NewsSouthern AfricaZimbabwe's blend of ethanol and politics

Mon,16Jul2018

Posted on Monday, 27 May 2013 11:22

Zimbabwe's blend of ethanol and politics

By Thabo Bhebhe in Harare and Gemma Ware

The Green Fuel plant has proved a headache for deputy PM Arthur Mutambara (centre)/Photo©Tsvangirayi MukwazHiAs elections approach in June, the future of an ethanol project in Chisumbanje linked to business tycoon Billy Rautenbach hangs in the balance. Locals claim the project has led to the displacement of 100 families.

 

For over 15 months, a large ethanol plant at Chisumbanje in south-eastern Zimbabwe has sat idle. With limits on where it could sell its supplies, it had filled up its storage containers and paused production.

Now, a political firestorm rages over the project, run by Green Fuel, a company backed by the controversial businessman Billy Rautenbach.

Ahead of crucial elections planned for 29 June, access to land remains a contentious political issue following large-scale redistribution of property owned by white farmers. Now accusations that smallholder farmers have been pushed from their land to make way for the project raise questions about the power of political patronage.

There were reports that the $600m Chisumbanje plant had re-opened in late March, following a visit and directive by vice-president Joice Mujuru of President Robert Mugabe's Zimbabwe African National Union-Patriotic Front. But the plant's management confirmed it remains shut.

"We are awaiting licensing," said Graeme Smith, Green Fuel's general manager.

Things were looking up in February, after a statutory instrument introduced provisions for mandatory blending of 5 percent ethanol in all petrol in Zimbabwe.

Yet, according to energy minister Elton Mangoma, who gazetted the new legislation after its approval by cabinet, for the law to kick in the companies proposing to produce the 5 percent ethanol blend, known as E5, must first enter into a joint venture with the government.

A member of prime minister Morgan Tsvangirai's Movement for Democratic Change (MDC), Mangoma told The Africa Report that although Green Fuel has a licence to sell higher grade E10 and E85, those products have not had a very large market.

"They then approached government for mandatory blending, at which point government turned around and said we will not use public policy to benefit an individual," says Mangoma, referring to Rautenbach, a close ally of Mugabe and defence minister Emmerson Mnangagwa.

No Bend, No Blend

Mangoma says neither Green Fuel, nor Triangle – an ethanol producer owned by South African sugar giant Tongaat Hulett – have formed a joint venture with government and therefore do not meet the requirements to benefit from the mandatory blending legislation.

The Triangle plant, in Masvingo Province, restarted production in 2010 and has the capacity to produce 40m litres per year. It exports 75 percent of its production to South Africa.

Smith confirmed that progress had been made on turning Green Fuel into a joint venture, but that negotiations were "still underway". For the future of the plant, he said it was necessary that its ethanol be eligible under the mandatory blending legislation.

In another development in early April, the Zimbabwe Energy Regulatory Authority (ZERA) approved the sale of E85 fuel. It will provide an extra market for ethanol producers, although ZERA warned consumers not to use the 85 percent blended fuel in vehicles that are not specifically adapted for it.

Mujuru's directive to re-open the Chisumbanje plant has led to accusations of her politicising the venture ahead of elections, after direct pleas to the presidency by laid-off workers to get the plant back up and running.

The project is located in Manicaland, a province that could swing either way in the upcoming election.

After four years of inclusive government during which Zimbabwe has struggled with a liquidity crunch and a lack of foreign direct investment, projects like this are vote-winners. But, like the project to build the Harare airport road (see box), much of the dealmaking seems to have favoured a few individuals rather than the interests of the public.

In March 2009, 16 days after the formation of the inclusive government following the 2008 election crisis, the government allowed Rautenbach to take over 5,100ha in Chisumbanje formerly run by the state-owned Agricultural and Rural Development Authority (ARDA).

Rautenbach's firms Macdom Investments and Rating Investments signed a 20-year build, operate and transfer arrangement with ARDA for Green Fuel's ethanol plant. Directors of Green Fuel include Toni Machado, a former business associate of Rautenbach.

The deal remains shrouded in secrecy, with some ministers claiming they were not allowed access to the site because they belong to Tsvangirai's party. Mangoma speaks angrily about the project: "There is no way you can allow one person, whatever colour, to take away land from the majority of the people so that those people become refugees in their own country. It's not acceptable."

Wedzerai Gwenzi, a spokesperson for the villagers, says that they feel cheated by the project. "We thought this project was going to bring relief to the people of Chisumbanje, but it's actually displacing them," he told The Africa Report.

According to Chipinge South deputy Meki Makuyana, as many as 187 families have relocated to Mozambique after the company encroached on communal plots and damaged crops.

In the last week of December police fired shots in the air and used teargas to disperse angry villagers demanding their land back. The stand-off started when villagers went back to till their land following the start of the rainy season. Police arrested 15 people who were released on bail after four days. Their case has been continuously postponed.

Murky Past

Green Fuel's Smith insists there were no displaced households: "There have been communal farmers who were cropping land previously designated for a commercial development, who were moved from this land onto irrigated cropping land by local government," he says, adding that all crop compensation claimed has been paid.

Rautenbach has been involved in a web of complex and often murky mining deals. He fled South Africa in November 1999 when police sought to arrest him on charges of fraud. After a prolonged extradition battle, he pleaded guilty in September 2009 to 326 charges and paid a R40m ($4.5m) fine.

The US and European Union (EU) put him on their sanctions lists for being a financial backer to Mugabe's regime. The EU lifted its sanctions against him in 2012.

After current upgrades are completed, Smith says the Green Fuel plant will produce 6.5m of ethanol a month. Ultimately, this will increase to 9m litres. Macdom's management believes the project will enable Zimbabwe to cut down on its fuel imports.

It was against this backdrop that the government introduced the new ethanol blending legislation.

Zimbabwe Energy Council (ZEC) executive director Panganayi Sithole says the ZEC would be in favour of a 10 percent mandatory blending, but that 5 percent is "a strong starting point".

The ZEC says that Zimbabwe imports 30-40m litres of petrol every month, and the new law could save the country $2m a month. However, deputy prime minister Arthur Mutambara, part of a cabinet committee investigating the project, raised questions about the price of ethanol being proposed by the company.

In a September report to cabinet, Mutambara said Green Fuel's proposal to sell ethanol at $0.85 per litre was higher than the international average and would put the retail price for E5 blended fuel at $1.47 – almost equal to the price of unleaded fuel. In other words, little benefit would be passed on to the consumer.

In other countries such as Brazil, which has a large programme of ethanol blending, ethanol sells for between $0.65 and $0.75 per litre.

Green Fuel declined to comment on its pricing.

Giles Anderson, a trucker with cross-border operations covering South Africa, Zimbabwe and Zambia, has strong reservations about the initiative. "The idea of blending will no doubt negatively affect operations. Government has not come clean on whether it will set aside a subsidy for us to procure compatible vehicles," says Anderson, who has a fleet of 18 trucks.

He believes other truckers will ignore the directive and procure fuel in neighbouring countries.

It was likely that such a big project in a country starved of investment would turn into a political debate ahead of elections. As a result, its future re- mains uncertain●



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