Agro-colonialism in the Congo: European and US development finance bankrolls a new round of agro-colonialism in the DRC

 

The young priest Robert Bolenge* could not have imagined the poverty he would find when he arrived at his new post in Yaligimba in 2002. The district lies at the heart of vast oil palm plantations belonging to Feronia Inc., in the northeast of the Democratic Republic of the Congo.

"I had never witnessed such suffering before," says Bolenge. "I couldn't have imagined that someone could work so hard with a basket tied to his back, cutting down palm bunches all day, and only take home about $20 a month."

(*Not his real name. Click here to listen to an interview with the pastor in French.
You can also read a transcript in English.)

Under Belgian colonial occupation (1908-1960), land was stolen from communities all along the length of the Congo River to establish oil palm plantations. Now, the communities have launched a determined effort to get their land back. But the company occupying their lands today is expanding its activities with funding from the world's biggest development finance institutions and multilateral banks – despite these agencies' stated commitments to support the rights of local people.

A simmering, 100-year old land conflict in the war-torn Democratic Republic of the Congo (DRC) is about to boil over.

In the name of "development"

Development finance institutions (DFIs) were created by northern governments to provide financing for high risk projects in so-called developing countries. Their role is to provide public money for private ventures that would otherwise struggle to raise capital for projects where the anticipated returns in terms of poverty alleviation are high.

Today these government-controlled institutions provide upwards of $100 billion to private companies operating in developing countries, which is equivalent to almost two thirds of official development assistance.1 A growing share of these funds are targeted at companies operating in the food and agriculture sector.2

Northern governments equipped their DFIs with codes and standards to guard against corruption and human rights violations in countries where they operate. These policies are meant to prevent DFIs from investing in companies that grab land, violate labour rights or engage in corrupt practices.

So how did several of the world's most prominent DFIs come to own Feronia Inc., a Canadian agribusiness company that people in the DRC say is illegally occupying their land, subjecting them to horrific work in plantations and leaving their communities destitute? There is also evidence that Feronia has engaged in financial practices that violate the anti-corruption policies of its DFI owners.

If the DFIs have a blacklist, Feronia should be on it. Instead, multilateral banks and the development finance arms of the United States, UK, France and Spain have poured millions of dollars into Feronia since 2012. DFIs now own over 70 percent of the company.

Colonial roots

In the early 20th century, Belgian colonial officials started to explore the possibilities of establishing oil palm plantations along the Congo River, in what are now the Equateur and Oriental Provinces of the DRC.

"When the Belgians first came, they saw that the forests were full of high-yielding wild oil palms and they began asking local chiefs for one or two hectares in exchange for some bags of salt," says Gaspard Bosenge-Akoko, an elected member of the Oriental Province parliament.

"They found the lands to be very fertile, and so they started grabbing more and more land and they cleared them of all but the oil palms so that they could establish plantations. The indigenous people were forced onto smaller areas, called reserves, where they were told that they could continue with their traditional practices. But today, even these reserve lands have been taken over. They took all these lands without a single legal document."

Belgian oil palm plantation development was backed by King Leopold's brutal colonial forces and financed by the Lever brothers. The brothers built up oil palm plantations near the villages of Lokutu and Yaligimba in Oriental Province and Boteka in Equateur Province. The plantations would eventually fuel a food processing empire and lay the foundations for the development of one of the world's largest food corporations – Unilever.

Unilever held onto its oil palm plantation business throughout the 20th century until 2002, when, with war raging in eastern Congo, it decided to pull out of the country. That year, it sold its consumer products subsidiary, Marsavco, to a Pakistani business family with deep roots in the DRC. Then, in 2009, after several years of neglect, it sold its oil palm plantations in Boteka, Lokutu and Yaligimba to Feronia Inc., a little known company registered in the Cayman Islands with no previous experience in the palm oil sector.3

Unilever's plantations were held through a Congolese company called Plantations et Huileries du Congo SARL (PHC) that was 24 percent owned by the DRC government. In 2009, Feronia Inc acquired Unilever's 76 percent share in PHC by paying $3,854,551 to a Unilever holding company in the Netherlands. The company's directors then took Feronia Inc public on the Toronto Stock Exchange in 2010 in order to finance its continued operations.

Over the next few years, Feronia racked up tens of millions of dollars in losses and its stock price tanked, from around $4 when it opened in September 2010 to less than a dollar by November 2013. The company would likely have collapsed completely had it not been for a startling rescue by several major multilateral banks and development finance institutes.

In December 2012, Feronia announced that the African Agricultural Fund (AAF) had agreed to purchase 20 percent of the company's shares for $5 million through its subsidiary, African Agriculture Fund LLC. The AAF is a Mauritius based fund managed by the Mauritian private equity firm Phatisa. It was established in 2009 to channel money from multilateral banks and development finance institutes into agribusiness companies in Africa in order to "combat the chronic undercapitalisation in the African agribusiness and food sectors."

The AAF has DFI investment from France, US, and Spain as well as the African Development Bank and several other African multilateral banks. The Alliance for a Green Revolution in Africa (AGRA) is listed as a "promoter" of the fund, while the European Commission and the Italian Cooperation Agency finance the AAF's Technical Assistance Facility.4

The AAF made further equity investments in Feronia in March and November 2013 totalling $14.5 million, this time through its Mauritius-based subsidiary Golden Oil Holdings Limited. By the end of 2013, AAF's subsidiaries controlled 32.5% percent of Feronia.5

The other major DFI investor in Feronia is the UK government's CDC Group plc, formerly the Commonwealth Development Corporation. The CDC made its first investment in Feronia in November 2013, spending $14.5 million to take 27.5 percent of Feronia's shares and providing the company with an additional $3.6m convertible loan facility to support the implementation of an Environmental and Social Action Plan. Then, in January 2015, it invested $7 million to take its ownership of Feronia up to 48 percent.

Today, the AAF and the CDC control over 70 percent of Feronia's shares, while the DRC government retains its 24% stake in PHC, Feronia's DRC oil palm plantations subsidiary.

An illegal occupation

When Feronia acquired PHC from Unilever in 2009, it claimed to have inherited lease agreements from PHC for all of the lands where the company has plantations. Feronia said it had "revolving 25-year leases" covering 101,455 ha at Lokutu, Boteka and Yaligimba, which expire at different times between 2017 and 2030 and which have a renewal cost of $1,000 per lot, with lots varying from a few hectares to 2,000 ha.

Yet community leaders at the company's Lokutu plantations say that the only document that Feronia or Unilever have ever shown them as evidence of the company's rights to the 63,000 ha concession it claims is an old registration certificate that is riddled with errors and that does not confer any legal title.

"All they have is a falsified certificate of registration, signed by an incompetent surveyor," says the provincial deputy, Gaspard Bosenge-Akoko. "Can you imagine a company grabbing over 40,000 ha of land from these communities, depriving them of their agricultural activities, on the basis of this kind of flimsy document?"

On March 8, 2015, over 60 customary chiefs and other community leaders from across the district of Yahuma, where 90 percent of Feronia's Lokutu plantations are located, gathered in the town of Mozité to call for the resolution of their longstanding grievances against Feronia. They say the company has never consulted them about the use of their lands and has no right to be there.

"We demand, first and foremost, the start of negotiations to reclaim our rights over the lands that have been illegally taken from us over the past 104 years," they stated in a declaration signed during the meeting.

"We want to be compensated, and only afterwards can we proceed to discussions over a memorandum of understanding for a new contract."

At its Boteka plantations, local leaders explained to RIAO that Feronia signed a concessionary agreement with the government of the DRC in 2012 establishing the company's rights to use the 15,000 ha former Unilever concession for agricultural purposes. However, the local communities say they were never consulted about the agreement, as is their legal right, and that they have never negotiated terms to the contract, as is also their right. They say that only a few local authorities (chefs de secteur) gave their authorisation, without the participation and consent of the customary chiefs or the local communities.6

In a letter sent to the president of the DRC in August 2013, the customary chiefs of the Territory of Ingende, where the Boteka plantations are located, wrote:

This company arrived in our Territory in 1912 during the colonial occupation. In 1947 it received a 25 year renewable lease, and not a perpetual contract as is insinuated in the behaviour of the managers of the company. A collective contract was signed, in one way or another, with our elders around a year ago and ever since, our community has been excluded from any decisions regarding the expansion of the concession and other activities and has only suffered from the negative impacts of the plantations, such as the disappearance of caterpillars, mushrooms, wild animals, freshwater fish, and, overall, the near complete loss of the flora and fauna. This has resulted in severe malnutrition amongst our children and even our elders; the mortality rate for infants and mothers during childbirth is amongst the highest in the province.

There's also the important question of whether it is legal for Feronia to control any land in the DRC at all. As Feronia's DFI backers know very well, the DRC passed a new Law on the Funadmaental Principles of Agriculture (loi portant principes fondamentaux relatifs à l'agriculture) on June 24, 2012 that states, under Article 16, that land can only be attributed to companies that are majority owned by national investors. Feronia has so far chosen to ignore this law, telling its investors that it "has been and continues to be involved in discussions with various levels of government in the DRC regarding the interpretation of the law."7

A brutal "system"

During the ten years that Pastor Bolenge has been in Yaligimba, he has been a witness to the harsh regime laid down by Feronia.

"All the lands the communities had were taken by the company, so they have nowhere to grow their own food,” he says. “At one point, I started encouraging them to plant crops and raise livestock in the abandoned areas of the plantation. But when it was time to harvest, the company destroyed all the crops and ordered the people out by force. It's as if the company wants to ensure that the people stay dependent on it for their survival. It's like a system of slavery."

The villagers say that even the most minor transgressions are brutally punished by the company's guards. Anyone caught carrying just a few nuts fallen from the oil palms is fined or, in many cases, whipped, hand cuffed and taken to the nearest prison.

People from the village of Yalifombo, inside Feronia's Lokutu plantations, say that about a year ago the company's guards caught a local boy named Papy Yve carrying a small amount of palm nuts. He was detained, whipped and then taken to prison in the city of Kisangani. At some point, however, he disappeared and has not been seen since. The villagers say his family fled the village to hide on one of the Congo River islands, fearing that the company would target them.

Having lost their traditional forests and farmlands,, the communities within the areas of Feronia's plantations have little choice but to work for the company, and few get access to anything but the lowest paying jobs. The people of Bayolo, in the District of Yahuma, say that 90 percent of the people working for the company from their village are poorly paid labourers, who receive no benefits: no housing, no medical services, no education, no potable water. Indeed, the Yahuma leaders says that the last time someone from their district worked for the company as a manager was in 1964.

Community members and other local sources that GRAIN and RIAO spoke with at the Boteka and Lokutu plantations maintain that the daily wage for a typical labourer in Feronia's Lokutu plantations and nurseries is about 1,400 francs congolais (US$1.50), which is below the country's minimum daily wage of 1,680 FC.8

Although payslips of some workers at the Lokutu plantations indicated amounts paid of 1,750 FC, these were per unit of work, not per day. As explained by the villagers that GRAIN and RIAO spoke with, a “unit” of work is something few, if any, workers can complete in a day.

The Yalifombo villagers working in Feronia's Lokutu plantations say the company expects them to harvest about 80 large bunches of palm nuts per day to be considered to have completed a unit's work, while workers in the nursery have to fill and transport around 600 seedling sacs to complete what the company considers to be a day's work. A day's task, they say, is too much for most workers to complete in a single day.

Some at the Lokutu plantation even hire others as "porters" or get their children and other family members to help them complete their daily tasks.

To make matters worse, the company often pays its workers late. Representatives of local civil society organisations that support communities in Feronia's Lokutu plantations say that wages can go unpaid for 3-4 months. This makes it extremely difficult for workers to make ends meet and leaves them vulnerable to loan sharks. They say that managers of the company use an illegal system of debt bondage, known as "ikotama", to force workers to work on weekends and holidays in order to pay off high interest debts.

Civil society organisations from the Lokutu area have documented numerous other labour abuses, such as the lack of contracts between the company and most workers, safety issues with pesticides and the violation of mandatory work hours.

Shady dealings

"The Corporation applies a ‘zero tolerance’ approach to acts of bribery and corruption." – Ravi Sood, Chairman of Feronia Inc.

One of the key people that has been involved in Feronia from the beginning is Barnabe Kikaya bin Karubi, the DRC's Ambassador to the UK since August 2008 and, prior to that, President Joseph Kabila's Private Secretary and Minister of Information

Kikaya served on the Board of Directors of Feronia from its inception until some point in 2014 when he was quietly dropped from the Board.

For his services as director, Kikaya was paid the company's standard annual fee of $10,000-20,000 per year.

But these were not the only payments made to Kikaya. Buried within the company records that Feronia is obliged to disclose as a Toronto Stock Exchange listed company is evidence that, Feronia paid Kikaya a total of nearly $3 million in cash and shares during his time as director with the company.9

Some of these payments were made to Kikaya as annual rental fees of between $120,000-150,000 for the lease of a "house and apartment in Kinshasa" located at Kikaya's family residence.10 The biggest payout was orchestrated through Feronia's Cayman Islands subsidiary as part of the initial purchase of PHC.

When Feronia purchased PHC from Unilever, the deal was structured through Feronia JCA Ltd of the Cayman Islands. This Feronia subsidiary was, for unspecified reasons, 20 percent owned by a DRC-based company called Jean Colette Afrique Sprl, which is wholly owned by Kikaya.

As soon as the deal with Unilever went through, Feronia Inc acquired Kikaya's share of Feronia JCA in exchange for the issuing of 8,894,344 shares in Feronia Inc, valued by the company at over $2.2 million. The deal included the acquisition of a farm from Kikaya, which Feronia says is worth over US$600,000.11 This farm asset, however, does not appear on Feronia's books after its mention in its September 2010 financial statements.

Big payouts are not unique to Kikaya. Even though the company has lost millions of dollars in every year of its existence and has failed to provide its workers and their families with a minimal level of compensation, the managers and directors of Feronia have lined their pockets. In 2011, for example, the Chairman of Feronia, Ravi Sood, received $150,000 in cash and $101,000 in share-based awards, and a company owned by his wife received $131,000 for "corporate development services". In 2010, her company was paid $256,754 for the supply of services and expenses.12

In 2010, James Siggs, then Feronia's CEO, was paid $616,000 in fees and share options. When he was replaced as CEO the following year, he received a compensation package of $317,379. Even Feronia's accountant, Georgina Cotton of the UK, got a hefty $306,000 in total compensation in 2010.13 That year the top four managers raked in around $1.5 million in fees, about 1,000 times the average annual pay for 4 of their plantation workers.

Taking back what's theirs

The local people living within the Feronia plantations have the neighbouring communities as visible evidence of how the company's plantations have impoverished their lives. Their neighbours have forests and farmlands that provide them with food, medicines and livelihoods. These forests are rich with wild oil palms, and all along the Congo River communities can be seen processing oil from these palms, and transporting it by small boat (pirogue) to nearby markets where it is always in high demand.

The villagers say that Feronia and Unilever promised them time and again that the plantations would improve their lives, that they would get good jobs, schools, modern homes, health clinics, and decent roads. But the communities have seen few if any of these benefits in the hundred years that their lands have been occupied by plantations. They are fed up with the company's promises. They are tired of slaving away on the plantations and watching the palm oil harvested from their lands flow out of their communities to enrich a handful of company bosses.

"Enough suffering!" says the Grand Chief of Yahuma. "We no longer want tears; we want this company to disappear, and we will do what's necessary to resolve our own problems"

At the behest of its DFI investors, Feronia has now hired consultants to carry out an Environmental and Social Assessment of its palm oil operations. The assessment will undoubtedly result in a new round of promised improvements, some of which may in fact be implemented. But the assessment will not result in what the communities want and what they have full rights to demand: the return of their lands.

"When we make demands for our rights to be respected, the company sends us delegations, but nothing ever changes," said a local prefect at a meeting of community leaders in the village of Mozité, Yahuma District in March 2015. "We don't want anymore distractions. If the company can't meet our demands, then they must leave and give us back our lands and forests, the lands of our ancestors. We are forest people and we can live fine without them. Everyone here needs to take back their share."

Feronia is now owned by DFIs that have a public mandate to support "development" and policies that oblige them to respect the rights of local communities to their lands (see Box 2). The DFIs that own Feronia need to do the right thing: give the people of the DRC back their lands and compensate them for the years of suffering they have endured and the wrongs this 100-year old colonial enterprise has committed.

Produced in collaboration with Fundación Mundubat, War on Want, Association Française d'Amitié et de Solidarité avec les Peuples d'Afrique, World Rainforest Movement, Food First, SOS Faim and CIDSE

 

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