GOVERNMENT is set to relax the indigenisation law that governs shareholding in the production of ethanol and biofuels as it seeks to avert the fuel crisis by promoting local production in the face of surging national requirements of petrol and diesel of 3,3 million litres and 4,3 million litres per day.
According to the Biofuels Policy of Zimbabwe (2020), launched by President Emmerson Mnangagwa in the capital yesterday, the relaxation of regulations in the capital-intensive sector, is aimed at attracting biofuel producers and investors thereby stimulating competition for the benefit of both feedstock and biofuel producers.
Currently, the general condition states that major shareholding (51%) should be held by Zimbabweans while special conditions grant exclusive rights to produce ethanol for sale under the national blending mandate to a single producer.
The new shareholding thresholds were not announced.
Last year, government was also forced to repeal the indigenisation law governing the shareholding in mining of special minerals except for diamond and platinum after experiencing capital flight because of the stringent law.
In the face of rising demand for fuel, according to the policy document, the objective is to reduce the country’s dependence on imparted petroleum products, stabilise fuel prices, ensure energy security, promote rural development and investment as well as create employment.
The policy aims to achieve a consistent and sustainable ethanol blending ratio of 20% by 2030, while also introducing biodiesel at a blending ratio of up to 2% by 2030. It also seeks to increase the number of players in the biofuels sector.
It also says: “Based on currently available information, set blending mandate as follows: for ethanol 10% until year 2020 and 20% by year 2030 if deemed feasible after additional information has been collected; engage with car manufacturers and importers to prepare the market for ethanol blends beyond 10%. For biodiesel 2% blend from year 20202 provided supply can be assured.”
The policy recognises that limiting the development of the domestic biofuel market to low blends would quickly pose a constraint on sector development (mainly ethanol) as the amount of biofuel required to meet low blend obligation could be reached quite quickly.
“Opening the biofuel (specifically ethanol) market to competition should in principle also open the possibility of having a decentralised model of small scale biofuel plants located in the immediate vicinity of the feedstock and possibly (co)owned by feedstock producers that could benefit from the value addition of the biofuel as opposed to the limited value selling raw material,” reads the report.
The policy, however, notes the high input costs in the economics of biofuel production saying these will eventually translate to relatively high prices for biofuels produced in Zimbabwe.