A Swedish alternative energy firm is pulling out of Tanzania, abandoning a $300 million investment due to the world financial crisis.
Swedish Ethanol Chemistry AB (Sekab) is terminating its investment in Tanzania even after injecting an estimated $250 million in equity and debt to produce around 100 million litres of ethanol a year from 2012 using the output of an immense cane plantation in Bagamoyo.
Investigation by The EastAfrican have confirmed that Sekab, which leased 40,000 hectares of agricultural land from the Prisons Department at Razaba farm in Bagamoyo, was to start production of ethanol for heavy and small motor vehicles around the world next year.
The investigation has further revealed that more than 70,000 direct jobs are on the line while another 210,000 people who were to be impacted by the farm and factory commercial cluster development will also lose out.
Kristina Nilsson, communication manager of Sekab, said from Omskoldsvik, Sweden, last week that its projects in Africa, including in Tanzania, will be sold or terminated while its operations in Europe will be sold.
She said that Sekab is in discussions with several interested external parties.
“The firm is terminating its investment in Tanzania in view of the current market situation,” she said.
Sekab BioEnergy Tanzania Ltd was formed in 2007 as a joint venture between the government of Tanzania and Swedish Ethanol Chemistry, BioAlcohol Fuel Foundation and the Community Finance Company to kick-start the development of a long term and sustainable bio-energy platform in Tanzania.
The firm was to be the first regional role-model cluster, putting about 400,000 hectares under cultivation by rolling out a number of role-model projects in Bagamoyo district.
Jan-Olof Backman, chairman of Sekab’s board of directors, said in Sweden that the company will focus its resources on its profitable core business of green chemicals, diesel replacement fuel and a cellulose ethanol research programme.
He said the organisation will be “adjusted” to these new conditions, which means halving the staff to about 80 in Sweden alone, quite apart from Tanzania and Mozambique. Last week, the Swedish and Norwegian governments granted Tanzania a total of $4 million to develop a sustainable biofuel industry in Tanzania.
Erik Korsgren, head of development co-operation at the Swedish embassy in Tanzania, said in Dar es Salaam last week that the project will also look into instruments to facilitate the domestic use of biofuel to complement the use of biomass and fossil fuels, thus creating a positive environmental impact
“The specific development objective is to contribute to a well-regulated, sustainable biofuel industry,” he said.
Shelving of the investment comes a month after Tanzania secured $3 million from Sweden and Norway to develop a regulatory framework for biofuel production and strengthen the National Biofuels Task Force.
Jon Lomøy, ambassador of Norway, said last week that the formulation of a national strategy with clear regulations would ensure sustainable development of the fast growing industrial sector in the country.
“The aim of the grant is to contribute to energy security, reduce dependency on oil import and environment protection,” he said.
Sekab also invested in a 20,000-hectare project in Rufiji and Kilwa districts of Tanzania.
Under the investment, construction of a factory and establishment of a plantation were earmarked to continue during 2009, with production starting by mid 2010.
The programme would have established Tanzania — and neighbouring Mozambique — as a leader in the biofuels sector in East Africa, attracting education, research and industrial development.
Copyright 2009 The East African
