Foreign investors buy German agricultural land – politics is failing!

Foreign investors buy German agricultural land – politics is failing!

In a worrying trend, foreign investors have greatly expanded their takeover of agricultural land in Germany. The most recent event is the sale of 20,000 hectares of agricultural land to the Australian investment company Igneo Infrastructure Partners. The Gustav Zech Foundation, which bought this agricultural holding company from a bankrupt estate in 2016 for just 5 million euros, acquired the land for a whopping 300 million euros. Mercury reports that all political control failed during this sale. Neither federal nor state governments have intervened, even though there should be laws in place to review such transactions.

The Foreign Trade Ordinance (§ 55a AWV) would have required an inspection for areas larger than 10,000 hectares. It is shocking that the Federal Ministry of Economics does not release any information about possible audits and instead refers to company and business secrets. The Working Group for Rural Agriculture (AbL) asked seven ministries and found that there was a lack of responsibility and transparency. The federal states of Brandenburg, Mecklenburg-Western Pomerania, Saxony and Saxony-Anhalt are particularly helpless when faced with this situation.

Political responsibility and lack of control

The state governments in the above-mentioned federal states are at a loss. Saxony-Anhalt's Agriculture Minister Sven Schulze described the state regulations as a “blunt sword”. One problem is that only the federal government can effectively prohibit such legal transactions. According to a report from the state parliament of Saxony-Anhalt, the federal government has the legislative authority to regulate the purchase of shares. Nevertheless, due to federalism, responsibility often remains unclear.

Brandenburg has also dealt with the topic. The Ministry of Agriculture there is examining legal options for greater transparency and control when purchasing shares. However, historically, companies with large owned and leased areas have been part of the agricultural structure in the region, which makes the initial situation complicated. A draft law in Lower Saxony, the Agrarian Structure Act, aims to make share deals subject to approval and envisages high fines, but there is already resistance from the rural population of Lower Saxony, who speak of a “aggravation of the agricultural structure”.

The problem with “share deals”

A central problem is so-called “share deals”, which enable investors to acquire agricultural businesses and thereby avoid property transfer tax. This happens because authorities often have no knowledge of such transactions and therefore have no control options. Loud Annemonika Spallek Since the financial crisis of 2008, the purchase of agricultural real estate has become an inflation-proof investment for many investors, especially in eastern Germany. A study by IAMO does not show that agricultural companies have a dominant market position, but many agricultural businesses suffer from difficult access to land.

After all, there are demands to regulate the agricultural land market. Proposals include a progressive property transfer tax and tax allowance regulations for farms. Finally, the federal government must also act and assume more responsibility towards agricultural businesses, which are often seen as the backbone of rural development.

In the midst of these developments, the need for a comprehensive reform that serves to both protect agricultural land and ensure access to land for sustainable agriculture becomes apparent. After all, these areas are not only a central production factor, but also essential for maintaining the agricultural structure in Germany.