Uganda: Madhvani Sugar Investment Test Case for New Land Policy?

Friday, 08 May 2009

The Ugandan government says it wants to modernise land policy to encourage commercial development in the agricultural sector. But, as one of Uganda’s oldest companies is discovering, political infighting and lack of support for clear legal reform continue to smother investor interests in the country. By Rachel Keeler.  In 2007, the Madhvani Group, Uganda’s largest business conglomerate with USD200m in assets spread over a dozen industries, announced plans to build a new USD80m sugar complex in northern Uganda. Madhvani has made much of its fortune since the 1980s at its Kakira Sugar Works factory in Jinja. Over 100,000 people depend on the plant, and the community has seen jobs, schools, hospitals, roads and electricity arrive all on the back of the industry. So when Madhvani decided to expand northward, the project was hyped as a godsend for the war-torn region; no other part of the country needs the development more. Plans were drawn up for a 40,000-hectare estate, with 20,000 hectares dedicated to community outgrowers, and Madhvani set off on a public relations tour promising hope and new beginnings.  But today, after two years of promoting and wrangling, the deal is nearly dead. The property lease remains mired in a caustic court case brought by locals who accuse Madhvani of attempting to steal their ancestral land. Politicians are doing everything to heighten the vitriol, and Madhvani is considering desertion to calmer environs – like Southern Sudan. So what happened? Big business and Bad Blood There is big money to be made in Ugandan sugar production. Kakira is operating at maximum capacity, churning out 150,000 tonnes of processed sugar a year, and barely meeting national demand with the help of Uganda’s four other factories. Regional demand tops 1.25m tonnes, half of which comes from Kenya. Kenya’s sugar industry is in debt, and the country still imports a third of its supply. Sugar exports are an important source of foreign exchange for Uganda, Kenya and Tanzania. All three countries want to expand local production now, before cheap COMESA imports threaten to inundate East Africa.   As it happens, northern Uganda’s soil composition and rainfall patterns are perfect for growing commercial sugarcane. So when Madhvani made the pitch, President Yoweri Museveni was more than happy to throw his political sway behind the project. In fact, he insisted. The government was to hold a 40% share in the deal, support infrastructure development and offload its stake on the stock exchange once things got rolling.  The partnership did not go well. “The fact of the matter is the people just don't trust this government,” says David Aliker Martin. Martin’s family owns land in Amuru, the district where Madhvani wants to build its new factory. Martin’s tribe, the Acholi, who live in Amuru and nearby Gulu, have nursed a dark grudge against Museveni for as long as Martin (who recently turned 30) can remember. In 1981, Museveni instigated a brutal rebellion to wrestle power from the Acholi. The north lost the war when Museveni took over the country in 1986, and the Lord’s Resistance Army (LRA) has been fighting the state ever since. Northerners have suffered all the bloody fallout. So with the presidential stamp of approval, the Madhvani proposal was immediately and vehemently rejected in the north. Acholi politicians jumped at the retributive chance to accuse Museveni of fronting for investors for personal gain. “You may take my statement as political,” says Simon Oyet, an Amuru MP who helped his constituents file the land case against Madhvani, “but that man [Museveni] does not mean well for us.” Madhvani says the political battle that has ensued – with Acholi leaders salivating for social capital and President Museveni acting as obstinate as ever – is depriving northerners of the development they deserve, and Ugandan industry of its potential.  "It is economic development and industrial development that will bring empowerment to the people there by way of employment and creation of viable opportunities for investment,” says K.P. Eswar, director of corporate affairs for the Madhvani Group. Eswar says Madhvani has received invitations from governments in Southern Sudan, Ethiopia, Rwanda and Angola to open the new factory abroad if it is barred from leasing land in Uganda. The company is just about fed up: "We are investors, we are not politicians – if you don't want us, fine. We will go to another area."  Land and Legalities When asked about the Madhvani debacle, members of President Museveni’s ruling party like to label the Acholi a “difficult tribe” – stuck in the past, obstinate for no reason. But for many northern Ugandans, all the politics and bad blood are becoming a tired story. The LRA war has finally reached a functional end. Investment and trade are on the rise in Gulu, which lies on an important trade route into Sudan. David Aliker Martin says despite the palpable memories of rape, murder and socioeconomic segregation, his people are ready to move on. What they ask is to retain ownership of their land; the Acholi remain highly suspicious of anyone who would take that away from them. And, surprisingly enough, there are better reasons than three decades of war not to trust Museveni’s personal investment guarantees. The president’s track record on respect for private land rights is dismal. Questionable allocations and re-allocation of land for unproductive projects in Kampala have cost the Ugandan taxpayer dearly. The Acholi raise other sensible concerns, such as the proximity of their land to major oil fields Uganda: Transition to Oil Production and Donor Independence?, the sheer size of the plot requested by Madhvani (which has since been reduced to 20,000 hectares), and the 23% resettlement rate that persists in Amuru. Norbert Mao, Gulu’s popular district chair who is considering a run at the presidency, wrote in 2007, “In the case of Acholiland, the level of debate needs to be moved away from the projection of our community as enemies of investment to the merits and timeliness of the investments proposed.” Mao and others argue that refugees from Amuru need a chance to resettle on their land before the government declares it unoccupied investor bait. As it stands, Ugandan law is somewhat fuzzy on the government’s land management role. The Ministry of Lands is busy drafting a national land policy, early versions of which call for respect of customary land tenure as well as a government mandate to appropriate “unoccupied” land and administer development projects. The land policy has raised considerable controversy Uganda: Challenges of Modernising Land Legislation. As the Madhvani case has shown, the two goals are incoherent at best. Customary land ownership as practiced in Acholiland means all land is communally owned, parceled out by traditional leaders and passed down along family lines.  The Amuru residents who filed the lawsuit against leasing land to Madhvani say their ancestors lived in the fertile area along the east bank of the Nile 100 years ago before being driven out by the British. Acholi custom says the land should be theirs. The government says the plot was cleared and declared state property in the 1970s, which gives the new district land board the right to title and lease it. Legally, both sides could be correct, so it will be interesting to see what the judge decides in June. The case should be an important step toward clearing up constitutional inconsistency on land issues.  Perspectives Unfortunately, the question remains whether the government is seriously interested in such legal clarifications. President Museveni has been happily exploiting grey areas in property law to manipulate private business deals for some time. With government approval, district land boards are playing fast and loose with land title distribution, in Amuru and elsewhere, with sloppy explanations as to how land is designated as public, private, communal, or anything else. If the Madhvani deal goes through, it will represent a conversion of once customarily-owned private land to public land, to government-owned leased land, all without proper compensation. This may be expedient, but maybe not so constitutional. Martin argues: “In the constitution it says land belongs to the people, so if an investor wants that piece of land that belongs to me, let that individual come and talk to me. Don't impose my government on me.” The Acholi say they want to be equity-wielding partners in the development of their land, a request the government has dismissed as troublesome tradition coming in the way of progress. Traditional law is easy to write off in Africa, where modernisation and development are held as sacrosanct goals. But in too many cases, state-led development acts as a cover for corruption. That danger is clear in Uganda, where power is centralised in the increasingly corrupt executive, and the economy continues to function inefficiently along patronage lines. Until Uganda’s Big Men learn to write clear policy, step aside, and let citizens bargain business amongst themselves, investment and development will continue to suffer. With that in mind, the Acholi need to be careful, too, not to cede management of their future to zealous politicians bent on stoking old passions for political gain.  Share this article with others: Comments (0) Subscribe to this comment's feed Write comment Show/Hide comment form Name Email Title Comment smaller | bigger Subscribe via email (Registered users only) I have read and agree to the Terms of Usage. Add Comment