Zimbabwe's government is accused of favouring sole licencee Billy Rautenbach by raising fuel's ethanol content.
Fearing that it would be unable to contain a possible flurry of lawsuits from a disapproving public, the government has been put in the embarrassing position of having to back down on its unilateral decision to raise the mandatory blending of unleaded fuel and ethanol from E10 (10% ethanol) to E15.
Public anger rose in recent weeks over allegations that the government was bending over backwards to accommodate controversial businessman Billy Rautenbauch, the owner of the sole ethanol licencee, Green Fuel.
It is illegal to sell unleaded fuel in Zimbabwe that has not been blended with a government-prescribed percentage of ethanol.
Energy and Power Development Minister Dzikamai Mavhaire this week announced that the government was temporarily reverting back to E10 and another ethanol producer, Triangle – which had been exporting its ethanol – was now allowed to sell the product locally for three months.
Mavhaire said the decision was taken to reverse blending from E15 to E10 because of incessant rains, which had made it impossible to harvest cane for ethanol production, resulting in dwindling ethanol stocks.
The measures had been taken to ensure consistent availability of blended petrol.
Complaints about exclusion
But contradicting Mavhaire's explanation of low sugar cane reserves, lowveld farmers were as late as this week complaining to the government about exclusion from the ethanol industry, saying that they were stuck with stockpiles of sugar cane.
The farmers object to Green Fuel's monopoly, saying that they too want to benefit from ethanol production.
Sugar-cane farmers, bearing the brunt of cheap imports that have flooded the country and led to sugar manufacturing companies using less of their produce, told the Mail & Guardian they had the capacity to supply the cane required for ethanol production.
Except for some of the farmers in Chisumbanje, who have been contacted by Green Fuel as outgrowers (contract farmers), most sugar cane farmers supply sugar-maker Tongaat Hulett. But Tongaat cannot buy all the sugar cane as it is struggling to exhaust its stock as a result of stiff competition from cheaper imports that have flooded the market.
Admore Hwarare, the chairman of the Commercial Sugarcane Farmers Association of Zimbabwe, said farmers had tasked him to engage Rautenbach so that they could also benefit from ethanol blending.
He said selling cane for ethanol production was less costly and laborious than refining it for sugar production, given the competition from cheap sugar imports from Brazil.
"The farmers have tasked me to engage Billy [Rautenbach] over the possibility of them supplying cane to Chisumbanje. We have the capacity to supply the much-needed cane as outgrowers," said Hwarare.
He said there were more than 1 200 outgrower farmers in the lowveld who had the capacity to produce 400 000 tonnes of sugar. Chiredzi West legislator and former Sugarcane Farmers Association secretary general Darlington Chiwa said Zimbabwe sugar-cane farmers were having a tough time owing to imports.
Local sugar was produced at a higher cost than in other countries in the region, some of which had the advantage of advanced technology.
"Inputs in Zimbabwe are generally more expensive compared to other countries in the region. A lot of ammonium nitrate is used as fertiliser and we buy a bag for between $40 and $50, while elsewhere the same bag can be purchased for between $10 and $15.
"Zimbabwe cane is naturally produced and takes between 12 and 14 months to mature, yet in some countries, the cane is genetically modified and matures after six to eight months," he said.
Chiwa said cane-farming organisations were negotiating with sugar manufacturing companies to benefit from ethanol production, produced by Triangle as a by-product. He said the government would empower farmers if it bought Triangle ethanol at 95c a litre, given that the company was exporting the product at 65c a litre.
Taking the government to court
Chiwa, in his capacity as a legislator for Chiredzi West where the bulk of sugar-cane farmers are found, is part of the negotiating team in talks with sugar manufacturers to ensure that farmers get value from ethanol production.
The M&G last week reported that the government had been taken to the Constitutional Court by motorist Tabani Mpofu – who is challenging mandatory blending, saying that it violates his constitutionally guaranteed freedom of choice; that the government has created and is protecting Green Fuel's monopoly; and that no research has been conducted by the government guaranteeing that ethanol blends beyond 10% are safe for vehicles.
Government sources said Mavhaire backed down over worries that Mpofu's case was watertight.
Added to this, some car-makers and assemblers, including Nissan Zimbabwe, have voiced their concern about fuel blending beyond E10, saying they cannot guarantee vehicles using such fuel.
The same sources said it was likely that Triangle would be allowed to sell its ethanol for longer than the stipulated three months, a development that would benefit farmers not contracted to Green Fuel.
Mavhaire could not be reached for comment.
Criticism of the government's assistance of Green Fuel to build a monopoly is another reason for Mavhaire's percentage reversal.
Steve Frampton, the general manager of the Association of Sugar Manufacturers, last week said the ethanol blending law in effect shut out private players, while favouring Green Fuel.
"The current legislation hinders private sector firms like Tongaat Hulett, or any other private companies that have no links to government from actively participating in the sector. "These companies are left to source for external markets while Green Fuel remains the sole player in the sector."
Tongaat Hulett wholly owns Triangle and has a 50.3% stake in Hippo Valley Estates. It produces 740 000 litres of fuel-grade ethanol a week and an average of 24-million litres a year, but until this week, had not been allowed to sell its product for local fuel blending.
The company has, however, been targeted for a fresh wave of land expropriation, and has issued a statement distancing itself from any criticism of ethanol blending.