For more than two years, Mariam al-Mheiri had been preparing for a crisis. So when aeroplanes stopped flying into the United Arab Emirates as the coronavirus pandemic spread across the Middle East in March, the country’s first food security minister knew what was expected. She had to guarantee that her desert nation, which imports 90 per cent of its food, was going to be able to keep supermarket shelves fully stacked.
While planes sat idle at the nation’s shuttered airports, she called an extraordinary meeting of the UAE’s nascent Food Security Council. Early warning systems were adopted and the movement of “strategic” food items — from cereals to rice and vegetables — was monitored inside and outside the country. Overseas diplomatic missions were put on alert in case food exporters imposed export restrictions. And a plan to diversify food imports was quickly passed on to UAE traders with a clear mission to identify alternative markets.
When planes did return to the skies to repatriate foreign workers to the likes of India, Pakistan and the Philippines, they came back loaded with food. “There were days when certain foods were not coming into the country . . . but we always managed,” Ms Mheiri says. “The leadership reassured the people and said ‘food and medicine is a red line for us, we will take every measure to ensure you always have access to what you need.’”
The UAE was not alone in fearing that disruptions to international supply chains and the risks of governments imposing protectionist measures could trigger a global food crisis. But for Gulf states — where there are no permanent rivers or lakes and minimal rainfall — the vulnerability to such shocks is acutely felt.
It is a phenomenon that has, over the past decade, sparked an upsurge in overseas investment in agricultural resources and in agritech ventures at home. That trend is expected to pick up pace given the pandemic, with the UAE and Saudi Arabia among the most active as they eye opportunities from the Americas to Europe, Africa and Asia.
In the four months since the Middle East’s first Covid-19 case was reported in Dubai, Abu Dhabi, the UAE’s wealthy capital, has made several investments all aimed at improving food security.
ADQ, an Abu Dhabi investment holding company, bought a 50 per cent stake in one of the region’s biggest agribusinesses, Al Dahra — which specialises in the cultivation of animal feed and production of rice, flour, fruits and vegetables — and already operates in more than 20 countries. It will now have the heft of one of the world’s richest states directly behind it. Another sovereign entity, the Abu Dhabi Investment Office, invested $100m in four agritech companies to build facilities in the emirate, including AeroFarms, a US-based group that plans to build a 90,000 square foot indoor vertical farm and research facility, touted as being the world’s largest of its kind.
Saudi Arabia, which imports about two-thirds of its food, has also been active. Salic, a food and livestock company owned by the Public Investment Fund, the kingdom’s sovereign wealth vehicle, in May acquired a 30 per cent stake in Indian group Daawat Foods, as part of its strategy to secure rice supplies. Last year, it invested £7m in British agritech firm Hummingbird Technologies, which employs drones, artificial intelligence and satellite imagery to produce high-resolution maps that can help farmers forecast crop stress, spot disease and weeds and predict yields.
“Food security should rank as high as defence — it doesn’t matter how many F-16s [fighter jets] you buy, if you can’t keep food on the shelves, you have bigger problems than defending borders,” says a UAE-based investor. “Before the [crisis the food security] ministry was about research, not implementation, but now it is writing cheques.”
Learning food diplomacy
Neither the UAE nor Saudi Arabia — the region’s two financial and political heavyweights — have suffered food shortages this year. Yet officials in both countries say they are accelerating their food security programmes after the crisis revived memories of past food emergencies, the last of which was in 2008 when rice and cereal prices soared.
Back then, spooked Gulf states, including Saudi Arabia, the UAE, Qatar and Kuwait controversially rushed to secure overseas farming projects, particularly in impoverished African countries such as Sudan and Ethiopia, stoking criticism that the wealthy oil producers were “land-grabbing”. Many of those projects failed to deliver.
“The Gulf countries barked up the wrong tree,” says Eckart Woertz, director at the Hamburg-based GIGA Institute for Middle East Studies. “Neither domestic self-sufficiency nor self sufficiency by proxy are the main challenges, rather the management of value chains and food diplomacy.
“The [Gulf states] are now much more cautious regarding those risky investments in food insecure countries,” he adds.
Officials insist the Gulf states have been refining their strategies in recent years to combine more targeted overseas investments with the development of technology-backed production at home, particularly for vegetables, fruits and fish. They have also built up strategic food reserves and invested in mills, logistics and production facilities.
The UAE and Saudi Arabia signed an agreement to co-operate on a range of food security measures in November — from investments to agritech development. And both harbour bold ambitions.
Ms Mheiri, who was appointed in 2017, was this year put in charge of a team to develop the agritech sector in the UAE, with an end of August deadline to produce a blueprint.
“We want to become a global hub for food knowledge and technology, why can’t we also start going into cellular agriculture, alternative protein?” she asks. “These are technology-based foods that are emerging but don’t need huge amounts of water and arable land.”
The goal is to increase domestic food production by 30 per cent by 2021 and give the local processing industry, which produces 6m tonnes of food annually, the ability to triple output if needed.
One investor in the sector says the UAE government previously focused on incentivising the private sector to build domestic capacity. But businesses have long faced problems in persuading supermarkets and consumers to choose locally grown produce over overseas goods. And many private sector investors also remain reluctant to invest heavily in a sector that is subject to the whim of price controls.
That helps explain the recent injection of state investment. Saudi Arabia, the largest and most populous of the Gulf states, is boosting its domestic production with $3.2bn set to be allocated through its Rural Development Programme over the next six years. Among Riyadh’s ambitious goals are raising annual coffee production from 300 tonnes to 2,500 tonnes by 2026, increasing rose-stem output from 500m to 2bn, and producing 5 tonnes of caviar per year.
Since the crisis began it has increased funding to the state’s $5bn Agriculture Development Fund by $666m to support local farmers and facilitate imports.
“[The pandemic] was almost a test, to check whether or not our strategy was working; it seems it is,” says Abdulrahman Abdulmohsen Alfadley, the Saudi environment, water and agriculture minister. “We may need to accelerate some programmes, some items.”
Yet Saudi Arabia’s own experiences underscore how challenging the process can be. During the 1970s, when the kingdom was flush with petrodollars after imposing an oil embargo that caused a spike in crude prices, it set about radically transforming agriculture in a quest to become self-sufficient. By the 1990s, the desert nation was the world’s sixth largest wheat exporter as the government subsidised the sector by paying farmers about six times global prices.
Its desire to become a top cereal producer was, however, unsustainable. As its precious water resources were depleted, the government announced in 2008 that it would phase out wheat production within eight years but it then had to reverse that decision when wheat farmers turned instead to alfalfa, a fodder for livestock that consumes even more water.
As a result, Saudi Arabia — which has reduced its non-renewable water usage from 25bn cubic metres to 10 bcm over the past five years — is looking again to increase its wheat production with a target of doubling output to 1.5m tonnes per annum, equivalent to 45 per cent of the kingdom’s needs, next year.
“This is a high-cost insurance to put their [leaders] minds at ease,” says Joseph Glauber, senior research fellow at the International Food Policy Research Institute, a Washington based think-tank. “The strategy is understandable and might help to deal with a short-term crisis. But it would be prohibitively expensive to achieve self-sufficiency, especially in bulk grains like wheat.”
The rise of agritech
A 45-minute drive from Abu Dhabi sits a high-tech greenhouse — an example of the type of project the UAE and Saudi Arabia are betting on to hit domestic production targets.
Operated by Pure Harvest, a start-up that has received funding from UAE, Saudi and Kuwaiti entities, the 6,270 square metre facility is made from materials that help control the strong desert sunlight, and extreme temperatures and humidity levels to maintain a Mediterranean climate in a country where outside temperatures can soar above 50C in summer.
Completed in August 2018, the greenhouse grows six varieties of tomatoes, satisfying between 2 per cent and 3 per cent of the UAE’s demand and claims to use almost 90 per cent less water than a typical Gulf greenhouse. Pure Harvest raised $20.6m in a fundraising in April, led by Wafra International Investment Company, a Kuwaiti firm that pledged $100m if its projects prove successful.
“The region has a competitive advantage — the sun, cheap labour, cheap energy and incredible transportation,” says Sky Kurtz, Pure Harvest’s co-founder. “We can harness the climate with technology.”
He does, however, acknowledge the difficulties of operating in the Gulf, from the extreme climate to the dearth of skills, the difficulty of attracting capital and promoting local produce. Not to mention the minimal water resources.
Josef Schmidhuber, a senior official at the UN’s Food and Agriculture Organization, warns that while agritech can increase domestic fruit and vegetable output: “What it won’t do is provide food security.”
“As an investment idea it’s interesting, but as a food security idea it doesn’t even exist,” he says.
This is the reality fuelling overseas investments. In the UAE, the state and about 14 companies, including Al Dahra, co-ordinate overseas projects under the umbrella of a “food security alliance” set up in 2015, and have invested in 19 countries, including Egypt, Pakistan, Namibia, Sudan, Vietnam and North and South America. In late 2018, the UAE signed a deal with Uganda to create an agricultural free zone in the east African nation.
The state’s investment in Al-Dahra, which has a land bank of more than 400,000 acres and operates across the agribusiness spectrum, was to strengthen its global supply chain, Ms Mheiri says. She adds that the firms do not necessarily ship food to the UAE, but “in crises they always have the means of diverting a certain quantity . . . if we need it”.
In Saudi Arabia, Salic — born out of the 2008 crisis — is leading the kingdom’s efforts to expand its overseas interests. It has a joint venture with Bunge, the US-based agribusiness, to develop grain operations in Canada dating back to 2015; arable operations in Ukraine; a 25 per cent stake in Minerva Foods, a Brazilian meat processor and exporter; and crop and livestock farms in Australia covering about 420,000 hectares.
But an industry executive says Salic has made some questionable investments and could have been more active. “What is their agenda at the moment? If they were serious they would be doing things, but it seems they are not doing anything.”
Mr Alfadley says he too is unhappy with the progress but believes Salic, which he chairs, is on the right track.
“It can’t be done overnight, it would be too expensive. We do it gradually,” he says. “We have done a good number of investments and there are more in the pipeline. Salic not only needs to increase its assets, but its knowhow as well.”
Salic has been set a target of providing 30 per cent of the kingdom’s food requirements from overseas investments within a decade. Started with capital of $800m it has approval to double that and has already received a $500m capital injection from the PIF.
“We do need huge capital if we want to be in farming, co-farming, transportation and the logistics parts,” says Mr Alfadley who believes the PIF will inject capital as needed. “We will go and do a bit of farming, we may co-farm as well, we will join hands with other interested parties when it comes to logistics.”
Yet food security efforts across the Gulf are seen as expensive, long-term exercises that still have to prove that they can deliver on a sustainable basis, whether through the investments in domestic agriculture or the grandiose overseas projects.
“The [Gulf states] will always have to accept that they will be vulnerable and even their food security strategy hasn’t been properly tested,” says John Sfakianakis, Gulf expert at Cambridge university. “When there is a food crisis in the countries they are invested in, how will they export what they think is theirs back to the Gulf?
“It all depends on global markets, that they don’t control,” he adds, “nation states and their decisions on supply chains.”
Additional reporting by Simeon Kerr in Dubai