THE newly enacted bio-fuels policy of Zimbabwe exposes how local tycoon Billy Rautenbach’s monopoly in ethanol production has crippled the country financially despite the availability of cheaper ethanol which is ironically being exported.
By Melody Chikono
Rautenbach is a major shareholder in Green Fuel, a joint venture between the state-controlled Agricultural and Rural Development Authority (Arda) and the tycoon’s companies Macdom Investments and Rating Investments.
The Biofuels Policy of Zimbabwe (BPZ) 2019, launched last week, states that one of the reasons for the relatively high cost of ethanol in the country is the inefficient market structure where a single ethanol producer dominates the country’s fuel-blending arrangement.
“This is causing cheaper ethanol, which is already being produced in the country to be exported or used in other sectors forcing the transport sector to rely on the more expensive producer,” reads the policy.
Rautenbach has extensive political networks and is reportedly close to President Emmerson Mnangagwa and other high-ranking officials.
He has multi-million-dollar business interests in several sectors of the economy including mining, transport, farming as well as bio-fuels.
He was named by then Zanu PF youth leaders Godfrey Tsenengamu and Lewis Matutu as one of three businessmen whose activities are affecting the economy, causing a fallout between political heavyweights and the party’s youth.
The fallout resulted in Tsenengamu’s expulsion from Zanu PF, while Matutu lost his position as deputy secretary for youth.
Matutu escaped expulsion after agreeing to go to the Soviet-like Chitepo School of Ideology for political re-education.
Government introduced fuel blending in 2008 following the licensing of Green Fuel’s Chisumbanje Ethanol Plant.
The plant, however, suspended operations in 2012.
Mandatory blending was introduced in 2013 — amid an outcry by motorists who complained that the fuel had harmful effect on vehicles — following the resumption of operations at Chisumbanje.
Despite research showing that ethanol can negatively affect electric fuel pumps by increasing internal wear and undesirable spark generation, the then president Robert Mugabe did not only capitulate to the push for 5% mandatory blending (E5), but went further to acquiesce to a lobby for 10% ethanol mandatory blending (E10).
Another weakness, identified by car manufacturers, was the fact that fuels with more than 10% ethanol are not compatible with non-E85-ready fuel system components and may cause corrosion of ferrous components.
There were also concerns that vehicles with carburettors are not suited to E10.
While there are other small ethanol producers, Rautebach’s Green Fuel has a monopoly in ethanol production, so an increase in the ethanol bending ration has over the years resulted in huge profits for the company at the expense of motorists who buy expensive fuel which does not last in the tank and the country which is spending more on ethanol.
The policy states that the opening up of 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 would benefit from the value adding of bio fuel as opposed to the limited value of selling raw material.
“In addition, opening the market to more bio-fuel producers should in the long-term provide feedstock growers with a wider choice of off takers.
“In the short-term, of course, constraints on credit availability, logistical and contractual issues and, of course, the necessary economies of scale might still favour a highly concentrated sector, so the development of a centralised biofuel market will require active government support,” reads the policy.
Mandatory blending currently stands at 20%, but the government has previously been forced to lower the ethanol threshold to 5% due to its unavailability on the market, especially during the rainy season.
Blending of fuel is exclusively conducted by licensed blenders only and currently there are 11 such licensees who comply with Zimbabwe Energy Regulatory Authority rules.
Five of the 11 fuel dealers licenced to blend petroleum products have blending depots in Harare and Bulawayo and the service stations can acquire either already blended or un-blended fuel from National Oil Infrastructure Company which they then blend.