Impact of Palm Oil on Gabon's Economic Growth and Poverty
Info: 9727 words (39 pages) Dissertation
Published: 18th Feb 2022
Economic growth is seen as a priority in the agenda of several developing nations today. The approaches taken to enable this growth is typically Neoliberal, making them investment heavy. The negative impact of such an approach on local livelihoods is often not considered by developing nations. In this regard, the new and yet fruitful palm oil industry in Gabon is an illustrative example of how a neoliberal approach towards economic growth, fuelled by one major investor, can be potentially destructive towards local communities. In contrast to dominant approaches towards investment and land acquisition, this dissertation takes a political economy approach to the consequences of building a palm oil industry in a developing nation. Thereby, I argue that while the palm oil industry in Gabon does promote economic growth in a neoliberal sense, there are several issues surrounding the economic, environmental and social aspects of neoliberal economic growth. This is especially true when further assessed through a political economy lens. Ultimately, I conclude that the palm oil industry in Gabon does not necessarily eliminate poverty and underlying inequalities.
A rise in trade liberalisation, neoliberal economic structures, and globalisation has led to a spurt in agriculture-related investments across the globe. The global land rush was sparked by a dramatic rise in food prices in 2007 and 2008. This led to a change in crop growth patterns, and more large scale agricultural land deals. Agricultural producers, amongst other businesses, began to expand their markets into Africa. The forgiving political frameworks in Africa, low land cost and low labour cost allow it to be a very profitable investment. At this time, developing economies within the continent were open to investors as a means to grow their economies. In 2011, Gabon invited investment from an agricultural company named Olam to produce palm oil in Gabon. The government was investment-oriented and was reliant on such investments to deliver economic growth. Gabon is an interesting country to investigate from this perspective; it holds the same advantages as any other African country, yet, is much smaller and has more available land, with significant urban and rural populations. However, this has a number of impacts on local livelihoods, economic growth, and political structure.
I will aim to answer the following questions:
- while according to certain theories, investment in land should lead to economic growth. Does it really in this case?
- Or, does the investment simply feed back into the cycle of poverty? This is a necessary question to answer in order to understand the contribution of neoliberal economic structures, investors, and governments in the process of furthering poverty.
This dissertation will evaluate how land acquisition, by an investor, for palm oil plantations in Gabon, impacts economic growth and poverty.
In order to understand the impacts of land acquisition for palm oil plantations in Africa, it is necessary to know the definitions of land acquisition and palm oil, in the context of this dissertation. Poverty and economic growth will be further explored as concepts throughout this dissertation. Land acquisition, is also known as land grabbing. Land grabbing refers to a controversial acquisition of a large piece of land, often in developing countries for foreign investments (Feintrenie et al., 2014). In this dissertation, land grabbing refers to FDI in agriculture in Africa, in order to develop the palm oil industry. Palm oil is a crop that is used for various purposes, from fertiliser to biofuels (Greenpeace, 2012). In this dissertation, palm oil is discussed in the context of how its plantations are developed. This is usually by clearing out land and forests.
The methodological approach to this dissertation primarily consists of the usage of secondary sources in order to formulate and present a clear image of the palm oil industry in Gabon. This is done through desk-based research, using peer reviewed academic journals and books. I have based my theoretical analysis of the topic, on approaches to poverty and economic growth, that have been explained by various authors. I will apply these theories to my next section. I have looked at one specific country, and one specific crop: palm oil in Gabon. This allows me to use a more specialised approach towards the issue at hand, and provide a close look at the country of choice. This close look begins by a review of laws in Gabon, and an assessment of the only company investing in palm oil in Gabon at present. As my argument relies upon theoretical approaches to economic growth and poverty, I have used these approaches to analyse the impacts and outcomes of the palm oil industry in Gabon.
The objective of this essay is to analyse the consequences of land acquisition in Gabon, for palm oil plantations, and to further assess its contribution to economic growth and/or poverty. Another objective is to use various approaches to poverty and economic growth, in order to understand the impacts of palm oil in Gabon, from a theoretical standpoint. I have also explored how palm oil production contributes to wealth and gender inequalities.
While Olam, the international palm oil investor of Gabon, has made a significant financial investment in Gabon, the economic, social and environmental disadvantages of this are numerous, and have a severe impact local livelihoods. Ultimately, while the Gabon Government aims to enhance economic growth through such initiatives, the palm oil project fails to address cultural and social issues caused by it. These are critical according to the political economy approach to economic growth and poverty alleviation. However, it cannot be said that Project is responsible for poverty in Gabon, it is simply contributing to an aspect of it. The argument presented in this dissertation will demonstrate that palm oil in Gabon does contribute to economic growth in a neoliberal sense, however, there are still challenges around economic and social issues, which enhance poverty in the long run. I argue that land acquisition for palm oil plantations in Gabon adds to its poverty, rather than contributing to its economic growth.
This dissertation starts with a literature review, assessing the neoliberal and political economy approaches to poverty and economic growth. It then provides a background on Gabon, including a background on land acquisition, and palm oil. The following section provides a summary of laws and policies in Gabon, and an overview of Olam’s operation in Gabon. This is followed by a detailed analysis of the impacts and outcomes of Olam’s palm oil plantations in Gabon, on its environment, local livelihoods, economy, women as well as on the Government. I conclude that the palm oil industry of Gabon does not necessarily eliminate poverty and underlying inequalities.
2. Literature Review
2.1 Approaches to Poverty and Economic growth
Poverty and Economic growth are interlinked; the eradication of poverty is positively correlated with economic growth. This literature review looks at the Neoliberal approach to poverty and economic growth, as well as the Political Economy approach to poverty and economic growth, highlighting Amartya Sen’s poverty theory.
2.2 Neoliberal Approach
Poverty can come from the exclusion of populations from financial commodity markets or labour (Saad-Filho, 2016). The trickle-down effect of economic growth can help eradicate poverty in developing countries in the long run, according to the neoliberal approach. It is also believed that growth creates a domino effect increasing income generating opportunities, leading to the creation of new jobs and higher wages. Additionally, it expands market and sales revenues, and consumption possibilities as well as improving productivity and skills (Saad-Filho, 2016).
The neoliberal argument for poverty eradication is primarily made by organisations dedicated to improving the economic status of developing countries such as the World Bank, and IMF. They argue that poverty can be reduced with the help of economic growth. They argue that countries should implement policies that will open up promote free markets (Besley and Cord, 2007).
The IMF believes that economic growth is the only way to improve living standards in developing countries, and that the best way to achieve this is through globalisation. The IMF, within its mandate is safeguarding the international financial system. It is helping members take advantage of the opportunities offered by integration into the world economy, while minimising the associated risks. However, the IMF also recognises that, while much progress has been made in with regard to globalisation, there is still a lot to do (IMF, 2001).
The IMF also believes that policies that make an economy open up to trade and investment with the rest of the world, are needed for sustained economic growth. This has been essential in enabling developing countries to develop comparative advantages in the manufacturing and production of goods and services. The IMF continues that liberalising agricultural markets would provide benefits for developing countries. The IMF also finds that the developing countries that lowered tariffs in the 1980s, grew more quickly in the 1990s than those who did not. This, according to the IMF shows the impact of trade liberalisation (IMF, 2001).
2.2.1 Foreign Direct Investment
The effects of Foreign Direct Investment (FDI) flows on economic growth have been the focus on middle to low income countries. There is a general opinion in neoliberal economic growth-related literature that FDI promotes growth in host countries of land acquisition (Kamara 2013). In the past few decades, FDI has become the most important source of external finance in developing countries, particularly in Sub-Saharan Africa (SSA). This is evident in the many efforts by SSA countries to attract FDI though FDI-friendly policies aimed at attracting foreign investors. Most developing countries prefer FDI to other forms of private foreign capital because of its perceived role in promoting economic development through job creation, technology transfer, increased productivity and economic growth (Kamara, 2013).
There has been pressure from the World Bank and industrialised countries on developing countries to liberalise their capital accounts. Sub-Saharan African countries have shifted their positions with respect to their policies towards foreign investors within the last two decades, offering favourable incentive packages to attract foreign investors. Though Borensztein et al (1998) claim that “these policies may result in a flow of FDI that does not respond to higher efficiency but only to profit opportunities created by distorted incentives”, many scholars and policy makers continue to argue for an increase in FDI flows to SSA, citing their potential for promoting long term growth (Kamara, 2013).
2.3 Political Economy Approach
Political Economy refers to the systematic relationship between political and economic processes (Staniland 1985). The political economy approach is a social approach, which demands intellectual sophistication as well as usability and relevance (Staniland, 1985). The approach requires one to think about the social structures that produce decisions, the institutions, and patterns of life that result in goods and services being produced and who benefits from these actions. (Ronen, 2013).
The political economy approach is that economic growth may not be sufficient to eliminate poverty, if the cause is structural inequalities in the economic system or insufficient development. Even as the economy expands, market-based growth strategies intensify asymmetries that create inequality and poverty. Growth and market relations can create poverty, alongside wealth, therefore, market strategies must be well directed (Saad-Filho, 2016). According to Saad-Filho (2016), poverty and inequality are inter-linked and require special policies rather than growth in general, or social policy interventions. Policies which address structural inequalities of control and access over political power, labour, and economic assets, are required to ensure growth does not cause more poverty.
Blank (2010) states that corruption, prejudice and stratified labour markets cause poverty, therefore anti-discrimination laws and labour market reforms are needed to overcome poverty. Another factor, is the labour market. The labour market is divided into a ‘primary’ and ‘secondary’ market, the secondary sector has low wages, unstable employment and low promotion prospects. (Townsend, 1979). The secondary market refers to members of a society who are understood to have unequal access to resources and opportunities. For poverty to be eradicated, from a Marxist Political Economy perspective, those belonging to the lowest classes, such as labourers should be in control of governance and production. If inequality is continued to be ignored, and living standards rise at the same time, measures focusing on social inclusion will not be effective in the alleviation of poverty, because the poor-rich gap could widen (Blank, 2010).
According to Barbara White (2006), poverty cannot be fully eradicated as long as capitalism is around. Capitalism helps generate wealth, but also induces poverty, because it promotes the dispossession of people through primitive accumulation, an example of this is land grabs, where land is taken over for various purposes by investors, typically for agriculture.
The Political Economy approach to women, states that women’s role in social reproduction, that is, domestic labour, also known as, the daily intergenerational renewal of human resources, is integral to the economy. Men benefit from women’s unpaid domestic labour (Mutari, 2000). Societal structure surrounding women is used as a means of expression towards the oppression of women in society, further raising inequality.
2.3.1 Amartya Sen’s Theory of Poverty
Amartya Sen, is a known scholar on the subject of poverty. Sen criticises the traditional measurement of poverty, done by counting the number of poor and expressing it as a ratio of the poor to the total population of a particular community. Sen explains that two major concepts necessary for understanding poverty are “consumption norms” and the “poverty line”. This determines standards of consumptions, and who falls below the poverty line. (Sarshar, 2010). Sen believes that the traditional method of poverty measurement does not take into account the poverty line and it does not take into account distribution of income among the poor. (Sarshar, 2010).
In Sen’s book ‘Development as Freedom’, he has emphasised poverty as Capability Deprivation, as a way to underline the theory of poverty. He explains that poverty should be seen as the deprivation of basic capabilities, rather than a standardised measurement of whether a person is poor or not. The capability approach measures real poverty, rather than lowness of income, which is not the only variable in determining poverty. The relationship between income, and capabilities is also affected by the age of the person, gender and social roles by the locality where he/she resides. (Sarshar, 2010). However, income and capabilities do have a link, according to Adam Smith, the absolute deprivation of social capabilities depends on the relative deprivation of incomes (Sarshar, 2010). Sen essentially argues that poverty needs to measure more than just income. It needs to take in consideration the capabilities approach, consumption norms, and poverty line.
2.3.2 Measuring poverty
Economics has used income as a major indicator of well-being and has accordingly treated income-enhancing policies as the centrepiece of any strategy to reduce poverty and equality. The Gross National Product (GNP) approach failed to take cognizance of other aspects of the quality of life that are not well correlated with economic advantage, even when distribution is factored in: aspects such as health, education, gender and racial justice (Grusky, 2006). Countries with high GNP sometimes exhibit huge inequalities as well (Nassbaum, 2006).
The Human Development Index represents the capabilities approach (Nassbaum, 2006) by focusing on income, literacy and life expectancy, assesses the standard of living of individuals and populations in a multidimensional way. It looks at women’s poverty and the relationship between poverty and gender inequality (Nassbaum, 2006). While this has raised awareness and changed the debate about poverty, the conceptual foundations of the HDI are underdeveloped. While education and health, are now also considered to be factors to determine poverty, income poverty remains the mainstream way to assess the level of poverty. (Grusky, 2006). Sen and Nussbaum argue that if we ask not only about GNP, but also about what people are able to do, and able to be, we come to a better understanding of barriers that have erected against the full justice for women and poor. (Nassbaum, 2006)
An understanding of poverty and how it is measured is require to contextualise the analysis of the impacts of palm oil in Gabon, in the following sections of this dissertation. While traditionally, poverty is measured only monetarily, social poverty can have just as high, or an even higher effect on livelihoods. The political economy approach to poverty tells us that economic growth does not solve poverty, because it doesn’t solve inequality in a community. This approach highlights the Marxist view that neoliberal growth structures lead to a further gap between the rich and poor, and stratify labour and working classes further.
The neoliberal approach to poverty tells us that Foreign Direct investment can lead to economic growth, through microcredit programmes, which will eliminate poverty. More recently, the neoliberal approach has been followed due to organisations such as the World bank and IMF implementing neoliberal growth policies. Land acquisition in Gabon follows a similar neoliberal structure, where FDI is expected to enhance economic growth. The rest of this dissertation will evaluate whether the FDI-led growth has been successful so far in Gabon.
3. Background on land acquisition in Gabon for palm oil plantations
Gabon favours a neo-liberalist approach to growth, by promoting private enterprise and foreign investment, as a means to promote economic growth. Their investment charter (1998) promotes foreign investment on their land (Article 1-14 1998)[i]. The government is often a shareholder in larger business deals, as a method of promoting economic growth in the country. In recent years, the Government has been looking to diversify the economy, because it is primarily an oil-based economy. Government involvement in business deals, can however put local populations at risk, considering that there are minimal laws protecting locals from being evicted or marginalised in favour of Businesses. (Wily, 2012).
At present, Gabon is an upper-middle income country. They have the fourth highest Human Development Index in sub-Saharan Africa, and their per capita GDP is one of the highest in Africa. Poverty levels are high, 32.7% of the population of Gabon live under the poverty line out of a total population of 1.8 million people in Gabon (World Bank, 2017). A majority of the population lives in towns or cities, resulting in a lack of attention towards rural rights despite the connectedness between urban and rural populations. (Wily, 2012).
The economy of Gabon is reliant on the production of primary products with foreign inputs. Gabon mainly produces petroleum, manganese mining and timber processing. The Gabonese economy is dependent upon oil, which accounts for over 80% of the country’s exports, 43% of GDP and 65% of state revenue (IMF, 2017). The economy is therefore subject to worldwide price fluctuations.
Forests cover 85% of Gabon, and the depletion of forests could lead to harsh effects, such as such as habitat loss for species, and livelihood loss for indigenous people, as well as enhanced environmental consequences such as climate change and flooding. The forests are entrenched as government property according to laws in 1982 and 2001. Customary use of the forests is upheld, however, they cannot be owned by anyone other than the state. The state has failed to demarcate the Rural Forest Domain, which would have helped rural populations secure rights of occupancy. The logging sector has not been regulated, which has created an overlap between logging, mining and businesses. Community lands are encroached, and with no community councils, there is a lack of representation for the local populations when it comes to land and resource allocation (Wily, 2012).
There are a few reasons why Gabon is a prime choice for land acquisition. There has been a higher demand for biofuel in recent times, which requires an increased demand for land. Palm oil has many functions, one of which is to produce biofuels. Furthermore, the political and environmental climate of Gabon make it a comfortable place for businesses to invest. Environmentally, sub-Saharan Africa is considered to have a favourable climate for the production of crops (Kachika, 2011). Politically, the government has few regulations on land acquisitions, and even so, the government themselves are stakeholders in projects requiring land. Furthermore, local labour is inexpensive and the land is also cheap.
3.1 Summary of laws and policies on land acquisition in Gabon
The constitution of Gabon provides that each person, individually or collectively has the right to property. The Gabonese law on the domain of the state, no. 14 of 1963, says that all vacant properties and those which have no owners belong to the state (Article 23). This essentially means that the government is in charge of all vacant property, and is free to distribute it to investors. This section will further outline the Investment Charter, Forest Law, as well as international laws Gabon has signed and ratified.
The Investment Charter of 1998 was made to attract land based investors. The charter reinforces and encourages handing over land and resources to private enterprises. The charter makes the private sector a part of the state, in promoting social and economic development through private sector expansion. Foreign persons are welcomed and free to undertake any trade and production activity (Article 1). Gabon assures investors that it is a member of the World Trade Organisation, as is a signatory to various bilateral agreements and multilateral treaties, to cite sources of investment guarantees. Tax advantages are also laid out including suspension of custom duties, a null rate on the VAT of exported products, tax exemption on companies in their first three years, postponements in payments to improve cash flows in their stage of profit improvement, and compensating investors for investing in social services in rural areas with adjustment to real estate taxes (Wily, 2012). The Investment Charter is clearly in favour of Foreign Investment, and serves as a go-ahead for any major land investments.
Forest law is important because for the production of palm oil in Gabon, large areas of forests are cleared. The status of forests with the state domain is unclear in this law. The law only says that woods and national forests are inalienable but then qualifies this by saying this is possible through the adoption of a law (Article 80). The state owns all of the forests in Gabon and rights are limited to use rights. All forests are within the national forest domain, which is made the exclusive property of the state. Customary forest use does not require permits, as long as they are strictly used in customary ways (Article 13-14, 2001). State ownership of the forests provides the state with full control for what it is used for.
Gabon has signed and ratified a number of treaties, which are relevant to land use. Most notably: the convention on biological diversity (1992) which adopts an approach to conservation and provides conservation measures, sustainable use and benefit sharing of natural resources. Gabon has however, not ratified ILO, which recognises customary land, as rights of property which must be upheld and protected (Wily, 2012). This shows a lack of protection of indigenous populations to access forested land for customary purposes.
3.2 Olam’s operation in Gabon
The palm oil industry in Gabon has been fuelled by one major company: Olam. Olam began to develop palm oil in Gabon in 2011. Olam is an agri-business that supplies food and industrial raw materials, they operate in over 70 countries. Palm oil producers and investors have been turning their attention to Africa in recent years. Palm oil is native to tropical Africa, and its fruit has been used by locals for centuries. However, governments and large companies have, in recent times, been producing palm oil at an industrial scale. (Greenpeace, 2012). The Gabonese government is in a joint venture with Olam for the palm oil project, and is a 40% stakeholder.
Olam began developing their plantations in Gabon in 2011, under a joint venture with the Republic of Gabon (Olam Palm Gabon). Olam (2016) states that the government was looking for a business partner to help develop the agricultural economy, reduce reliance on oil and gas exports and food imports, and support cooperative smallholder programmes. Both Olam and the government wanted to develop palm oil plantations through the RSPO certification. RSPO stands for ‘Roundtable on Sustainable Palm Oil’, which is a registered, not-for-profit Swiss organisation that works to improve the sustainability of global palm oil use and production (RSPO 2017). Olam has planted 44,000 ha, of which 58.8% was secondary, degraded or previously logged forest, and the balance was savannah. Olam (2016) explains that they are conserving an area of High Conservation Value forest, of 55,000 ha. Olam’s Awala plantation and mill in Gabon were the first to receive the RSPO certification in Africa. The project is aimed to be completed by 2021 (Chauhan, 2016).
In order for Olam to be able to operate in Gabon, they have had to follow a step by step procedure to be authorised to develop an industrial plantation. Agribusiness companies can be entitled land leases on the national domain, for renewable periods of 18 to 99 years. More than 50 ha require Presidential Decree. The procedure requires the consultation of representatives of the local population by the land titling committee. It is required to assess future impacts and submit proposals of mitigation of compensation to the local population and regional authorities. Claims over land can be made to the committee. If proper land titles are owned by individuals, they can either sell their land to the state who further leases it to the company, or benefit from compensation (Feintrenie et al., 2014).
Olam has also entered into new ventures with the Government of Gabon, the Special Economic Zone, and GRAINE. The SEZ’s purpose is to concentrate local timber processing through partnerships with foreign firms. In 2015 Olam announced a second joint venture with the Republic of Gabon, through the Society Gabonaise De Transformation Agricol (SOTRADER). The Republic of Gabon holds 51% equity ownership and Olam owns 49%. It is through ‘Gabonaise des Réalisations Agricoles et des Initatives des Nationaux Engagés (GRAINE).
4. Impacts and outcomes
Olam’s operation in Gabon is a result of an FDI-led economic growth strategy by the Government. The government’s neo-liberal approach to diversification from oil in its economy, means that it is now a major shareholder in Olam’s palm oil industry. The impacts of land acquisition by Olam for its palm oil plantations, unquestionably has impacts upon local livelihoods, the environment, women, and the government itself. The law of Gabon does in fact protect the environment, agriculture, employment forestry, irrigation, improving rural conditions and seed production under its 2008 Agricultural law, where it states that investors must protect the mentioned factors (Article 2-6). However, the government cannot enforce companies to practice certain laws, especially when the government is a stakeholder in the project.
This section discusses the environmental, economic, social outcomes of land acquisition for palm oil plantations in Gabon, as well as the impacts faced by the government. It will deduce whether the government’s neo-liberal approach to economic growth, is a successful process, or whether it leads to more poverty.
4.1 Environmental impacts and outcomes
Several risks are posed when it comes to clearing out forested land for palm oil production. These include the impacts on wildlife in the area, followed by the long-term impacts of the act of deforestation itself, in terms of higher CO2 emissions, and finally, the risks posed to human livelihoods.
Areas proposed by the Government for palm oil development, include areas in Estuaira and MoyenOgooue provinces, as well as Mounila in Ngounie province. Ramsar-listed wetlands, untouched primary forest within an area of ‘Intact Forest Landscape’, and areas including rare, threatened or endangered ecosystems and species. In these areas, chimpanzees, elephants, great apes and forest buffalo have been found to have their habitats. Some of these habitats may be safe since Olam has committed to not touch valuable forest area. However, the government being willing to give up valuable forest, could pose a threat for future companies who may lease this land. (RFUK, 2013).
Environmentally, palm oil plantations require a large amount of land. The clearing out of large areas of secondary tropical forests, results in huge carbon monoxide emissions from the machines, this would impact the local climate in Gabon in the long run, making it warmer (RFUK, 2013). Forests regulate water flow and rainfall, and play a role in stabilising the Earth’s atmosphere and climate change by capturing and storing large amounts of carbon, allowing humans and other species to adapt better to the impacts of climate change. The conversion of forests to establish palm oil plantations would result in more CO2 emissions (Greenpeace 2012). Additionally, the Gabonese government has created a Special Economic Zone, with the help of Olam. The SEZ requires between 50,000 and 200,000 ha of forest concession, and two million hectares of wetland has been dedicated to this purpose (Wily, 2012).
The carbon emissions are not considered under HCV assessments (High Conservation Value assessments), and the result of the development will lead to doubling of the carbon emissions. The High Conservation Value (HCV) assessment was undertaken for these areas. ‘High Conservation Value’ means lands typically contain very significant biodiversity or endangered ecosystems; or provide basic services like watershed protection. HCV also includes forests essential for basic needs of local communities or their cultural identity. If a forest is deemed to be HCV, it should not be cut down” (Higgonet, 2016, p 10). The estimated carbon stock in the forests planned for clearance is 160 tonnes of carbon per hectare (RFUK, 2013). The “forest management practices in Gabon have resulted in over 500 million tons of avoided CO2 emissions, that our protection and forest management efforts mean that today the forests of Gabon sequester about 60 million tons of CO2 per annum and that Gabon is, and has committed to remain, a net sink of CO2” (White, 2016).
While Olam does not deforest, or use areas of High Conservation Value for its plantations, it still uses areas of low density logged over forest. “But a “logged over forest” can simply mean ‘secondary’ forests that still provide ecosystem services, habitat for biodiversity, and climate benefits, and the forests we found in our investigation included substantial numbers of mature trees.” (Higgonet, 2016). According to Higgonet (2016), Olam is still deforesting Gabon, but simply changing the definition of what a forest is in order to do so. “Olam argues that the definition of what constitutes a forest is ‘contextual’ and should be determined through a vague ‘multi-stakeholder process in the country of origin.’ This gives Olam latitude to clear viable areas of rainforests, for example, in its forested concessions in Gabon, while still claiming to be compliant with its commitment to protect HCS and HCV forests, all because it is redefining deforestation on its own terms.” (Higgonet, 2016, p.23). The High Carbon Stock Approach typically determines how ecologically viable a tree is. “To get around this framework for forest protection, Olam helped develop an alternative to the HCSA standard based on a carbon offset approach to deforestation, called ‘HCS Plus’. This ‘responsible conversion of forest’ approach (rather than the ‘No Deforestation’ approach), seeks carbon neutral development but still allows some clearance of forests. It was developed off the back of a “High Carbon Stock study”, for which Olam’s plantations in Gabon were used as a case study. In 2015, Olam decided to adopt the HCS Plus approach, rather than accept the HCSA methodology” (Higgonet, 2016, p.25).
Olam wishes to use technology to reverse tropical deforestation (White, 2016). The Gabonese Government has invested in a space agency, in order to download satellite imagery for Gabon and the African rain forest belt, to develop a plan. While this may potentially reverse harmful effects of deforestation in the future, it still does not solve the issue of current populations livelihoods being in jeopardy as a result of palm oil plantations. While it appears that not many people are affected from the Olam project, due to a low population in Gabon, it is still apparent that even people living in cities have a cultural significance attached to rural areas, of which many are now used for palm oil.
The main issue in regard to the environment, is deforestation. Primarily, deforestation leads to climate change, possible flooding, drought and landslides in the future. The lack of trees to absorb CO2 emitted from humans, animals, cars and industries make Gabon more vulnerable to higher climates in the future, and the lack of trees also means that the absorption of water by tree and plant roots will decrease, leading to a higher chance of flooding. In the long-run, a country consisting of 85% forest, attracting investors who may be encroaching on forested areas, would lead to harmful effects when it comes to climate change. This would affect the poor more so than the rich, as a result of the inability of the poor to deal with the consequences of climate change, flooding, drought and landslides. For example, a warmer climate would disrupt the growth of certain crops, which would affect the poorer farmers. This, according to Marxist political economy theory, would widen the rich-poor gap and generate more community stratification.
The more immediate impacts of deforestation, are the effects on livelihoods. While Olam claims to only be using secondary forest, or savannah area, other research shows that this may not always be the case, and even where it is the case, secondary forest still has cultural importance. Giving up areas of high cultural importance may affect some groups of people more than others, feeding into inequality. Hunter-gatherer communities, who comprise 20,000 of the 1.8 million people at a disadvantage (Knight, 2011). Based on the Political Economy approach to poverty, this would negatively impact economic growth, due to its contribution to poverty and inequalities in communities. Eliminating poverty as a whole, requires equal treatment of all communities and people, and policies which address the equality of all communities. Other issues linked to deforestation are endangered species, an affected irrigation system, affected flora and fauna, and the decrease in CO2 levels. This has an effect on poverty in a social sense. Amartya Sen’s capabilities approach is applicable here. When capabilities of people are limited, it leads to poverty. Deforestation limits the capabilities of people.
4.2 Local livelihoods
Large-scale plantations in previously forested areas, have various impacts. Large projects attract workers, who bring their families, into the area. This increases the pressure on the forested area, pressuring the flora and fauna. In addition to this, once a plantation has been established (Olam’s project is due for 2021), more companies are likely to do the same. This could mean more pressure on forested areas after the completion of Olam’s project. What this also leads to, is more infrastructure, in terms of roads, within forest areas for easier access. Once the forests are more accessible, this would lead to an increase in logging, and commercial bushmeat hunting and poaching (RFUK, 2013). Livelihoods of hunters, collection of non-timber forest products, artisanal timber harvesting would all be impacted by the palm oil project. Forest areas identified as HCV forests, of particular use to local communities are areas the plantation will be developed on. Only 7,134 ha of the total area are suitable for plantation, which is 14% of the initial allocation, according to RFUK (2013). Olam however responded by stating it will allow fishing, but not hunting. The dependency of indigenous people on the forest, and forest communities for survival, shows the impact it has on livelihoods. (Greenpeace, 2012).
In 2015 Olam announced a second joint venture with the Republic of Gabon, through the Society Gabonaise De Transformation Agricol (SOTRADER). The Republic of Gabon holds 51% equity ownership and Olam owns 49%. It is through ‘Gabonaise des Réalisations Agricoles et des Initatives des Nationaux Engagés’ (GRAINE). While the Republic of Gabon provides land and financial resources for developing smallholder plantations and logistics infrastructure, Olam leads in the development and management of smallholder plantations. Small farmers are incentivised to work directly with a given company within or near its oil palm concession, planting palm oil on their own small farms and selling it directly to the larger company. The same has been done in Indonesia and Malaysia, and they have been criticised on environmental and sustainable development grounds. Smallholders have often found themselves trapped with only one place to mill and sell their products and little leverage on what price they can charge, as well as few of the protections or benefits that come with being an employee. Another risk is the transition from a subsistence farming/forest economy to a paid economy, and the impact that an influx of labourers can have on local food, security and the local economy.
In Malaysia and Indonesia, cutting forests further, for palm oil was outsourced to the local farmers. “As of 31 October 2016, 15,659 Gabonese have been enrolled in the GRAINE scheme, each of whom will receive approximately seven hectares, and who will then sell their oil palm harvests (i.e. Fresh Fruit Bunches FFB) to Olam. However, local press reports that officials within the government and Olam have stated that the program will be rolled out in nine provinces and aims to cover a total of 200,000 ha with 30,000 participants across 1,600 villages by 2020” (Higgonet 2016: 12). Olam signed a $140 million deal with US equipment company Caterpillar, to purchase 475 bulldozers to clear the area targeted for development by GRAINE, as well as 3,000km for roads to access the future plantations. There is a concern that farmers could be incentivised to cut forests and grow palm oil as GRAINE “smallholders”. GRAINE plantations are only subject to Olams sustainable palm oil policy. GRAINE is not currently RSPO certified. (Higgonet, 2016)
The earmarked area for future expansion of industrial timber attached to the Special Economic Zone, are lands which rural communities could rightfully claim under customary tenure but which for the failure of identification of the promised Rural Domain are not protected under state allocation. The lands will impinge local community areas. As a result, Olam (Olam oil Gabon, a subsidiary of Olam international) carried out assessments to identify primary forest areas of high conservation. They reported that local communities use these areas for hunting and fishing, the report also believes that enabling access to these areas would remove conflict, as these lands may be already owned by local communities. This would mean that rather than only members of the local community in charge of the land being able to access the land for hunting or fishing, any local would be able to, because upon completion of Olam’s project in the area, the land will revert to the government for reallocation, not to the community. (Wily, 2012).
Bolossville is located in North Gabon, bordering with Equatorial Guinea and Cameroon. It is close to one of Olam’s palm oil plantations. The settlement in Bolossoville comprises of seven villages, each comprising of members of the same clan, the fang clans. Many areas where the clan reside include important rivers, and farms. Villagers still use their traditional areas for hunting, fishing and forest product collection. Hunting, however, is not a right that Olam supports, and would not be allowed if this area were under their leasing area for palm oil development.
The village approved chief of the Bolossoville council has made a rule saying no one may negotiate with Olam directly, the concessionaire on land, harvesting or employment matters. The area under Olam includes traditional land of the different clans, and extends within 5km of the Bolossoville settlement. Local exploitation of the forest is possible under an association ((Société des Techniques forestières de l’Okoumé (STFO) created to assist families, where the family receives 60% and the harvester gets 40%. Another route to local exploitation is le fermage which is sub-leasing of the permit; this is now legal. The owner is responsible and pays the tax but the harvester ends up with most benefit. This shows that forests under the Bolossoville area, which hold high cultural significance due to the Fang clan who lives there, is not open for Olam to plant in, it however does provide customary rights to its own indigenous community. This does not represent the effect of palm oil plantations on indigenous people directly, however, it shows that the government does back the indigenous communities, and as a stakeholder in major projects impacting Gabon, it shows that they have high chances of protecting indigenous populations’ rights, should their land be encroached upon for plantations in the future.
Palm oil plantations in Gabon do, however impact indigenous populations in Gabon at present. Land in Gabon is owned by the state formally, and customary use of forest areas is not recognised, Olam has volunteered to protect customary rights. While this initiative is positive for most, it however, does limit hunter-gatherer communities, since they do not have formal rights, and Olam does not support hunting. Additionally, as a result of the areas being more populated, due to the palm oil developments, there would be less resources for indigenous people. As explained earlier, forests regulate irrigation, and a more populated forest, would mean that the natural cycles of irrigation are affected. It would also mean that natural flora and fauna are affected, which in turn, means that indigenous people do not have access to the same quality and amount of resources they may have had prior. While the African Charter on Human and People’s Rights (1981) guarantees the protection of property unless required for public purpose, Olam does recognise areas of High Conservation Value, and attempts to protect them for indigenous populations. (RFUK, 2013).
While jobs are created due to Olam’s project in Gabon, it is important to note the working conditions in palm oil plantations. There can be numerous risks for labour rights abuses. Most jobs in palm oil plantations are for casual workers, with little job security, and often low quality of work. Wages are typically low, and can be below the minimum wage, which is not a living wage. According to Higgonet (2016) Olam should practice responsible hiring and employment, and limit casual or day labour to jobs that are seasonal. They also recommend Olam commits to ILO standards, especially for its smallholder projects such as GRAINE. (Higgonet, 2016). However, Olam explained how their provision of jobs has benefitted the locals and the economy of Gabon: “Olam employs over 6,000 unskilled or semi-skilled Gabonese workers in rural areas whose experience of agriculture is at the most basic subsistence level. Of these, Olam estimates that over 60% had never held a permanent job. Olam provides regular training for these staff and workers so that they can progress in developing their skills and responsibilities. All of our staff are paid at least the legal minimum wage (150,000 FCFA or approximately $300/month), and have opportunities to earn more through overtime and high productivity. This equates to $1.8 million in cash going into the local economy each month, which has created a huge and visible socio-economic development in the local communities” (Chauhan, 2016).
While job provision is what gears an economy towards economic growth, based on World Bank and IMF specifications for poverty eradication and growth, the political economy approach to poverty explains that if job provision plays into the existing stratification of society, it does not help economic growth. A significant part of Gabon’s population is under the poverty line, and has a large rich-poor gap. This gap is only widened when high-intensity labour jobs are offered to poorer populations, who do not have the means to advance from this into a more technically-skilled jobs. This leaves the poor populations poorer, and allows those with access to education, to remain richer. Low skilled labour will have no opportunities to upskill and train and increase capabilities. While they may make more money than before, due to Olam’s investments, the long-term sustainability of this is in question.
4.3 Economic impacts and outcomes
Part of the joint venture between the Republic of Gabon and Olam, was a joint venture for the building of a urea fertiliser plant and a Special Economic Zone focusing on timber processing. This reduces taxes and shipping costs. The President of Gabon announced that upon completion of Olam’s palm oil project, it would become the largest producer of palm oil. A McKinsey study confirmed that upon completion, it would be Africa’s biggest palm oil plantation, and Gabon would be the second largest palm oil producer in Africa. The study claimed that the project would provide a 1.1% per annum boost to non-oil GDP (RFUK, 2013). This represents usage of the World Bank and IMF methods of economic growth, where the focus is monetary.
While the economic growth potential upon the project’s completion in 2021 is major, there is a question as to whether FDI really boosts the lives of locals. Job provision is what brings about the hope that development will come about with an investment as large as Olam’s. So far, job creation in most large-scale agribusinesses have been limited. Gert Vandermissen, the director of previous commercial vegetable oil and rubber plantation company in Gabon (SIAT), said it will not be a challenge for Olam to clear the forest needed, however, their targets will not be met unless labour is brought in from outside Gabon. (RFUK, 2013).
Following neoliberal ideals for growth leads to an FDI-based growth strategy. This growth is monetary and not social or community-based, and therefore does not resolve inequalities. Capabilities are not improved when growth is only measured on a monetary basis, based on Sen’s theory of poverty.
In order to eradicate poverty and achieve economic growth, it is important to pay attention to gender inequality. Eliminating gender inequality from a society, from a political economy perspective, would contribute towards the growth of a country. According to the Political Economy approach to women, women’s household role is of great importance in ensuring a household is stable.
Women are the most vulnerable group in Gabon, and 37% of Women in Gabon suffer from poverty as of 2012. (Wily 2012). Women’s land rights are yet to be resolved in many rural societies across Africa. Women’s responsibilities primarily include agricultural production and preservation of land resources. These responsibilities are made tougher when certain land is not accessible to them. When men are at the centre of the negotiation process, women do not have a say. For example, in Bollossoville, the local council with rights for the area, is made up on elderly men. (Kachika, 2011)
Due to unequal power relations, men do not contribute to household tasks, and women are affected by this, especially when land they are used to accessing is more densely populated, or unavailable to them as it was before. While this has not happened due to palm oil in Gabon as of yet, the relocation of a community due to agricultural investments affects women the most. They are typically care givers in communities for the sick and children, and with resettlement, a lack of social amenities is felt the most by women. (Kachika, 2011).
While Olam has employed more people in Gabon as a result of the palm oil plantation, typically, women are not beneficiaries of this employment. Typically, men are employed for jobs available, which does not help prospects for women when it comes to income and supporting their families or themselves. As a result of the reduced access women have to education, they are also prevented from being considered for skilled jobs. So, any job they may receive, will not be of high income. (Kachika, 2011).
When assessing the higher intensity of hardship women face in rural communities in Gabon, it is clear that this is due to a lack of capability. A lower education, and a culture expectant of women to take care of children and the elderly, means they do not have the ability to provide for themselves.
Government plays a role when it comes to alleviating poverty and creating economic growth. Based on a neoliberal structure, the role a government should play to grow economically, is to invite investment, and open up trade. Based on a political economy view of poverty and economic growth, a government should strive for equality within communities, and seek to close up the rich-poor gap by doing so. The government of Gabon has taken to the neoliberal structure, and while it is promoting FDI, it is not protecting its citizens from the possible impacts of FDI. First I will outline the government’s role in perpetuating economic growth though a neoliberal structure, and then explain how the governance is adversely impacting citizens.
The Special Economic Zone created by the Gabonese government in conjunction with Olam, will bring in other industrial developments by the companies which invest in it, and would further develop the SEZ. (Wily, 2012). The advantages of this project are numerous to the government, in terms of their goal to bring in investment to the economy. Infrastructural development, like the Special Economic Zone in Gabon, can have a multiplier effect, whereby competitiveness for diversified industry is not alleviated. The more money that is made as a result of the SEZ, the more there will be a demand for consumption and services. (Potts, 2013). The SEZ is an example of the neoliberal economic plan of Gabon for economic growth.
However, are outlined in previous sections, the government is unable to provide protection to its citizens. Citizens are unable to claim rights over customary tenure, and therefore, these lands impinge on local community areas. While Olam provides rights for fishing, but not hunting, it is not guaranteed that the same would occur in the future when the investor is different and the government provides different land. The government not providing rights to citizens to access land of cultural value, does not contribute to growth from a political economy perspective. It, in fact, creates inequality between communities and leaves people with less resources due to a lack of access. This leads those impacted by this, more vulnerable to loosing income, and therefore, further perpetuating a sense of inequality within a community.
While there may be some short term benefits for Gabon as a result of the palm oil industry, there are a number of short and long term disadvantages that outweigh these benefits. Critical amongst these short term outcomes is the impact to the environment, primarily as a result of widespread deforestation that takes place to create the necessary land for palm oil growth. While Olam has committed itself to protecting HCP and HCV forests; the definition of what areas of land can be used and whether or not they constitute deforestation is still arguable. The other impacts of deforestation are more long term and take the form of climate change, landslides, changes in patterns of irrigation and natural disasters; including floods. This will interrupt with the ability for locals to farm, and continue with their daily tasks. Further, in the event of natural disasters, these communities will not be able to cope with the effects thereby leading to further poverty.
While environmental impacts are harmful, the impacts towards local livelihoods, the economy, women and the government are also significant. The immediate economic impact of land acquisition through deforestation will most likely be felt by the local communities in Gabon. A number of local communities rely on the forests and the natural environment to carry out traditional activities such as fishing and hunting to sustain their livelihoods. These communities will continue to come under severe strain as a result of progressive deforestation. Economically, jobs are created, and income is generated for labourers. On its own plantations, Olam employs a number of locals and pays them comparatively more, thereby injecting money into the economy. This is however, below the per capita income in Gabon.
Further, the skills needed are very basic and there is no effort to improve the capabilities of the farm workers. Therefore, the quality of life in the long run does not improve drastically. Additionally, land acquisition was found to obstruct women from their daily tasks that involve access to forest lands as in many African countries. Women remain unemployed, and remain tasked with household duties, and therefore do not benefit from FDI in Gabon. In Ghana, for example, women have lost traditional sources of income through shea trees (used for making shea butter) that have been destroyed for agricultural investments. Similarly, loss of forests in Gabon could deprive women of cultural traditions. Compensation schemes typically do not take into account such losses to women’s livelihoods (Kachika, 2011).
A significant weakness in Gabon’s model is the local laws and the level of protection provided to local communities. The laws are investor friendly and do little to protect the rights of their people. Their land rights are unprotected, and access to public land is prohibited once leased to an investor. In the long run, future investors could be using valuable land in a manner that puts local communities at risk.
The Gabon government’s investments and spending also are focussed towards supporting the needs of its foreign investors as opposed to the alleviation of poverty. As an example, infrastructure such as access roads to the plantations and mills have been built to benefit investors. While these benefit the country overall, they are not specifically built with the intention of alleviating poverty, to benefit locals. In order to truly eradicate poverty and improve equality, the government would have to re-examine and re-prioritize its investments in a manner that the rural population and local communities also benefit from improvements to their health, education and living standards. There must be an effort to help communities enhance their capabilities as part of this process.
The model has allowed the Government to generate income and an alternative to the country’s dependence on fuel. Therefore, Olam’s projects in Gabon are seen as a success by the external world. The political stability of Gabon, the resources available and a favourable legal framework make it attractive for investors to invest in similar projects. While this will lead to more monetary benefit for the Government, it will also increase the pressure on local communities and their livelihoods. This leaves those impacted more vulnerable to losing income, and therefore, further perpetuating a sense of inequality within a community.
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