Biofuels in Africa: investment boon or a food threat?

JOHANNESBURG – Africa’s vast arable lands have the potential to rival top agricultural nations like the United States in supplying biofuels to a world seeking cleaner energy sources.

But using land reserved for food production to supply biofuel demand could squeeze food supplies in a region vulnerable to shortages. It could also hurt poor consumers if the biofuel boom continues to push food prices higher.As alternative energy takes off, Africans hope to cash in on the high prices of the commodities used to produce these fuels.Already, investors have pledged billions of dollars for plants to produce bioethanol and biodiesel from crops like sugar, maize and soy in Africa.Ernst Janovsky, head of agriculture at First National Bank in Johannesburg, said the high rainfall belt between Angola, Zambia and Mozambique alone had the potential to rival the United States as a producer of maize used in bioethanol.”It’s almost as big as the size of the midwest of America.It has the same of type of potential and could actually outperform America,” he told Reuters.As is so often the case in Africa, however, there is one major obstacle to this kind of investment – infrastructure.In Angola, for one, the land in question is covered by dense forest.Roads and manufacturing capacity have been wrecked by two decades of civil war.Nevertheless, as the energy movement spreads and major agricultural powers find limits to their output, they may be forced to turn to Africa and be willing to spend money on setting up infrastructure, analysts say.POOR CONSUMERS MAY BE HIT “We think this will be extremely big,” said Gregor von Drabich-Waechter, whose Green Power East Africa Ltd has been running a biodiesel plant in Nairobi since last June.The United States, the world’s biggest maize producer, is already pressed to meet its domestic demand for biofuels.Nearly a quarter of its annual 230-million-tonne maize output goes to ethanol production.That is with a requirement of just four per cent ethanol content in gasoline – a quota set roughly to double in a few years.The European Union, among those leading the push for cleaner fuels, faces a similar challenge and already imports much of its bioethanol from Brazil.So, in the long run, this may make a turn to African inevitable.And African governments seem to be taking their cue from their Western counterparts.Take for instance Nigeria and South Africa – the continent’s biggest economies.Nigeria last year awarded two oil concessions to INC Resources after it committed US$4 billion to an ethanol project in the northern state of Jigawa, while South Africa has unveiled a R6 billion (US$828 million) plan that hopes to see biofuels contribute up to 75 per cent of its energy needs by 2013.For all its economic promise, though, some analysts feel the current commercial momentum threatens to overshadow food security, especially if it excludes Africa’s many poor peasant farmers.The best way to help people and secure food supplies is to teach more productive farming techniques and ensure they become more than mere subsistence farmers, but part of the biofuels boom, said Jeremy Wakeford of the University of Cape Town’s School of Economics.”I think if a biofuels industry is done in a labour intensive way, (with small-scale farmers) producing food as well as biofuel crops …it will have benefits,” Wakeford told Reuters.”We’re already seeing prices of food staples like maize increasing quite dramatically …This obviously impacts most on poor consumers who spend a chunk of their money on food.”In South Africa, prices of the staple maize have shot up since the beginning of the year on fears of a crop shortage and industry groups have asked the government to step in to curb food prices.Most-traded July white maize has climbed by around 40 per cent so far this year.Nampa-Reuters (Additional reporting by Daniel Wallis in Nairobi and Lagos bureau)It could also hurt poor consumers if the biofuel boom continues to push food prices higher.As alternative energy takes off, Africans hope to cash in on the high prices of the commodities used to produce these fuels.Already, investors have pledged billions of dollars for plants to produce bioethanol and biodiesel from crops like sugar, maize and soy in Africa.Ernst Janovsky, head of agriculture at First National Bank in Johannesburg, said the high rainfall belt between Angola, Zambia and Mozambique alone had the potential to rival the United States as a producer of maize used in bioethanol.”It’s almost as big as the size of the midwest of America.It has the same of type of potential and could actually outperform America,” he told Reuters.As is so often the case in Africa, however, there is one major obstacle to this kind of investment – infrastructure.In Angola, for one, the land in question is covered by dense forest.Roads and manufacturing capacity have been wrecked by two decades of civil war.Nevertheless, as the energy movement spreads and major agricultural powers find limits to their output, they may be forced to turn to Africa and be willing to spend money on setting up infrastructure, analysts say. POOR CONSUMERS MAY BE HIT “We think this will be extremely big,” said Gregor von Drabich-Waechter, whose Green Power East Africa Ltd has been running a biodiesel plant in Nairobi since last June.The United States, the world’s biggest maize producer, is already pressed to meet its domestic demand for biofuels.Nearly a quarter of its annual 230-million-tonne maize output goes to ethanol production.That is with a requirement of just four per cent ethanol content in gasoline – a quota set roughly to double in a few years.The European Union, among those leading the push for cleaner fuels, faces a similar challenge and already imports much of its bioethanol from Brazil.So, in the long run, this may make a turn to African inevitable.And African governments seem to be taking their cue from their Western counterparts.Take for instance Nigeria and South Africa – the continent’s biggest economies.Nigeria last year awarded two oil concessions to INC Resources after it committed US$4 billion to an ethanol project in the northern state of Jigawa, while South Africa has unveiled a R6 billion (US$828 million) plan that hopes to see biofuels contribute up to 75 per cent of its energy needs by 2013.For all its economic promise, though, some analysts feel the current commercial momentum threatens to overshadow food security, especially if it excludes Africa’s many poor peasant farmers.The best way to help people and secure food supplies is to teach more productive farming techniques and ensure they become more than mere subsistence farmers, but part of the biofuels boom, said Jeremy Wakeford of the University of Cape Town’s School of Economics.”I think if a biofuels industry is done in a labour intensive way, (with small-scale farmers) producing food as well as biofuel crops …it will have benefits,” Wakeford told Reuters.”We’re already seeing prices of food staples like maize increasing quite dramatically …This obviously impacts most on poor consumers who spend a chunk of their money on food.”In South Africa, prices of the staple maize have shot up since the beginning of the year on fears of a crop shortage and industry groups have asked the government to step in to curb food prices.Most-traded July white maize has climbed by around 40 per cent so far this year.Nampa-Reuters (Additional reporting by Daniel Wallis in Nairobi and Lagos bureau)