FUEL prices shot up recently before Government intervened by reducing import duty on fuel to stem the price madness that rose as a result. Questions have been raised as to the contribution of the multi-million dollar investment by Green Fuel in Chisumbanje and Middle Sabi into ensuring affordable fuel for Zimbabwe. Our Senior Reporter Freeman Razemba caught up with Conrad Rautenbach to talk about the project and other issues.
Question: So, how was 2017 for you guys?
Answer: 2017 was a much better year for us compared to previous years.
We were able to significantly increase our sugarcane yields and, as a result, our production of ethanol. To give you an idea of what I am referring to, at the Middle Sabi Estate, which is under centre-pivot irrigation, we produced 138 tonnes of sugarcane per hectare in 2017, compared to 92 tonnes per hectare in 2016.
On the Chisumbanje estate, which is under lay flat irrigation, we produced 105 tonnes per hectare, compared to 87 tonnes per hectare in 2016.
These increased yields equated to a 40 percent increase in ethanol production, from 40 million litres of ethanol in 2016, to 56 million litres in 2017.
Our factory also produces green, renewable electricity which is exported into the national grid. With our increased production, we were able to export over 33 000MW of power into the grid last year.
Q: How did you manage to make such huge improvements in such a short space of time?
A: Well there were numerous factors involved from the agricultural, production and logistical aspects, as well as support from the RBZ and our local ministries in pushing our expansion program forward.
We managed to plant around 1100ha of additional cane in 2016 (which equates to 8,5 million litres of ethanol) and we updated and improved our irrigation techniques which made a huge difference to our crop; namely the introduction of lay flat irrigation in Chisumbanje and green cane harvesting.
Green cane harvesting basically means that the crop is harvested green, without being burnt first. This leaves a thick trash blanket on the ground which acts as a mulch, saving up to 40 percent of water consumption due to reduced evaporation.
We also further mechanised our process, including row spacing and mechanical twin row planting, as well as introducing 10 new sugarcane varieties into our Estate.
Added to this is the fact that last year, for the first time, we had consistent power and water supply at Middle Sabi Estate which made a huge difference in our ability to adequately irrigate our crop.
Q: What are your expectations for this year?
A: We expect to increase our production to approximately 75 million litres this year. Our yields should remain consistent and with the additional cane we have planted, we are confident that we will be able to reach this prediction.
We are in the process of planting an additional 1 500ha of sugarcane in order to increase our production by a further 20 percent, to 90 million litres in 2019.
Q: What about your factory with this increased tonnage and production, can it handle it?
A: At full capacity, our current factory can produce up to 120 million litres of ethanol per year, however, in light of our expansion plans and the significant increases in production, we are actually adding another mill this year and we have made a number of modifications to our distillery in order to ensure that it will cope and be as efficient as possible.
We’ve also improved our logistics, harvesting and transportation.
Q: I know a lot of the public are concerned about blending ethanol with unleaded petrol and the potential damage this can do to their vehicles – can you explain how it works and what level blending can you go to safely?
A: Yes, unfortunately there is a lot of misinformation out there about the safety of ethanol and many incorrect rumours about risks to vehicles.
Basically, you can blend up to 25 percent ethanol with 75 percent unleaded petrol (E25) without making any modifications to your vehicle. Ethanol is clean-burning and a higher-octane fuel compared to unleaded petrol and so it actually improves the performance of your engine.
Ethanol has been used as a vehicle fuel for a very long time, starting with the first Model T Ford which was built by Henry Ford in 1908 to run on ethanol.
Over 64 countries in the world now actively promote the use of ethanol as a mainstream fuel, with Brazil, for example, mandating a minimum ethanol blend of 25 percent.
In addition, fuel injected petrol vehicles newer than 1990 can run on blends as high as E85 (85 percent ethanol, 15 percent unleaded petrol) with the help of a very small modification. E85 offers superior performance and burns cleaner than petrol, together with being competitively priced and much better for the environment.
We did a trial run of this in 2014-2015 with great success and, we’ve been testing our own vehicles on site in Chisumbanje and Middle Sabi by running them on 100 percent ethanol — they have now done over 500 000km on 100 percent with no mechanical issues.
Assuming that we continue to increase our ethanol production, E85 may be an option for Zimbabwe in the near future.
Q: And so what percentage are we currently blending in Zimbabwe? And how does this blending actually benefit us?
A: In 2017 all local unleaded fuel was consistently blended with 20 percent ethanol (E20) for seven months. This year, with our increased production, the country should be able to blend at a rate of 20 percent for at least nine months of this year.
There are huge benefits of blending both to the consumer and to the Country.
Firstly, blending unleaded petrol (at a price of $1,35) with ethanol (at a price of $1,04) has the direct effect of reducing petrol prices at the pump.
During these hard times, I am sure everyone noticed the 6 cent increase in the price of blend at the end of last year when we stopped production – this was largely due to the decrease in the blending ratio below E20.
As our ethanol is locally produced, blending it with imported fuel provides direct import substitution and significant foreign currency savings – so last year Zimbabwe saved $56 million in forex just because of ethanol and this will only increase as blending increases.
The factory also generates green, renewable electricity which is exported into the national grid – so increased production of ethanol also means increased power generation.
Added to these benefits is, of course, the additional employment that increased production will create – we are expecting to employ a further 500 Zimbabweans this year, added to our existing workforce of over 3 000 employees.
Q: What about your outgrowers as we know this has been a bone of contention with the farmers in the area?
A: At the inception of the project we made a commitment to develop 10 percent of all land under sugarcane in Chisumbanje for the community. To date, over 1100ha of land has been developed for the community at a cost of approximately $11 million to the company.
600ha of this is farmed by outgrower farmers producing sugarcane.
The remaining 500ha consists of irrigated plots, measuring 0.5ha each and benefiting 1000 families.
The water is pumped year-round at the cost of the company, ensuring consistent availability of water in an area that receives very little rainfall and, as a result, each farmer can produce up to three cash crops per year.
As I mentioned before, we intend to plant a further 1500 ha of sugarcane this year, and, in keeping with our commitment to the community, we will develop a further 150ha of irrigation schemes – meaning a further 300 families will receive irrigated land.
Q: Ok, and what about the issue of the land being used by the project?
A: There really is no issue. The land to which you refer has been set aside for an agricultural project for ethanol since the 1960’s and an area of approximately 35 700ha was surveyed and pegged in 1982 for this very reason.
As such, the local community never built any permanent structures within the greater Chisumbanje area and merely undertook cropping activities pending the implementation of such a project.
This land is considered Communal Land, under the control of the Chipinge Rural District Council, and is currently leased to our partners, the Agricultural and Rural Development Authority (ARDA).
All land that the estate occupies falls within and under the ambit of a Joint Venture Agreement with ARDA and within the concession that is under a valid and lawful lease agreement between ARDA and the Chipinge Rural District Council. Any community members who had crops on the land in question were compensated for those crops and offered irrigated land as a substitute.
Q: Okay, that makes sense. So, how else has the project benefitted the community down there?
A: Green Fuel has a robust Corporate Social Responsibility program that is immensely benefiting the local community called ‘Vimbo – Hope for a better future’. Through Vimbo, we have introduced a portfolio of community projects, all of which have been constructed around the principle of sustainable development through irrigation farming, entrepreneurial projects, education and social service infrastructure rehabilitation.
Our current, major projects include a sewing workshop which is run by a group from the local community; a library and technology centre, opened in partnership with Old Mutual to provide the local students and community members with computer lessons and access to books; a community kitchen which is run by a group of local ladies to feed our factory staff; broiler projects; fencing projects; donation of reusable sanitary pads; rehabilitation of local roads, drilling of boreholes and reforestation of the area to name a few. We also provide continuous support to the local schools, clinics and hospitals.
Prior to the ethanol project, Chipinge district, particularly Chipinge South where the factory is located, was considered the least developed area in Zimbabwe owing to the harsh region 5 climatic conditions which are characterised by very low rainfall and high temperatures.
Currently, up to US$2 million is injected into Chipinge South every month in the form of salaries and procurement finance, which has resulted in significantly increased commercial traffic.
Q: What, if anything, has hindered your expansion thus far?
A: As with many companies, we really struggled with the economic and political challenges that the country was facing last year and we are excited to welcome a new era in Zimbabwe.
Now that we have clearer policies from the new administration, we hope that it will be easier to get finance for future expansions, as well as further foreign investment and forex allocation.
As I noted when we first sat down, the RBZ has always been very supportive of our project, however, as everyone is aware, they were forced to work within strict constraints and so we have been limited with how much we have been able to improve.
With things finally moving forward in Zimbabwe, we hope that it will become easier and easier to obtain finance for our planned expansion, as well as hopefully bring in some foreign investment.
Q: The issue of price was recently raised in parliament – specifically the fact your ethanol is more expensive than Triangle’s – can you explain this?
A: Yes of course, there are a number of reasons for the price discrepancy.
First and foremost it is important to realise that Triangle is a relatively small ethanol producer and sugar is their primary source of income which, I would assume, covers the vast majority of their expenses.
Their ethanol is produced from molasses which is a by-product of their sugar production and so any income they receive from their ethanol sales is over and above that of their sugar sales. Green Fuel only produces ethanol and so our ethanol sales are our only source of income.
Added to this is the fact that the sugar price in Zimbabwe is heavily protected and Triangle receive around $2 per kg of sugar, as opposed to, for example, 95cents per kg in Brazil.
This $2 per kg of sugar is the equivalent of $1,60 per litre of ethanol and is why they are able to subsidise their ethanol to such an extent.
People also have to acknowledge that Triangle’s factory is nearly 60 years old and, I assume, has been fully paid off, significantly reducing their capital expenditure.
Q: How are you guys feeling moving into 2018?
A: We are excited about 2018 and we are extremely happy with the positive signals being sent by the new administration. We’ve already budgeted to spend an additional $20 million this year on capital equipment and further expansion and we’re hoping to take this to $50 million.
As a company, we are finally back on track with our original plans for expansion.
We will continue to plant more cane to ensure that our production continues to improve and we are excited to add additional by-products to our green cycle, specifically CO2 recovery, cattle feed, methane recovery and yeast recovery.
We are eager to keep going from strength to strength as a locally owned and operated company and to be the driving force behind Zimbabwe becoming energy independent in the very near future.