 million hectares of land on the continent, an area roughly the size of Ukraine, according to an academic analysis of media reports collected by the International Land Coalition.

National policy makers and international development institutions, including the World Bank, have enabled this trend by promoting large-scale land investments as a catalyst for rural development. Supporters contend that these projects increase the productivity of under-used land and create jobs in countries rich in natural resources but poor in capital.

Yet by encouraging foreign investment in land that was deemed "idle" or "empty," these policies have enabled the seizure of land that local people have sustainably used and managed according to their traditions for centuries. To those affected, these deals have been nothing more than land grabs, resulting in dispossession and displacement on a massive scale.

The World Bank Group has been at the center of this storm. Through its advisory services, the IFC has encouraged governments to make land easily available to investors by setting up land banks and similar one-stop investment shops. Acknowledging the environmental and social risks of large-scale land deals, the bank's leadership has argued that these can be managed and minimized through the adoption of voluntary codes of conduct, to which investors and governments could be persuaded to adhere.

The IFC has also provided direct financial support for companies to develop largescale industrial plantations. These investments have, however, been limited since 2009, when the bank's then president, Robert Zoellick, instituted a temporary moratorium on lending to the palm oil sector, following a damning investigation by the IFC's ombudsman into complaints of land grabbing and deforestation by an IFC client in Indonesia. While the palm oil moratorium was lifted in 2011, the IFC has been hesitant to invest directly in large-scale land projects because they inevitably — and visibly — run afoul of its environmental and social standards.

But IFC money is still flowing to these projects in Africa — through the murky back channel of financial intermediaries. By following this trail of money, Inclusive Development International has revealed that the IFC has contributed to some of the most notorious land grabs on the continent.

In Ethiopia, the IFC indirectly financed the Indian agribusiness company Karuturi Global through ICICI, a top Indian bank that the IFC provided with $150 million in 2006. In 2010, with financing from ICICI, Karuturi signed long-term leases for 111,000 hectares of land to develop sugarcane, corn and oil palm plantations in the Gambella region. Thousands of indigenous Anuak and Nuer people were forcibly displaced from the area that was simultaneously offered to foreign investors, including Karuturi, under the government's "villagization" program, according to the Oakland Institute.

In Gabon, Ecobank Transnational, an IFC financial-sector client, has financed oil palm plantations and processing facilities operated by the Singaporean company Olam. The project is being developed on a 300,000-hectare concession that local and international environmental groups warn threatens to destroy large areas of the Congo Basin rainforest, harming biodiversity and the liveli- hoods of thousands of people.

Export-oriented industrial sugarcane plantations in Sierra Leone and Zambia, funded by multiple IFC financial intermediaries, have been accused of grabbing small-holder farmland and displacing thousands of people, leading to declining incomes and food security.

The IFC's exposure to these projects demonstrates the risks of financial-sector lending. Yet the World Bank Group member has doubled down on the practice in recent years. The institution's outstanding commitments to commercial banks, private equity funds and other financial intermediaries have risen by 45% since 2010. According to the IFC's own data, between 2013 and 2015, its lending to financial intermediaries categorized as "high-risk" jumped by 300%, from $450 million to $1.3 billion.

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