Dar es Salaam. Several investors have abandoned their $1 billion (Sh2.3 trillion) biofuels projects in Tanzania, according to a survey by BusinessWeek.
Influx of biofuels- Foreign Direct Investment (FDI) between 2008 and 2011 in the country was part of global movements by industrial nations under the leadership of UK ethanol investors, but now the movement has warned, according to an international Journal of Environment & Development published by University of Maryland based in the United States.
“It has been estimated that between 2007 and 2008, Southern Africa experienced an influx of more than $3 billion in biofuels investments; Tanzania alone received commitments of about $1 billion to be spread over 20 years, which is a large relative to Tanzania’s 2010 GDP which was estimated at $23.057 billion by the World Bank, in 2011,” reads part of such journal published by a university’s research unit.
About $20 million was invested in a jatropha plantation in the Kisarawe District in 2008; a large number of other private companies also established processing facilities and initiated land acquisition, according to the same journal.
The companies that invested in jatropha ventures during that period, according to such journal include; Sun Biofuels Ltd which is a branch of the UK-based BioShape Ltd., Bioshape Tanzania Ltd —a subsidiary of the Netherlands BV Holdings.
Others are Diligent Tanzania Ltd, and Prokon Tanzania Ltd), sugarcane (Sekab BioEnergy Tanzania Ltd, palm oil Felisa Company.
The government on its part has been following up such trend of abandoned biofuels FDIs, as a policy advisor in the Ministry of Agriculture, Mr Revelian Ngaiza last Wednesday said although there is no specific policy governing biofuels investment, the government has been closely following up the current global environment of biofuels, which does not encourage flows of FDIs in Africa. “We don’t encourage biofuels because first of all, we have ample natural resources to produce fuels which are yet to be exploited to the maximum,” says the policy advisor for the agriculture ministry.
Other reasons, according to him, include what many biofuel researchers have stated like increasing costs arising from heavy investments, tendency to steer land grabbing and land conflicts, its role in encouraging food insecurity to many small holder farmers and that they are not friendly to environmental protection. Other sources of fuel which can produce fuels in large quantities in the country include coal, natural gas for Liquefied Natural Gas (LNG), petrochemicals, biogas and other sources from biomass, and new minerals for making car batteries like Lithium and graphite are yet to be exploited at maximum level, according to energy researchers.
In 2008, UK-company Sun Biofuels leased 8,000 hectares in Tanzania for growing Jatropha curcas, a non-edible plant whose oil-rich seeds can be processed into biodiesel, according to researchers of Maryland University.
“The biofuels movements has not died but they have become dormant in the wake of increasing cost of producing ethanol and relatively decline price of petroleum products with more discoveries of hydro carbonic resources,” said the executive director of Haki Ardhi, Mr Mr Cuthbert Tomito, during a recent interview with BusinessWeek.
According to him, it is bad to say that international monopolies have buried their mission to embark on massive investments in biofuels, but the movements can resurge at a certain points in time in the history of the world.
“It is important to note that the basic reasons for waning of biofuels investments are rising costs of ethanol production in many African countries amidst policy resistances and uprising in some African countries, including Tanzania,” says Mr Tomito. “We can say the biofuel investments have been sleeping,” Haki Ardhi executive director insists.
According to global market analysts of fuel resources, ethanol has been experiencing lower market demand growth rate than LNG, partly explaining why global biofuels investors have pulled out of Africa.
According to Transparency Market Research of November last year, global ethanol market is expected to reach $105 billion by 2022; while other researcher agency, WorldWood Energy report of December this year forecast that global LNG capital expenditure will hit total $236 billion 2022. Likewise, the 2018 report by international Energy Agency (IEA) forecasted that the global demands of petroleum will rise in the next five years, passing the symbolic 100 million barrel a day threshold in 2019 and reaching about 104 mb/d by 2022.
Criticism against biofuels
Apart from Haki Ardhi which for the past six years was in the fore point position to oppose biofuels investment on the grounds of accentuating poverty in the wake of land grabbing and increasing food insecurity, even researchers had opposed such farming practices imposed by the powerful industrial nations.
The case in point are the research findings of an NGO think tank, Repoa of 2012, which called for framing of biofuels policy for guiding policy makers, Tanzania Investment Centre and participation of villagers in in the process of land allocation and reaping benefits from investments.
In Tanzania biofuel investment was happening in absence of a biofuel policy this should be halted until a biofuel policy is put in place, according to Repoa research report of November 2012. Prof Jamidu Katima of the University of Dar es Salaam, was also critical of biofuels guidelines adopted by the government in 2010.
“There are no plans to build refineries, nor obligations for foreign investors to reserve part of their output for the domestic market,” he said.
Another risk is that biofuel use could increase carbon emissions by increasing destruction of forests when displaced local farmers to clear land.
The Institute of European Environmental Policy recently said carbon released from deforestation linked to biofuels could exceed carbon savings by 35 percent in 2011 rising to 60 percent in 2018, Prof Katima said.
James Smith, professor of African and Development Studies at Edinburgh University, said: “Private investment is running far ahead of our knowledge of the impacts of biofuels, such as land dispossession.
Yet Kisarawe MP Selemani Saidi Jafo was quoted in 2011 as saying that: “I am the MP and I am not yet informed there is a new owner. What is the secret behind it? I need investors to come to my district, especially to help bring employment for many people. I prefer a win-win project, but this is not a win-win.”
Busting of biofuels
Why Sun Biofuels went bust is unknown, as attempts to contact the previous owners were unsuccessful, according to researchers quoted by the same journal of Maryland University.
A large Jatropha plantation created by a Dutch firm called Bioshape in the southern Tanzanian district of Kilwa also went bust, leaving locals complaining of missing land payments.
Also, a large ethanol biofuel project set up by Swedish company Sekab also went bust. In both cases, the land has not been returned to its owners, according to sources.
All these recent findings by international market researchers the government and local activists against biofuels testify that global biofuels investors have foregone massive FDIs after realising that the costs outweigh the benefits in such ventures.