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February 24, 2009

Ghana and the sugar cane trap

by Emmanuel Kwablah

A Brazilian delegation called on Ghanian Vice President John Mahama last month. The purpose was to discuss that country’s planned investment in bio-fuel production in Ghana. Mahama’s body language, as captured by national television, depicted great excitement.

Of course, no one frowns on such an offer at a time when the global economy has gone bonkers, reeling under the effects of a credit crunch which last year followed immediately on the heels of a yet-to be-resolved food supply crunch and an unprecedented skyrocketing crude oil price that spiked at US$147 in July but has since dipped and now hovers just above US$40.

The Brazilian visit was the follow up to another by President Lula da Silva’s last year, after which he bragged: “In Ghana, we are developing a project that will result in growing 27,000 hectares (of sugar cane) for the production of 150 million litres of ethanol per year that is destined for the Swedish market.”

We seem to be very fortunate in attracting such massive direct foreign investment (FDI), given the current global financial crisis wherein hitherto cash-flushed countries are resorting to “financial protectionism”. And to think that it is in bio-fuel, too, at a time when a crashing crude oil price ensures that it doesn’t make economic sense to put money into that.

So we are very fortunate. Or we could be sleepwalking into a big trap.

What’s the worry?

Oil and food are special commodities. They differ from other commodities because they are indispensable for the functioning of society. The behaviour of both commodities over the past year has created new situations that are prompting a rearrangement of relationships between nations.

Recent forecasts indicate the world has passed its peak of crude oil production and henceforth demand will outstrip supply (the current slump in demand due to a global economic downturn is a temporary quirk), thereby prompting heightened interest in renewable energy sources, with bio-fuel gaining serious attention. Food shortages in recent times are being partly blamed on the increasing use of food crops for bio-fuel production.

Ghana has been seeking to create a bio-fuel industry for some time now, and the worry is that, naturally, as we convert more of our arable land into that activity rather than for food production, we could be seriously exposing ourselves to increasing self­ insufficiency in staple food production.

Additionally, with the Brazilian project, there is a serious possibility of turning a number of northern smallholder food-crop farmers into landless, dependent, plantation farmhands.

But perhaps most revealing about the Brazilian project is what critics of that country’s bio-fuel industry at home are saying.

The authoritative German­ Foreign-Policy.com quotes Brazilian critics as saying that the rich industrial states are getting “a full tank in return for empty stomachs.” They complain that hundreds of thousands of sugar cane plantation farm workers working for Brazilian ethanol industry are being “held like slaves”: their “working conditions are cruel, their pay ridiculous, and their children are starving”. According to a recent study, sugar cane slaves were better nourished before slavery was abolished in 1888, than farm workers are today.

Could Ghanaian farmhands on such Brazilian projects here fare any better, than their counterparts in Brazil? It has been estimated that as crude oil prices fell below US$70 per barrel, bio­fuels became uncompetitive. The consequent cost reductions needed to make bio-fuels production viable would naturally be borne, mostly, by the plantation farmhands.

As Brazil’s bio-fuel industry matures, with labour costs becoming a problem, it is seeking to shift the low value-end to Africa, while it maintains its control over the trade in the product.

It is now being argued that as such arrangements are put in place, the former European colonies on the continent are again reduced to the status of suppliers of raw materials.

That is not to say that Ghana should not go into bio-fuels production, especially as the renewable energy industry is expected to attain a market value of 2.2 trillion euros by 2020 - of which bio-fuels is an important component. The point is that the local industry must be developed with Ghanaians at the high-value end of it.

The question then is: have we made any efforts to develop a policy for guiding development of the industry to the benefit of country and its people?

Definitely yes! However, like all homegrown policies it is not being given the needed serious attention that would allow for its useful application.

Why not jatropha?

In November, 2005, the Energy Commission completed a National Bio-fuels Policy Draft, which was subsequently forwarded to the Cabinet. It still has not been presented to Parliament as a bill to pass into law. Portions of it were, however, incorporated in the 2008 Budget Statement, including fiscal incentives to be provided for investments in the bio-fuel industry such as tax-holidays of up to five years and a reduction of corporate tax from 25 to 20 percent for businesses directly related to the development of the bio-fuel industry.

With the strategic objective of reducing poverty and creating wealth for the well-being of the country’s people, among others, as well as considerations that the bio­fuel industry ought not to compete with human consumers for foodstuff used to produce bio-oil, jatropha curcas was identified as the most suitable energy crop that would be of the greatest benefit to the country’s bio-fuel industry.

And jatropha has the added advantage of doing well on marginal lands that are unsuitable for food crop cultivation, thereby not taking up too much of the country’s food crop land. That cannot be said for sugar cane.

Perhaps developing and sticking to our own policies for our industrial development and then getting others to buy into them is a far better way of ensuring our proper development rather than going after any offer that is dangled in our faces. Otherwise, we are likely to be kept as hewers of wood and drawers of water far longer than necessary.

Ghana Business News

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