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March 13, 2011

Tanzania biofuel project's barren promise

by Stefano Valentino

An ambitious project to produce clean energy for the Netherlands and Belgium has degenerated into a controversial abuse of natural resources in Africa.

Bioshape, a clean energy company based in Neer, the Netherlands, is going through bankruptcy proceedings after spending 9.6 million dollars on a failed biofuel project in Tanzania. In 2006, the company agreed to lease 80,000 hectares of coastal woodland in the southern district of Kilwa to grow jatropha, a shrub whose seeds contain an oil that can be processed into green fuel.

Bioshape planned to employ thousands of local farmers and export seeds from Tanzania to the Netherlands, where they would be processed to produce electricity, heat and biodiesel. Jatropha is one of the preferred feedstocks for fuel produced from plant material. Commonly called biofuel - agrofuel to its critics - such fuel is supposed to be less polluting than traditional fossil fuels.

BioShape invested 25 million euros in a facility intended to process 45,000 tonnes of vegetable oil per annum, and generate 25 megawatt hours, enough to power 50,000 households. The plant in Lommel was just one component of an ambitious network of refineries and co-generation plants that Bioshape planned to build across Belgium and the Netherlands.

The project was backed by big investors such as the Dutch merchant bank Kempen & Coand the utility Eneco.

The plantation shows how foreign investors’ interests may clash with local development needs. Tanzania's government hopes the use of locally-produced biofuel would generate savings on oil imports, which could then be reinvested to boost agriculture and food production. But - as with large-scale land transfers for food production - lack of public policies requiring investors to supply the local market, could see all the benefits exported, giving away both the land and crude agro-fuel.

"There are no obligations for foreign investors to reserve part of their output for the domestic market," says Jamidu Katima, professor of chemical engineering at the University of Dar es Salaam, criticising the new biofuels guidelines adopted by the government last year.

"To continue to buy expensive fossil fuel for our domestic economy and yet produce biofuel for export is not rational," concludes Kassim Kulindwa, economist at the University of Dar es Salaam.

"Bioshape managed to acquire land through the complicity of local authorities which breached the rules on land lease," explains Stanislaus Nyembea, expert at the organization Lawyer Environmental Action Network.

Nyembea says villagers relied on their plots to grow food, mainly maize and fruit, as well as for firewood. They agreed to give their land away with the expectation of receiving fair financial compensation based on the value of the allocated land.

According to Tanzanian law, only the central government can lease a parcel of land larger than 200 hectares directly to foreign investors. So ownership of the land in Kilwa was first transferred to the central government, then the Tanzanian Investment Centre authorised the lease to Bioshape.

"We have found out that villages were not properly informed about the terms of the law," Nyembea explains. "They didn’t know that they would definitively lose ownership of the land allocated to Bioshape. They naively thought that they would get it back at the end of the lease period that usually lasts 99 years."

Worse, only 40 percent of the compensation paid by Bioshape went to farmers, Nyembea continues. "The rest went to the District Office which had persuaded local villages to sign up to the deal. The District Office has the power to approve the transfer of land from the village level to the district level, before it is eventually transferred to the state level, but has no legal right to receive a share [of the money]."

Wilfried Hermans, Bioshape CEO, replies: "Out of the total concession of 81,000 hectares approved by the Tanzanian Investment Centre, we only acquired an initial 34,000 hectares for our kick-off plantation as for which we paid 490,000 euro (676,000 dollars) to the local authorities which was then supposed to be distributed among the villagers. We don’t know what happened afterwards."

Local farmers were not the only ones misled by Bioshape.

The company had announced that the plantation would reach a size of 1,000 hectares by the end of 2007, but high costs slowed progress.

"The [Bioshape] company board feared that its shareholders would pull out from the venture", says Annick Miya-Verstraelen, former head of the Sustainability and Monitoring Department at Bioshape.

Miya-Verstraelen left the company in February 2008, but in November, she found out that Bioshape’s website claimed the jatropha trial plantation covered 350 hectares; but she knew from field reports regularly sent to the board in the Netherlands that it was not yet even 100 ha.

"I believe that the Board resolved to mention a higher figure to convince the shareholders to keep or even increase their investments," she said.

Hermans is defensive: "We just made a mistake. After conducting the GPS measurement we realized that we had over-counted the number of hectares and that the exact figure was 285 hectares."

The miscalculations proved fatal. In February 2010, the company suspended its field operations and salaries to local employees. This followed the withdrawal of its major investor, Eneco, which had lost confidence in both the economics and the environmental sustainability of Bioshape's plans.

The 285 hectare trial plot cleared by Bioshape in Kilwa is still there. The jatropha shrubs have been left without water and are slowly drying out. But the trees cut down to make room for them have disappeared.

"We needed to find a way to use the timber," Hermans says, "So we made a deal with a company based in Arusha, called Artif which bought part of it."

Artif does have a factory in Arusha, in Northern does have factory in Arusha, in northern Tanzania, whichproduces and exports furniture to the Netherlands; but its listed headquarters share the same Dutch address as Bioshape in Neer. The company is owned by Chris Pilley, whose girlfriend is the daughter of Cor Vaes, one of Bioshape’s Holland-based managers.

According to its confidential business plan, which IPS is in possession of, Bioshape expected to earn up to 6.7 million dollars in profits from logging and to use this money to partly subsidize its biofuel project. Around 225 cubic metres of valuable miombo hardwood timber was harvested from just the first 70 hectares to be cleared. The Bioshape concession includes between 200,000 and 800,000 cubic metres of valuable hardwood, worth 50-150 million dollars.

According to a WWF study published in 2009, the project's Environmental Impact Assessment failed to mention that the concession falls within the Namateule/Namatimbili Forest, an important reserve of biodiversity. The plantation thus poses a risk to seven threatened vertebrate species, according to the Tanzania Forest Conservation Group.

The report also asserts that the claimed reduction of greenhouse gas emissions reported in the EIA in order to fulfill EU directives is not supported by any scientific evidence.

The EIA, required by both the Tanzanian government and the European Directive on the Promotion of Renewable Energy, was conducted by the Tanzanian consultancy company Environmental Management Consultants.

But the provenance of the document itself is in question: one of its authors is identified as Canisius Kayombo, a botanist based at the National Herbarium in Tanzania. But Kayombo denies taking part in the assessment. He sent an official complaint to the competent authority, the National Environmental Management Council, but the council nevertheless approved the EIA.

In 2009, REM, a British organisation monitoring the use of natural resources worldwide, conducted an investigation and concluded that, Bioshape cut and sold timber without prior permission. REM recommended that Bioshape be held accountable for its illegal activities.

"In order to cover the gaps that emerged in the EIA, we commissioned two complementary studies on biodiversity and carbon in 2007/2008," says Jan Paul van Soest, former Chair of Bioshape supervisory board.

"Following the Strategic Impact Assessment conducted by Aid Environment, we decided to preserve the native forests which occupied 50 percent of the leased land, while the CO2 cycle analysis conducted by CE Delft estimated that our project would generate a net sequestration which was even beyond the European standards which set a threshold of 35 percent compared to fossil fuels."

Five years after its ambitious launch, Bioshape's plantaion has produced only a scar on the landscape. Jobs promised to villagers have not materialised, and they have seen only a fraction of the promised compensation for the land they were persuaded to give up.

For the moment, they are able to resume farming within the concession, but they have signed away their title to it and remain vulnerable to the project's resumption.

Despite the long list of doubtful practices in the Bioshape project, a number of new investors from the Netherlands, the UK, the U.S. and Italy have expressed interest in taking over its business.

"Their names cannot be disclosed at this point, because we have not signed an agreement with any of the parties yet," says Hanneke Lamers, attorney at Boels Zanders, the legal firm which is in charge of Bioshape bankruptcy.

IPS News

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