Govt mulls new plan to rescue ethanol project
Saturday, 03 March 2012 19:03
BY NDAMU SANDU
GOVERNMENT edged closer to introducing mandatory fuel blending last week
after a crucial meeting endorsed the plan in a move that could rescue the
US$600 million ethanol project in Chisumbanje.
There has been a slow uptake of ethanol from Chisumbanje as fuel players are
reluctant to blend the fuel saying it is an extra cost to them since they
are supposed to have additional handling facilities.
As a result, production stopped after the plant reached its 10 million
litres storing capacity in December last year.
The ethanol project is a partnership between the Agricultural and Rural
Development Authority (Arda) and Billy Rautenbach’s Rating and Macdom
Investments in a 20-year Build-Operate-and- Transfer arrangement to
transform estates at Chisumbanje and Middle Sabi.
Standardbusiness heard on Friday the plan now awaited the assent of the 11
ministers that form an inter-ministerial committee.
A piece of legislation via a statutory instrument would be in place to
ensure the plan takes -off smoothly, sources said on Friday.
Cabinet has been seized with the matter since last year and requested Joseph
Made, the minister of Agriculture Mechanisation and Irrigation Development,
to present a detailed report to cabinet on the ethanol project.
Cabinet then resolved the setting up of an inter-ministerial committee
chaired by Made to coordinate the implementation of the project.
This paper was reliably told there was no way the industry could take up all
the ethanol as it could only use 10% meaning that the remainder has to be
taken up elsewhere.
However, financiers have rolled out an ambitious plan that will see 11 000
hectares under cane this year in Chisumbanje and Middle Sabi up from 7 000ha
in 2011.
It will rise to 16 000 next year.
At the same time 5 000 ha will be put under cane in Nuanetsi next year. This
year 120 million litres of ethanol will be produced up from 18 million last
year.
The production is set to more than double to 252 million litres next year.
By 2020 fuel production would have reached the 1,5 billion litre mark with
raw materials coming from Chisumbanje, Middle Sabi and Nuanetsi.
According to the projected rollout, the blending will save US$120 million
annually in fuel imports. By 2020, the country would have saved US$400
million from fuel imports.
Currently 10% of the blended fuel contains ethanol and there are plans to
double that to 20%.
Projected data also show that exports will start in 2015 generating US$60
million assuming that half of the fuel produced is used for local
operations.
The earnings are set to reach US$1,1 billion in 2020.
Basil Nyabadza, Arda board chairman said last week the project is the only
route for the parastatal to be self-reliant in line with government’s
intention for state-owned enterprises to wean themselves off treasury
coffers.
The project has seen the recruitment of labour from outside Chipinge and
more work needs to be done, taking into consideration there is need for more
schools, clinics and accommodation facilities.
The financiers, Nyabadza said, want to build a US$300 million Kondo dam
because the project needs more water for its expansion programme.
To get enough cane, villagers in Chipinge have been given a quarter acre
each to grow cane under contract.
“The raw materials and the final product are coming from a village
environment thereby creating jobs in the village. This fits well into Arda’s
vision of rural development,” he said.
Analysts say a holistic approach has to be adopted taking cognisance of the
concerns raised by fuel players and motorists.
There are also calls for legislation governing ethanol production laying the
parameters for the fuel industry.
More required before mandatory blending: experts
Experts in the fuel industry told Standardbusiness on Friday, more needs to
be done before government introduces mandatory blending.
“For players in the industry, they need separate tanks for handling and this
is an extra cost to operators. Government cannot just force oil companies to
blend because it is an extra cost,” one expert said.
“In addition, the promoters of the project were telling us that they can
export (ethanol). The question is why can’t they export?”