Saudi Billionaire to Invest $100 Million in Ethiopian Farm

Saudi Star Agricultural Development
Plc, an Ethiopian company owned by billionaire Mohamed al-Amoudi, plans to invest $100 million in a rice farm in western
Ethiopia next year to kick-start the stalled project.

The company leased 10,000 hectares (24,711 acres) in the
Abobo district in the Gambella region, where it’s based, in 2008
and bought the 4,000-hectare Abobo Agricultural Development
Enterprise from the government 18 months ago for 80 million birr
($4 million). After delays caused by unsuitable irrigation
design and contractor performance issues, Saudi Star wants to
accelerate work in 2015 after a change of management, a redesign
of the farm and a successful trial of rain-fed rice on 2,000
hectares at the formerly government-owned operation, Chief
Executive Officer Jemal Ahmed said by phone.

“We have a very aggressive plan,” he said on Nov. 26 from
Jimma, about 260 kilometers (162 miles) southwest of the
Ethiopian capital, Addis Ababa. “If we’re able to do that we’ll
be able to produce more.”

The project is part of a government plan formalized in 2010
to establish commercial farms on 3.3 million hectares of fertile
land in sparsely populated parts of the country such as
Gambella. Ethiopia expected to earn $6.6 billion a year from
agriculture exports in 2015, according to a five-year economic
plan published in 2010, though total goods exports last fiscal
year brought in $3.3 billion.

Prime Minister Hailemariam Desalegn said in October 2013
that progress on the program had been “very slow.”

Billionaire Investor

Ethiopia-born al-Amoudi is worth $8.1 billion, according to
the Bloomberg Billionaires Index, which ranks him as the world’s
157th richest person. His company built underground oil-storage
facilities in Saudi Arabia and he owns Preem AB, Sweden’s
largest crude oil refiner. Al-Amoudi is increasingly investing
in formerly government-owned farms in Ethiopia, a nation where
companies under his Midroc group operate the only commercial
gold mine and built the largest cement plant in 2011.

Saudi Star’s $100 million investment will focus primarily
on building irrigation infrastructure, including finishing the
main canal from the more than 25-year-old Alwero Dam built by
Soviet engineers, as well as a rice de-husking plant, storage
silos and land clearing, according to Jemal.

An initial plan to have the farm divided into 3.75-hectare
plots to produce rice from submerged paddy fields has been
shelved as unworkable, he said. Only 350 hectares has been
developed since 2008 on the land leased for 300,000 Ethiopian
birr ($14,908) a year.

Economically Unviable

“It was not environmentally and economically viable,
that’s why they were struggling, so we stopped that,” Jemal
said. “We want to make it large-scale flood irrigation, not
small ponds.”

Saudi Star’s revenue is forecast to be about $60 million in
2016 once the irrigation system is developed, with 60 percent of
the aromatic rice exported mainly to Arab nations on the Persian
Gulf, Jemal said.

Hampering current harvesting are late rains and, for two
days in October, unrest in Abobo town after violence between
ethnic Anuak, who are indigenous to Gambella, and other
Ethiopians. The company has Ethiopian soldiers guarding its
compound and about 100 stationed nearby. Two Pakistanis and
three Ethiopians employed by Ghulam Rasool Co., a closely held
Pakistani engineering company building the irrigation canal,
died in April 2012 after an attack by a group of gunmen.

Security Addressed

The government has “taken care” of security issues, farm
manager Bedilu Abera said while seated in one of the air-conditioned trailers that are now Saudi Star’s headquarters
after they were moved from Addis Ababa.

Anywaa Survival Organization, a Reading, U.K.-based rights
group, said in an Oct. 14 statement that land leases in Gambella
have fueled conflict.

“The rush for land, water and other essential natural
resources has become a curse for indigenous and minority peoples
who barely have legal protection and redress,” it said.

Saudi Star says only two Anuak villages of huts with
sweeping grass roofs lie just outside the project’s boundaries
in deep forest. Some local residents complain they’ve not
benefited from the investment and that they suffer collective
punishment by the military.

“They used to kill people from the village,” Akea Ojullo,
a 27-year-old teacher, said in a Nov. 23 interview in Perbong
village. “It got worse after the attack on Saudi Star.”

‘Wrong Project’

The company plans to work with local residents by investing
in workers, distributing rice and plowing land for them. “We
know we’re creating job opportunities, transforming skills,
training local indigenous Anuak, but there’s a campaign to have
people perceive it as a wrong project,” Jemal said.

The farm still has the backing of officials, even though
progress has been slow, Jemal said.

“The government wants the project to be a success and see
more Gambella people be able to work and produce more,” he
said. “That’s the big hope.”

Large, complex projects like Saudi Star’s need many years
to produce results, Gambella President Gatluak Tut Khot said in
an interview in Gambella town.

“We are not disappointed about the operation because we
know that agricultural operations are very difficult,” he said.
“We are giving them time in order to correct every mistake,
overcome every obstacle, every challenge they face.”

Ethiopia is Africa’s fastest growing economy, averaging 11
percent growth during the past decade, according to the
International Monetary Fund.

To contact the reporter on this story:
William Davison in Addis Ababa at
wdavison3@bloomberg.net

To contact the editors responsible for this story:
Antony Sguazzin at
asguazzin@bloomberg.net
Sarah McGregor, Michael Gunn

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