Karuturi to Borrow From Sovereign Fund After First Ethiopia Crop

March 28, 2013 (Bloomberg BusinessWeek) –Karuturi Global Ltd. (KARG), the world’s largest rose grower, said it will borrow more than $100 million from a sovereign wealth fund to invest in farming in East Africa after selling its first produce from a plantation in Ethiopia.

The company, based in Bangalore, India, produced 21,000 metric tons of corn in the last quarter of 2012 that sold for about $6.5 million in Ethiopia, Managing Director Sai Ramakrishna Karuturi said in a phone interview on March 27. The harvest, grown on its plantation in western Ethiopia, showed the project was “not a disaster” after floods destroyed a 60,000- ton corn crop in September 2011, he said.

The deal with the unidentified fund comes after development banks declined to provide assistance because of “unfair” criticism of commercial farming by advocacy groups, Karaturi said. “Hundreds of millions” of dollars will be advanced to the company by the end of April and invested in Ethiopian projects as well as Kenyan flower farms, he said.

Ethiopia’s land-commercialization drive has been attacked by groups including the California-based Oakland Institute, which says the farms forcibly displace people and will increase poverty. Karuturi leased 100,000 hectares (247,105 acres) in the Gambella region from Ethiopia’s government in November 2010 for 2 million Ethiopian birr ($108,151) a year

Horizon Plantations, majority owned by Saudi billionaire Mohamed al-Amoudi, leased a 20,000-hectare plot in the western Benishangul-Gumuz region in September to grow groundnuts to produce cooking oil.

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The benefits of commercial farming in lowland areas of the country include a boost to crop production to reduce hunger and more jobs and foreign earnings, according to Ethiopia’s Agriculture Ministry.

Since September 2009, the central government has leased 416,803 hectares to 34 domestic and foreign investors with an average plot size of 12,259 hectares, data from the ministry’s website shows. The state identified 3.3 million hectares of land nationwide, an area about the size of Belgium, as suitable for large-scale farming.

Karuturi’s contract stipulates it should develop half its plot within 12 months and the remainder the following year. The agreement starts from the date of signing or “from the date of receipt of all the clearances from the government.”

The project to grow and process crops including cereals, sugar, palm oil and vegetables has “good support” from senior Ethiopian officials, Karuturi said. The leasing of an additional 200,000 hectares to the company is conditional on completion of the current phase, according to the contract. All land in Ethiopia is owned by the state.

–BusinessWeek