Sierra Leone: Green pastures for biofuels
The lease of rural land by European oil companies may encourage the use
of clean and renewable energy but requires careful negotiation with the
government and local landowners
How many landowners live in the village of Kolisokoh? The question is politely ignored. When pressed, a reluctant “four” comes from the deputy chief. A murmur becomes a brief argument and then fades away. After a little while, when the subject is revisited, we hear “two”. Then a wave of protest swells. The argument is resurrected, and raised voices ripple around the interpreter, who eventually explains that there are, in fact, four families who own land in Kolisokoh – named Kamara, Follah, Forna and Karagbo.
World Ethanol Market in 2020
The US Congress and the European Parliament have set the stage for a
boom in the demand for ethanol. In January 2009, the EU proposed a minimum
target of 10% ethanol content in all road transport fuels. The US Congress put a
cap on the amount of corn-based ethanol it will allow, preferring to support
investment in cellulosic bioethanol, reserving a 20% share for sugarcane
ethanol. This will create import markets of 10m cubic metres in the EU and 35m
cubic metres in the US by 2020.?
Brazil produces around 20m cubic metres of
ethanol per year, using slightly more than half domestically. With Asia facing
its own energy crunch, the Brazilian model looks desirable on a purely economic
level and when the environmental price of carbon is factored in, ethanol is even
Not to be left out of the renewable energy business, the oil
majors are linking up with Brazilian companies. After investigating wind and
solar options, Shell announced a $12bn deal with Cosan in February and BP
announced a venture with Verenium, which is focusing on cellulosic ethanol
production from sugarcane.
The variance illustrates the issues faced by a new agribusiness venture in Sierra Leone. Disagreements over who owns land are nothing new but come to a head when the land changes status, in this case by being leased to a foreign company.
Outside Makeni, some 140km north-east of Freetown, a subsidiary of oil company Addax & Oryx is creating a sugarcane plantation in the rolling hills of the Rokel Valley that should reach 10,000ha when complete. A factory will be built to process approximately 100,000m³ of ethanol a year for export to Europe.
This reaches the crux of the debate on land use: is it possible, or even desirable, to use African soils for purposes other than food production, especially given the terrible scenes that followed the 2008 spike in food costs? Is European guilt over climate change pushing Africans off their farms? Addax Bioenergy hopes the manner in which it has executed the project will outweigh the potential for controversy.
Since the horrific civil war which ended at the turn of the century, almost half of the population is under the age of 14. Life expectancy is around 40 years, unemployment is high and wages are low. However, land is plentiful and there is sunshine all year round, though less in the rainy season, from May to October.
Sierra Leone also has bountiful water resources – the Bombali district, where the Addax project nursery plantation is being rolled out, is downstream from the Bumbuna Dam which will provide a steady flow of irrigation.
Yields in the nursery were around 70tn/ha after nine months, which should work out to 100tn/ha after a year – competitive by international standards. Makeni is 150km away from the port on a well-tarred road. In addition, Sierra Leone imports into the EU are tariff-free under various treaties including the Everything But Arms pact.
With a co-generation unit in the ethanol factory, none of the spent sugarcane will be wasted, according to Addax. Instead, it will be recycled into feedstock for power generation of about 30MW – of which only around half is needed, with the rest to be sold to the national grid.
Residues collected from the process will help create the fertiliser vinasse. When running at capacity, there will be 200tn of cane per hour, producing 350,000 litres of ethanol per day. The pilot 400ha are now being planted. Next year the project will be rolled out to over 3,000ha and by 2012 the project will be at its 10,000ha capacity.
Politics before business?
In a sense, the business case is not the issue. Sierra Leone is a tropical country with plenty of resources. It has a decent-enough export infrastructure that is close enough to the EU, and demand for ethanol is growing. Making money is the easy part.
Rather, it is the politics that is complicated. Partly because the global conversation around modernising African agriculture has centred around neo-colonial ‘land grabs’, Addax is treading cautiously. After a spate of bad publicity, it brought several news organisations to look at its project in the hope of making its case to EU consumers, some of whose tax dollars may be spent on funding the project.
A recent investigation by The Observer in the UK estimated that up to 50m hectares of African land had been ‘sold off’ or was under negotiation with foreign governments. The charge that Africa is swarming with, “international agribusinesses, investment banks, hedge funds, commodity traders, sovereign wealth funds as well as pension funds” is hard to dismiss, and the lobby groups are just starting to crank into top gear.
To alleviate its political risk, Addax turned to the finance arms of European aid agencies. The lenders range from Sweden’s Swedfund to the Dutch FMO via the Emerging Markets Infrastructure Fund, itself a hybrid of European and South African lenders. The African Development Bank and European Investment Bank are also involved. The model is 40% ?equity and 60% debt, with Addax retaining 60% equity and investing around h200m. This brought with it a particular set of regulations, with each investor ensuring compliance with its criteria on social, environmental and labour impacts.
Addax is also constrained by EU regulations on tariff-free ethanol imports, which place binding criteria on ethanol production such as no biodiversity damage, no use of savannah with a high carbon stock and no use of forest with 30% canopy cover.
?Risks and reputations
Noticeably skittish about the project, the head of rural development at the European Union delegation, Matthias Reusing, explains that although EU policies invite this kind of investment, the euphoria surrounding biofuels soon turned to criticism following the devastation of rainforests in Malaysia and Indonesia. He is keen to see an independent monitoring body for the project.
Not far from the Addax project is the Magbass sugar complex owned by the China National Complete Plant Import & Export Corporation. It provides a handy counterpoint to the inclusive, bottom-up model of land leasing. The ?Chinese company provided a lump sum to government, which gave them the land. Locals were not consulted, nor properly recompensed. As a result, there are often industrial disputes.
Preparing the fields
Guided by the preconditions on financing as well as the Magbass example, Addax has spent the last 18 months preparing its environmental, social and health impact assessments. An army of consultants has been at work – one study involved a g50,000 genetic analysis at University College London to ensure that if the waters of two rivers merged, there would not be the introduction of any harmful predators into either waterway.
A key part of the process has been interacting with local communities and drawing up land leases. The interaction between agribusiness and customary land usage is the most challenging part of the project.
The UN Food and Agriculture Organisation (FAO) is working with the World Bank and UN Industrial Development Organisation to draw up a new set of protocols over land deals in Africa – but that will not be ready until the end of 2010.
Innovation in land-use policy has been a two-step process – the first following Sierra Leonean law, with a lease agreement signed by the government (via the Chiefdom Councils) which owns the legal title to the land. This is reasonably straightforward, but rather top-down, and central governments are rarely good at redistributing revenues to the people who actually live on the land.
The second, more progressive, step is an ‘acknowledgement agreement’ with landowners at the local level. These family lands, passed on through generations, exist in no land register – but at local level people know who owns what and any disputes around the edges are settled by paramount chiefs.
The services of a local member of parliament, Martin ?Bangura, have helped the company communicate with residents. A former farmer who became popular during the war for handing out seed stock to neighbours, Bangura became district chairman before being elected to parliament and has played a critical role travelling from village to village, holding meetings with paramount chiefs and explaining what the project will mean to local residents. “I would not gamble my integrity,” he says, keen to dispel concerns over exploitation of his community’s land. He would like to serve on the board of Addax one day, perhaps after his time as an MP – which may raise concerns over conflicts of interest.
Represented by a local lawyer, Franklyn Kargbo, who was chosen by the villagers and then paid by Addax, these landowners have drawn up 50-year lease agreements. “First they were asking for $2 per acre per year. Now we have negotiated $5 per acre a year,” says one. The agreements are subject to renegotiation after seven years.
Drawing up the contracts took six weeks and a team of eight lawyers, with over 50 landowning families and 20,000 people in the area affected. A block of 20,000ha will be leased but only 10,000ha will be used for plantations, allowing the sugarcane to avoid the lowlands used for rice production. The rest of the land will be ceded back to local residents.
At the Swiss hospital outside Makeni, established during the civil war, there is a steady stream of children to the 100-bed stabilisation unit. “In the wet season, when there is less food, we sometimes have 130-140 children here and we have to turn some away,” says hospital founder Harald Pfeiffer. Malnutrition is a serious problem in the area, mostly because of diarrhoea caused by poor sanitation.
Critical to food security is the training that is being extended to farmers who are losing land. A programme is now being set up in association with the FAO. Currently, rice yields in the area are about 1tn-2tn/ha. With training, appropriate seed stock and mechanisation, yields for cassava and rice will rise substantially, reducing the amount of land needed.
The cash earned by the 2,000 direct jobs that the Addax plantation plans to create will stimulate the local economy – but is almost of secondary importance compared with the agricultural skills transfer that should come with it. As World Bank country representative Engilbert Gudmundsson explains, “The social spin-offs in agriculture are much greater than in mining or oil.” The workers will also require loaves of bread and food, such as chickens, to eat each day in the canteen, creating another 2,000 indirect jobs.
The results of the project’s lofty goals have to be monitored. Nearly half a million Sierra ?Leoneans survive on food hand-outs from the WFP.
If it is revealed to have boosted food production in Bombali District and reduced infant malnutrition – two easily verifiable metrics – this project may provide a gold standard for others. But if, on the contrary, the project is seen to increase hunger or worsen conditions for local people, it will be jumped on by campaigners who believe that Africa is undergoing a second colonisation.
It may also feed into the global debate on how to uplift African agriculture without leaving smallholder farmers – the continent’s majority – behind.