News Column

Bright Prospects Seen On Bagamoyo Energy Farm Project

June 17, 2014

Staff Writer

GOVERNMENT changing to certain policies and ongoing due diligence exercise are eagerly being followed by African Development Bank (AfDB) and International Fund for Agriculture Development (IFAD) which plan to finance Bagamoyo sugarcane, ethanol and power generation project.

AfDB Regional Communications Manager, Mr Edson Rurangwa and IFAD Regional Communications Officer, Mr David Paqui, said in principle their institutions supported the over 800bn/- project that will directly employ over 2,000 people while another 1,200 become outgrowers.

"As with all projects of this nature, the Bank needs to carry out its due diligence comprehensively. Currently, the Bank is still waiting for certain policies to be passed by the government before the project structure can be finalised and the financing completed," Mr Rurangwa said in an emailed message to Business Standards.

He said because the project is a public private partnership (PPP) venture involving the government and Agro EcoEnergy Tanzania Limited, the Bank has no problem supporting it provided that it is sustainable.

IFAD's Mr Paqui shared the same sentiments as AfDB's Rurangwa as the giant project remains stalled since 2006 because of land tenure problems, massive sugar smuggling which distorts prices in the domestic market and lack of incentives. "Regarding the project you are enquiring about, it is too early to provide you with information.

Kindly note that from IFAD's side, the project is still in conception phase, as such, the design phase will start shortly," he wrote.

Mr Paqui further noted that after the design stage, the project will be submitted to the IFAD executive board for approval. Agriculture, Food Security and Cooperatives Minister, Engineer Christopher Chiza, Land Housing and Human Settlements Development Minister, Professor Anna Tibaijuka have both expressed support to the project which has a 10 per cent government stake. Both Ministers have pledged to ensure that the project takes off this year.

"We are addressing concerns by the investor and currently there is a cabinet paper that will make important decisions by next July," Engineer Chiza said. Eng Chiza also promised to address regulations governing importation of sugar into the country which is one of the reasons making local manufacturers less competitive.

"Very soon we will have strong regulations to make sure unnecessary sugar imports are stopped," the Minister noted. The country's sugar industries produce less than 350,000 metric tonnes of sugar against demand of over 500,000 tonnes per annum.

But importation and smuggling of cheap sugar from Asia has forced local producers suspend expansion plans as they are rendered less competitive in the market.

"Our shareholders and development bankers cannot invest massively in this project before the government addresses policy and regulatory issues raised," said Agro EcoEnergy Tanzania Executive Chairman Mr Per Carstedt.

Mr Carstedt said apart from security of land for the project, investors also want to see improved policy on taxation to suit giant project financiers.

The Agro EcoEnergy project is the first new integrated sugar project in Tanzania since 1974. Under Southern Agriculture Growth Corridor of Tanzania, the project is expected to produce about 130,000 tonnes of sugar, 10 million litres of ethanol and 100,000 Megawatts hour capable of supplying 100,000 rural households.

In its latest annual report, Grow Africa terms the Bagamoyo project as promising and with potential to transform the country's struggling agriculture sector.

"For its part, Agro EcoEnergy Tanzania Ltd is seeking land to establish a modern sugarcane plantation and build a factory for producing sugar, ethanol and power.

In response, the government has piloted a cooperation framework that balances the interests of all stakeholders, striking a win-win deal whereby local communities will receive a 10 per cent non-dilutable shareholding in the project company Bagamoyo EcoEnergy Ltd," read part of the Grow Africa report.

It further noted that a 15 per cent bonus -share stake will be offered to the public after 18 years of operations in exchange for Bagamoyo EcoEnergy being granted a 99-year lease of land free from encumbrance.

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Source: AllAfrica

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