Barbarians at the barn 3

06.10.2020
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Claudia Stürzinger und Silva Lieberherr work at Breat for all in the area of agriculture.

Problematic investments in obsolete agricultural models

Recently, the Swiss Federal Department of Foreign Affairs (FDFA) proudly reported in its News news that a Swiss player is at the centre of attention when it comes to counteracting the “investment challenge” in the rural areas of the global South: Bamboo Capital Partner, a private equity firm based in Geneva. The Agri-Business Capital Fund (ABC), managed by Bamboo Capital, also receives money from the Swiss Agency for Development and Cooperation (SDC). However, this money takes a tortuous route. It is worth looking where it flows to.

The Swiss Agency for Development and Cooperation (SDC) paid a sum of CHF 9.3 million Swiss francs (about 8.6 million euros) to the International Fund for Agricultural Development (IFAD). IFAD, a specialized UN agency, is an international financial institution that grants loans to companies in the agricultural sector. Recently, IFAD has also started to focus on private equity and has initiated its own private equity fund, the ABC Fund. IFAD’s goal is to mobilize 200 million euros from public and private investors for this private equity fund over the next ten years. This includes the over nine million Swiss francs that the SDC has paid to IFAD.

The ABC Fund is managed by Bamboo Capital Partners, the company praised by the FDFA as a social impact investor. Normally, managers of private equity funds receive 2 percent of the invested capital as a fee. The SDC emphasizes that the 2 percent share decreases with increasing investment volume and that the ABC Fund has a different fee structure. But the chairman of the ABC Fund’s board adds that the fees would “[take] into account the very large number of investments” because the fund only grants small loans – compared to other so called development financers. What this means is that many small investments take a lot of time for the fund managers, which must be paid for. The amount Bamboo Capital actually collects for its services is confidential according to SDC.

The high fees are one issue. Another central question is which agricultural projects are supported with the fund’s money. According to FDFA-News, Switzerland is providing expertise through Bamboo Capital. We do not doubt that.  But whether this expertise is of agricultural nature is questionable, as all the company’s employees come from the financial sector. The ABC Fund selects its projects accordingly: it “provides loans and equity investments to support carefully selected farmers’ organisations, rural SMEs and financial institutions in low- and middle-income countries”, whose main criterion is that they show “a potential for high growth”. Kristina Lanz of Alliance Sud takes a critical view of such development financing: “If we are to reduce poverty, inequality and the destruction of natural resources in order to achieve the SDGs [UN Sustainable Development Goals], there must be a special focus on the poorest groups of people, as well as on conditions for sustainable production and consumption. This is hardly compatible with the notions of liquidity and profitability of the financial economy.”

Wrong approach

One of the first investments of the ABC Fund is Dragon Farming in Ghana, a subsidiary of the US-based Inter Grow-Company Ltd which processes soybeans into feed for farm animals on a large scale. Thanks to the investments from the ABC Fund, the quantity of processed soybeans is to be increased by 40 percent this year. People in northern Ghana, where part of the soybeans for Dragon Farming is grown, already feel the consequences: “This intensification means more application of chemical fertilizers and pesticides which all worsen the already fragile ecosystems and undermine the regenerative capacity of the landscapes. The few available arable lands are being used for soybean cultivation, which means households have very little or no land at all for cultivating other local staples such as cereals, cassava and vegetables,” says Amos Yesutanbul Nkpeebo, research director of the FIDEP Foundation, a well-known think tank based in Ghana focusing on agriculture, climate change and ecosystems.

The organizations with which the ABC Fund works also stand for industrial capitalist agriculture. For example, the Alliance for a Green Revolution in Africa (AGRA), one of the investors in the ABC Fund. Together with IFAD and Bamboo, AGRA selects the projects the fund finances. AGRA works closely with large agricultural corporations such as Syngenta or Bayer, whose business model is based on pesticides and patented seeds. This type of agriculture leads to increased dependence on these large corporations. It contradicts the promotion of food sovereignty of the people, which Bread for All and our partner organizations are working towards. Furthermore, a recent study shows that AGRA’s methods have not achieved its own goals, such as improving the income of small farmers or fighting hunger.

Financial-driven agriculture – a dead end

The example from Ghana shows that such investments do not help to solve local problems. What is needed is a different kind of agriculture. The north of Ghana is highly impoverished, explains Amos Yesutanbul. He works closely with smallholders and advocates for sustainable interventions: “We recommend a mix of real solutions, including support for peasant agriculture, improving local food systems, agrarian reform and agroecology. These solutions have solid data backing their feasibility and could ensure the security and sustainability of community livelihoods in the northern region of Ghana.”

So it has not become clear to us, why the fact that a Swiss company manages a fund that promotes industrial, profit-oriented agriculture in the global South and receives considerable fees in return, is a reason to celebrate for the FDFA. The fact that money from the SDC flows into this fund is worrying. After all, we do not need a financially driven agriculture, but one that is people oriented. This is the type of agriculture in which the SDC needs to invest.