Habibco Agriculture Ltd and Agrowest Ltd, both established in 2012, are two Georgian agribusiness companies owned by the Habib family of Egypt. Habibco Agriculture operates a mixed dry land cereal and pulse cropping enterprise in Bolnisi, Kvemo Kartli on 692 ha, and Agrowest operates a mixed dryland cereal and pulse cropping enterprise on 1650 ha in Ulyanovka, Kakheti. The owners have a seven-decade history of trading and manufacturing in Egypt, and they plan to fully develop both properties with irrigation, establish a vertically integrated livestock operation, and develop vineyards in Ulyanovka.
Upon taking possession of their land in Ulyanovka, it quickly became apparent to the investors that relations with the neighbors were going to be a serious issue. Both parcels included substantial areas that had lain fallow for a number of years, and the neighboring villagers had long used them as common grazing land. At the same time, many Ulyanovka residents had not received their full quota of freehold land during land reform, and they were distressed at being denied free grazing access to what had previously been open to them and free.
When Agrowest arrived with farm machinery, villagers denied them access to the land, threatening violence against the machinery operators and property managers. When Agrowest sought support from the local authorities to mediate the dispute, for reasons that still remain unclear they were unsuccessful.
Nevertheless, Agrowest was in a good position to respond directly to the challenges raised by the local population. They hired a respected local operations manager who was effective in negotiating with villagers and reaching agreement on a package of benefits that would accrue to the local population. The package, which included local sourcing of contractors from the village, employment of some of the key agitators, utilization of Interior Ministry Security Police to secure property rights, and a local social welfare program, sufficiently ameliorated local concerns to allow operations to commence without further conflict. However, some of the locals still have mixed feelings about an commercial operation in their midst.
Once Habibco and Agrowest were able to begin operations, the broader benefits of the investment started to become clear. The companies have been using western technical advisors as well as a skilled Egyptian technical manager with a strong record in cereal cropping. Using modern dry land farming methods and novel crops, the companies are likely to displace a substantial quantity of imported grain. Their first harvest will already see them exporting oilseeds and pulses. The introduction of novel forage crops and raw materials for pharmaceutical manufacture are firsts for Georgia, and the companies are planning to outsource some of their production to neighboring farms. Agrowest is likely to plant around 350 ha of vineyards, which will be a substantial employer of both full-time and seasonal staff from the village, potentially making Agrowest the second largest wine grower in the country. Finally, although it will take as long as six years to come to fruition, the development of labor-intensive dairy enterprises on the properties will eventually create many more jobs for the local population.
Still there is impatience among the local population, and by their timelines the benefits they have been promised are slow to accrue. Given the regional uncertainty and comparatively high risk of doing business in rural Georgia, it is not unusual for investors to execute investment plans in stages, with clear milestones to be met along the way. Local residents who lose access to grazing land have a much higher level of urgency than the cautious investor’s pace is likely to match. Hearing government promises of economic and technical benefits from foreign agricultural investment, villagers become frustrated and impatient with the slow pace of benefits accruing to the local community.
The lessons learned and recommendations related to this case fall into two categories: those concerning national and local government and those concerning foreign investors. We recommend that government track investment pipelines, actively engage with incoming investors, and proactively manage disputes with the community to avoid collateral damage to investors. At the same, time there is an urgent need for the government to finalize the land reform process that began more than a decade ago. The process needs to enable local communities to be more financial viable and give them (and local government) a greater voice in decisions—like land privatization and investment in infrastructure—that will directly the livelihoods and well-being of their constituents
At the same time, investors need to work with a knowledgeable Georgian with ties to the local community. They should actively engage the local government while they are making investment plans, not as a reaction to inevitable concerns raised by local stakeholders. This should include communicating with the local community before commencing operations, developing a Corporate Social Responsibility (CSR) strategy to mitigate any negative impact of the investment on individuals and the community, and considering training, extension services and other capacity building measures for neighboring farmers.