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Eight Indian firms and individuals have acquired over 250 thousand hectares of the 347.1 thousand hectares already allocated for commercial farming in Ethiopia. In total 23 local and international firms and individuals have started working on the land, according to a research conducted by Access Capital.
The largest plot is also run by an Indian firm Karuturi Agro Products Plc with 100 thousand hectares for crop development in the western region of Gambella.
Six local individuals and firms have obtained in between them about 42.5 thousand hectares of land; a Chinese company then follows in the sugar cane investment with 25 thousand hectares, while next in line are five Diaspora investors who together have 13.57 thousand hectares of land. The Ethiopian born Saudi tycoon, Sheik Mohammed Al-Amoudi’s firm Saudi Star Agricultural Development follows with 10 thousand hectares of investment. Access Capital itself obtained five thousand hectares of land in the Benishangul Gumuz region for the production of sesame, cereals and pulses.
The government has allocated three million hectares of arable land to boost its currently low cereal production as well as to generate income from cash crops.
The firms have benefited from the government’s incentive with income tax holidays ranging from 3 to 7 years. The grace period increases depending on the agricultural value added by the investment and the proportion of exportable products. The investing company is also provided with exemptions from import duties on capital goods. In addition investors who export at least 75 percent of their produce or those who reinvest their profits are exempt from the minimum capital requirements of USD 100,000 for independent operations and USD 60,000 for those who forge a partnership with domestic investors.
Meanwhile, the government has made no restrictions on the use of the land for particular crops or purposes (e.g. exports) and allowed investors to use water without charge from rivers or ground water; to build dams, water boreholes and irrigation systems.
Commercial farming opportunities have been given a big boost in recent years thanks to large-scale land allocations by the government for both domestic and foreign investors. Such land allocations have not come with requirements to produce particular food items, but most investors so far have concentrated on cereals like wheat and maize and on cash crops like palm oil and cotton.
Based on trends in domestic food markets, import developments, and the outlook for global food prices, the Access report however sees three staple crops -wheat, corn, oilseeds- and two cash crops -sugar cane and cotton- as offering the most hopeful scenario over the coming years.
The government in order to counter critics of the commercial farmland lease policy has mandated and given the right to investors to build infrastructure suitable for the areas depending on the area’s needs such as dams, water boreholes, power houses, irrigation systems, roads, bridges, offices, downstream processing plants, residential buildings, fuel/ power supply stations/outlets, health centers/hospitals, educational facilities with notification.
According to the report, growth in Agricultural sector has been near eight percent in recent years and in value terms the combined output of the agricultural sector is now worth an estimated Birr 221 billion ($13 billion) according to the latest GDP statistics.
However it says only 12 percent of arable land is being cultivated for rice, 17 percent for tea, less than one percent for horticulture, 64 percent for oil crops, 42 percent for pulses and one percent for cotton.