MINISTERS have resolved to turn the US$600 million Green Fuel ethanol project into a joint venture, with the government as a majority shareholder.
If Green Fuel approve, mandatory blending will start immediately at five percent, rising to 20 percent by 2015, Deputy Prime Minister Arthur Mutambara announced in Harare on Wednesday.
Green Fuel stopped ethanol production at its Chisumbanje plant in eastern Zimbabwe early this year after failing to win government backing for mandatory blending of petrol and ethanol, leaving the project, which was touted as a solution for the country’s fuel supply problems, on the brink of collapse.
Two private firms were developing the project under a build, operate and transfer agreement with agro-parastatal ARDA, but a cabinet committee led by Mutambara has recommended that the project should be turned into a joint venture with the government.
“The Cabinet decision to convert the project from a build, operate and transfer to a joint venture must be upheld and implemented within the proposed timeline of two months,” Mutambara told a news conference.
“It must be noted that the ethanol plant is not on ARDA land, and was not part of the BOT, which means this BOT arrangement was actually detrimental to the national interest. In doing the BOT conversion to JV, due diligence and investment or project valuation there is need for rigour and creativity.
“The veracity of the claim that US$600m has been invested must be established, including the source of the financing. There must be robust and creative valuation of the State’s asset contributions to the project, such as the land (40 000ha).
“In fact, the State can easily bring to the project assets that will enable it to achieve 51% ownership of if not higher. The work on converting the project from a BOT to a JV must proceed speedily. In fact once concluded this conversion to a joint venture will make most of the other technical and business issues easily resolvable.”
Mutambara headed a ministerial taskforce to look into the Green Fuel crisis, which included Energy Minister Elton Mangoma, Local Government Minister Ignatius Chombo, Economic Planning Minister Tapiwa Mashakada and their Public Works counterpart Joel Gabuza.
Cabinet stepped in after Mangoma refused the grant Green Fuel’s request for mandatory blending insisting Green Fuel had failed to address various issues including the compensation of hundreds of families displaced by the project as well as the pricing and possible impact of its E10 blend on vehicles.
Mutamabra said mandatory blending would only be introduced when the project was turned into a joint venture with the government.
“We cannot have mandatory blending for one private producer of ethanol. If there were several producers, it might make sense,” he said.
“As a starting point, the mandatory blending should be at the 5% (E5) level. This should be implemented immediately, on the assumption that the conversion from the BOT to a joint venture is now irreversible.
“E5 is also the ideal starting point because none of the car manufacturers and sellers has a problem with that level of ethanol, whereas there were complaints about certain vehicles’ compatibility with E10.”
Ministers are also pressing Green Fuel to immediately resettle and compensate hundreds of families who were displaced by the project.
“Out of the total 1,754 households displaced from their communal lands… only 516 have been resettled. The company should immediately relocate the outstanding 1,238 households who have not been relocated on irrigated land,” Mutambara revealed.
“The company should immediately compensate households that lost crops in the process of developing the project’s dams and canals in accordance with the assessments of crop damages that were carried out by Agritex officials and further enhanced and adjusted by information obtained directly from the affected communities.
“It is unfortunate that some of these crops were insensitively ploughed down by Green Fuel. This is completely unacceptable. A total of US$80,500 is due to these households (and) this compensation must be paid immediately.”
He added: “The quantum of resources required to address these concerns are quite insignificant compared to the financial scale of the project.
“While we appreciate that resolving the business issues leading to the running of the plant will make it easier, and less financially burdensome for the company to address the social concerns, it is our unyielding conviction that not only has the company got the requisite resources, it has a legal and moral obligation to address the concerns of the communities, immediately.
“This project is a national and strategic asset with a potentially huge impact on our economy, through radically changing our fuel economics, power generation (supplying the entirety of Manicaland), multiple downstream industries, new dependent projects such as Kondo Dam, and a potential car manufacturing industry.”