ETHANOL-PRODUCING giant Green Fuel is in advanced talks with the Zambian government which will see Zimbabwean ethanol being exported to that country at prices cheaper than those obtaining on the local market.
Highly-placed government sources told the Zimbabwe Independent that a memorandum of understanding has already been signed between the Zambian government and businessman Billy Rautenbach’s Green Fuel Company which manufactures ethanol at its plant in Chisumbanje in Manicaland.
“He (Rautenbach) is finalising a deal with the Zambian government where he will sell the ethanol for US$0,85 cents per litre compared to the US$1,05 locally,” said a government official who spoke on condition of anonymity.
“There is so much which is just not right with this deal coming as it does when government has been embarrassingly forced to climb down from the mandatory 15% ethanol blend because the company says unfavourable weather has reduced the cane available for the manufacture of ethanol to meet local demand,” said the source.
Only last week government was forced to beat a hasty retreat from the compulsory blending of petroleum with 15% ethanol, reducing the amount to 10% ethanol after claiming rains had affected the harvesting of cane for ethanol production in Chisumbanje.
The mandatory blending was introduced late last year beginning with 5% before being increased to 10% and lately to the 15% requirement.
“The blending of petrol with ethanol has been progressing well until recently when a lot of rain made it impossible to harvest cane for ethanol production leading to the strained supplies,” Dzikamai Mavhaire, the Energy and Power Development Minister, announced last week on Monday.
“Given this development, the ministry has relaxed the blending of petrol from 15% to 10% until adequate stocks have been built,” Mavhaire said.
In an e-mailed response to enquiries from this paper yesterday Green Fuel spokesperson Lilian Muungani said “discussions with Zambia pertaining to ethanol supply in that country are underway but have not yet been concluded”.
Agricultural and Rural Development Authority (Arda) chairperson Basil Nyabadza, however said the Zambians were only in Zimbabwe to assess ethanol production.
“There is no truth at all in the reports,” Nyabadza said, insisting that although the Zambians came into the country to do an assessment of the situation, no deal was being worked out to supply them at the moment.
“Zambian officials came last year to assess the situation in Zimbabwe in terms of ethanol production. Ethanol costs US$1, 85 (per litre) there so they wanted to see how they could benefit from the Zimbabwean situation,” said Nyabadza yesterday in a telephone interview.“We would want to be a regional and international player, supplying other countries but we must service the Zimbabwean market first before we supply the international market,” he added.
Arda is in a joint venture with Rautenbach’s two companies, Ratings Investments and Macdom. The 20-year Build, Operate and Transfer (BOT) agreement signed in 2009 between Arda and the two joint venture partners, Macdom and Ratings Investments, only relates to the parastatal’s land on which the three partners were growing sugar cane.
Green Fuel has always insisted that it is a stand-alone private company built on land leased directly from the Chipinge Rural District Council in order to facilitate easy access to the cane grown on the estates of Ratings and Macdom. It buys its sugar cane from Ratings, Macdom and other growers for processing into ethanol.
Green Fuel is still to reach an agreement with government over its ownership structure with insiders saying Rautenbach is resisting demands for a 40% stake. Sources said talks at the end of last year between Rautenbach and Energy and Power Development permanent secretary Justin Mpamhanga were deadlocked with the businessman offering only 10%.
“Government proposed 34:66% share ownership with Rautenbach retaining the bigger chunk,” said a source close to the developments.
“However he is reneging on the joint venture agreement saying that there is need for valuation of the project to assess each party’s contribution which will then determine shareholding. He says he is ready to cede only 10% and even that will be a gradual process expected to take up to four years.”
Mpamhanga refused to comment on the matter yesterday saying: “All those negotiations are handled by the Agricultural and Rural Development Authority so speak with them or the Ministry of Agriculture.”
Nyabadza, however, downplayed the disagreements over the shareholding saying “the laws of the land are very clear that indigenisation has to be implemented on the basis of at least 51% local shareholding”.
“We will get there but it must be understood that indigenisation is a process not an event,” Nyabadza said.
Asked to comment on the shareholding talks, Muungani refused to shed light on the issue, saying “Green Fuel is unable to comment on behalf of government”.
When contacted for comment Mavhaire said he was in a meeting and had not responded to telephone messages at the time of going to print.