Tanzanian Shillings ONE TRILLION Sugar Deal Vanishes Into Thin Air

But signs of troubled times for the project were in the air much of last month after Action Aid released a study that claimed that the project land was grabbed and launched an international online petition urging President Kikwete to intervene and ensure that the project is not implemented on the disputed land. PHOTO|FILE 

By Songa wa Songa, The Citizen Reporter

Posted  Saturday, April 25  2015 at  13:52

IN SUMMARY

The much talked-about $620 million model project, which was to be based in Bagamoyo and was jointly owned by the government and Swedish investor Agro EcoEnergy, may go down because the State has reportedly failed to hold up its end of the deal.

Dar es Salaam. The much-touted $620 million (roughly Sh1 trillion) project aimed at ending sugar crisis in Tanzania is in a fix.

The much talked-about $620 million model project, which was to be based in Bagamoyo and was jointly owned by the government and Swedish investor Agro EcoEnergy, may go down because the State has reportedly failed to hold up its end of the deal.

Of that investment, some $120 million (Sh220 billion) was set aside for smallholder farmers in the out growers scheme—a key element that attracted a number of investors. But all that may now be history unless someone or something intervenes.

EcoEnergy executive director Per Carstedt told The Citizen yesterday that the three main investors who had committed billions of shillings to the project would pull out on 30 April, the deadline the financiers gave those implementing the project to iron out all pending issues before funds could be released.

The project has some high-powered supporters: The Swedish International Development Agency (Sida) committed more than $100 million, the International Fund for Agricultural Development (Ifad) set aside $65 million and the African Development Bank (AfDB) was ready to put in some $30 million. Come Thursday, no cent will be released if the preconditions remain unmet, dealing a killer blow to the project’s lifeline.

According to Mr Carstedt, three main issues remained unsettled as of yesterday.

Given the time left, the chances are high that they will not be solved. The contentious issues include a land dispute in the project area, control of sugar importation and corporate tax exemption for the investor. All three items fall in the government’s to-do list.

In the joint venture company that was registered in 2007 to run the project, Bagamoyo EcoEnergy Ltd (BEE), the government was given 25 land-for-equity shares as it provided the former 22,300 hectare Ranch of Zanzibar in Bagamoyo (Razaba).

But some residents, who had settled on the land that was idle then, went to court to challenge the deal, claiming that the property was their ancestral land. The case is still in court.

According to a 2005 Gazette notice, some 3,000 hectares of Razaba appeared to fall within Saadani National Park, contrary to a 1973 gazette and the BEE title that put the piece of land under Razaba. According to the investor, the land is the “best and most viable” for cane production. That issue is also not yet resolved.

Moreover, the government has done nothing concrete to plug the loopholes that lead to irregularly imported sugar flooding the market despite the 100,000-tonne annual deficit. Given that the investor has not been given a corporate tax waiver, doom is all but certain.

“The government has done a lot but, considering the few remaining days and what still needs to be done, we are very concerned,” Mr Carstedt said.

EcoEnergy has already injected $45 million (about Sh80 billion) in the project which, come Thursday, will enter the firm’s books of account as loss.

The multi-billion project is one of the investments being co-ordinated under President Jakaya Kikwete’s Delivery Bureau’s Big Results Now (BRN). A top BRN official privy to the project and who has been working closely with EcoEnergy towards sorting out the issues, declined to offer details. “We’ve done a lot,” he said. “I cannot say much on the phone.”

The Presidential Delivery Bureau’s deputy chief executive, Mr Peniel Lyimo, who was among the government’s key actors as far the EcoEnergy project is concerned, said he was in a meeting and asked that questions be sent via text message. He had not responded as we went to press.

The investment is expected to provide the domestic market with 130,000 tonnes of sugar every year, 100,000 megawatt of electricity to the national grid and 10 million litres of ethanol.

But signs of troubled times for the project were in the air much of last month after Action Aid released a study that claimed that the project land was grabbed and launched an international online petition urging President Kikwete to intervene and ensure that the project is not implemented on the disputed land.

A dialogue forum with the theme “Implications of large scale agro-investments for smallholder producers”, held a day before the release of the study, led to angry exchanges after the NGO presented highlights of ‘Take Action: Stop Ecoenergy’s land grab in Bagamoyo, Tanzania”.

Mr Sospeter Mtemi, acting director for land use, planning and management in the ministry of Land, housing and human settlement, denied claims that the project land was grabbed and said the project was essential not only to the socio-economic development of Bagamoyo but the country in general.

Ms Mwatima Juma, a senior country programme officer at Ifad who attended last month’s forum, warned that publication of the report would jeopardise the project and appealed to the NGO to ease off. But Action Aid went ahead and uploaded the study on its website.