In the last week we have been reached by the final
confirming news that two Swedish agro-business ventures abroad have failed
totally.
Black Earth Farming, a Swedish owned company that have been operating in the chernozeme black earth region in Russia recently announced that they are selling the company to a Russian oligarch.
The Swedish owner Kinnevik will lose about 400
million SEK when they sell the company. I have been following Black Earth
Farming since at least 9 years (see my blogpost in Swedish Svartjord
på börsen from February 2008) . Through modest 10 shares which I
bought for 800 SEK when they were close to their peak I have been able to
follow the general assemblies here in Stockholm. Successively I have got a more
and more clear picture of their operations, how they bought the the shares of
former kolchos workers, accumulating a "land bank" and more lately
trying to make some profits from the agricultural operations. Throughout these
meetings the company has tried to convince us shareholders 1) that the shares
and the land values were undervalued and 2) that profits from successful
farming operations were just around the corner, if not last years weather would
have created unforeseen problems... Brian Kuns and co-authors have followed
shareholders meetings more systematically and also interviewed key actors. They
analyse in detail the performance of different Swedish owned agrobusiness
companies in the paper The
stock market and the steppe: The challenges faced by stock-market financed,
Nordic farming ventures in Russia and Ukraine . They point to
the contradictions between the expectations and the actual operations. In
short: far too high expectations from returns to scale, partly fueled by the
expectation from the stock market + a totally unrealistic understanding
of the vagaries of farming the steppe seems to explain the failures. My 800
Swedish crowns have boiled down to some 60 or 70 Swedish crowns when I will
finally be reached by the offer from Volgo-DonSelkhozInvest to buy my
ten shares..... That is a small loss compared to the former kolkhos workers who
have once and for all sold their shares of the land to the foreign companies
and whose lands will now be in the ownership of a Russian oligarch.
Parallel to this development the Swedish company
Agro-Eco-Energy in Bagamoyo, Tanzania, have now finally declared their closing
down. They have been criticized for almost the same time - at least
9 years now, by Swedish and Norwegian researchers, by Action Aid, scrutinised
by Swedish investigative TV Uppdrag granskning etc etc and their grandiose
plans for a large sugar cane plantations have not materialised in spite of a
decade of planning and misuse of money from Swedish publicly owned energy companies
and from Swedish aid through Sida. The land which the Swedish company
claimed to have leased has now been confiscated by the Tanzania state -- see my blogpost
from November . Now this has finally also been confirmed from
the owner see Sugar
project: Swedish investor calls it quits .
It is of course just a mere coincidence that these two
total failures of Swedish agro-busíness plans have reached news media the same
week. But there is some logic to it. Both projects started druing the financial
crisis in 2007-2009 with surging food crop prices in 2007. The expectations for
investments in farmlands and for agricultural production were at a peak. It has
taken almost ten years for investors and in the case of Agro-Eco-Energy donors
to realise that this was an exceptional situation and that realities on the
ground were more complicated. Far too high expectations to returns to scale
have also played a role. In the case of Tanzania the political realities of the
contentious land issues and protest from villagers losing their land have also
played a role. .
