BY FIDELIS MHLANGA/TINASHE KAIRIZA/MELODY CHIKONO
THE country’s two ethanol producers, Green Fuel and Ethanol Fuel Company of Zimbabwe (EFCZ) are failing to produce enough ethanol forcing energy authorities to drastically reduce the petrol blending ratio from E10 to E0 as the country manoeuvres to build new storage tanks, it has emerged.
The Independent is informed that the situation has been worsened by the companies’ failure to access their vast sugarcane plantations due to the prevailing wet conditions.
Ethanol production in Zimbabwe is in the hands of Green Fuel, owned by US-sanctioned businessman Billy Rautenbach, while EFCZ is a joint venture investment between the National Oil and Infrastructure Company (Noic) and Triangle Sugar Estates.
Contacted for a comment on the recent change in the blending ratio, Zimbabwe Energy Regulatory Authority (Zera) chairperson David Madzikanda said there was a shortage of ethanol on the market.
“The country simply does not have enough ethanol,” Madzikanda said.
Prior to the formation of EFCZ in 2017, Green Fuel enjoyed an ethanol production monopoly under a controversial policy that was strongly criticised.
Rautenbach, named in a United Nations (UN) report in 2002 among high profile Politically Exposed Persons (Peps) responsible for alleged plundering of the mineral resources of the Democratic Republic of Congo (DRC), is linked to the ruling Zanu PF party. He has a vast business empire straddling the Zimbabwean economic landscape.
As criticism against Green Fuel’s monopoly in the lucrative sector mounted, the government, through its joint venture with Triangle in EFCZ, is gradually liberalising ethanol production, opening the business for more private players.
Zera chief executive officer Eddington Mazambani this week told the Independent that ethanol production has been liberalised.
“Ethanol production is not restricted. We removed the requirement to allow joint ventures with the government so that more players can participate,” Mazambani said.
But to date, it has been evident that the two players have been struggling to produce enough ethanol to meet the country’s blending demands. This saw the country continually reducing the petrol blending ratio from E20 in 2019 to the latest E0.
At the start of this year, Zera, in its regular monthly updates, announced that the petrol blending ratio, which previously was pegged at E10, would be reduced to E0 meaning there would be no blending at all.
“The public and operators are advised that the blending ratio has been reviewed from E10 to E0,” Zera said in a recent statement. The statement also pegged the price of unblended petrol at a maximum of US$1,41 per litre.
The Zera statement did not disclose reasons why the blending ratio was whittled to E0 from E10.
Mazambani told the Independent that the latest blending review ratio came into place due to the challenges faced by producing firms to access sugarcane fields due to heavy rains.
“Blending was not abandoned. Every year during the rainy season we reduce blending levels due to limited ethanol supplies as the producers cannot access the sugar cane fields.
“Blending levels will be reviewed by the government after accessing the availability of ethanol from the two producers in the country,” Mazambani said.
However, multiple petroleum industry sources said the review was passed to address logistical challenges arising from transporting ethanol from Chisumbanje to the inland port at Msasa.
“As a result of logistical problems emanating from moving ethanol from Chisumbanje to the inland port of Msasa authorities have temporarily suspended mandatory blending. Zera has no powers to change laws. However, they have suspended the law due to physical challenges impeding implementation of the regulations,” a source told this publication on condition of anonymity.
“As industry players, we view this as a temporary measure because of challenges which have arisen to move the ethanol to where it is needed.”
Mazambani said Noic was working on plans to build new storage facilities to boost the country’s capacity to stockpile ethanol reserves.
However, he did not disclose the size of the investment for the planned storage infrastructure and referred further questions to Noic.
“Storage is under construction so that we can build up stocks before the rains. Kindly get in touch with Noic on this matter,” Mazambani said.
Green Fuels representative Nicole Rautenbach could not be reached for comment as her mobile phone went unanswered. She did not respond to questions sent by this publication.
The Independent sought to understand whether the firm was consulted when the latest blending ratio was passed and the effects of the move on the company’s operations. This publication also sought to understand the volume of ethanol Green Fuels sells to Noic annually.
Noic chairperson Daniel Mackenzie Ncube was not available at the time of going to print.
Since its formation over a decade ago, the operations of Green Fuel have been challenged, notably by former Finance minister Tendai Biti who approached the courts seeking a ruling that would render the monopoly an illegality.
Zimbabwe passed a mandatory blending policy through Statutory Instrument (SI) 17 of 2013. The legislation states that all petrol shipped into the country by rail and pipeline is subject to mandatory blending with ethanol.
Petrol imported by road is exempted from the requirement.
At the time the legislation was passed, policymakers envisaged that the price of petrol would tumble since ethanol is locally produced and Zimbabwe would save foreign currency.
However, the price of ethanol, denominated in hard currency has failed to yield the desired policy outcomes, with Zimbabwe perennially gripped by acute fuel shortages.
Fuel industry players argue that maintaining the blending regime was no longer serving its purpose.
A recent survey showed that local players are buying a litre of ethanol at USD$1,10 inclusive of transportation to Harare either to their private depots or Noic depots. Fuel companies are getting ethanol at USD$1,04 per litre and an additional US$0,04 to cover transportation costs.
This means the price of ethanol alone is now higher than unleaded petrol, triggering the conversation that blending is not useful.