The importance of understanding land-based livelihoods and why disrupting them can lead to conflict

An SME was seeking a 5-year term, LKR million facility to set up a 40-acre green field agricultural enterprise. The company had secured a 30-year lease title and approval for a mixed intercrop farm. The farm was previously a government run onion seed farm. Fruits were to be sold to hotels, juice bars, supermarkets with the high-quality grades being exported. The loan was for infrastructure development, irrigation, power and cold storage. The operation is located in an arid agricultural zone and neighbouring small holder farmers are dependent on water from government-maintained irrigation canals. Background

E&S Due DILIGENCE The transaction was categorised as high E&S risk by the Bank triggering the need for an E&S due diligence assessment. The scope of the assessment was limited to checking the client’s adherence to requirements attached to the Environmental Protection License. This included concerns associated with a change in land use, soil erosion and potential impact on water resources from irrigation. No follow ups were made on land rights concerns as the client had submitted lease titles and approvals for the proposed land use. No checks were made regarding the adequacy of the client’s engagement with stakeholders and particularly the neighbouring communities.

Security of access to land and land-based resources is a significant issue for a large part of the world’s population who still depend on land and natural resources for a source of income or other means of livelihood. Particularly when access under prevailing land tenure systems is insecure. Developments that disrupt existing rights to access land and/or associated resources, directly threaten land-based livelihoods and can become a potential source of conflict. Disruptions can be outright dispossession, pollution of a natural resource, limitations to previous access rights conferred. Disruptions may result in physical displacement and/or economic displacement to the parties directly affected. When Land-BASED RESOURCES = livelihood Be sure to understand the context & Avoid conflict

It’s all about the onion seed Shortly after the release of the first LKR 25m and the commencement of land clearing and installation of the irrigation network local farmers forcibly occupied part of the land acquired. The occupations and associated protests stopped any further development work and threatened the loss of nursery plants due to delayed planting. The local farmers alleged that the leasehold had been acquired corruptly and that the land concerned had been historically used for the cultivation of onion seeds and a source of planting material for local farmers.

no small matter Accessing quality seeds and planting material is considered critical to the local farmers. Losing access to this source of material threatened the livelihoods of the farmers. The failure to identify parties that had the potential to be affected by the new venture and to engage with them meant that this matter had been overlooked by the investor. Subsequent engagement, in response to protests, helped to resolve the conflicts, but not without delaying project implementation. The new venture failed to meet its repayment schedule which had to be revised to allow the company to continue as a going concern.

The scope of the E&S risk assessment must be commensurate with the level of E&S risk flagged. New ventures involving land acquisition, where land tenure systems are insecure, and where involuntary displacement is triggered must be approached sensitively. Where displacement is unavoidable the impact must be mitigated to ensure that livelihoods are maintained and not eroded. Identifying and engaging with parties whose livelihoods may be affected is essential if sources of conflict are to be avoided. reflections