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Africa Seen as Potential Leader in Biofuel Production

Thursday, December 14, 2006

NAIROBI, Kenya -- For a number of reasons, including an agricultural sector that enjoys relatively low land and labor costs, many see sub-Saharan Africa as well suited to pioneer the development of biofuel as an alternative energy source for the continent and the world.

Development analysts say it may be decades before biofuel becomes a significant alternative source of energy for Africa, but significant production could mean a boost for sub-Saharan economies by both providing new income and reducing the continent's reliance on imported fossil fuels.

For many countries in Africa, oil makes up a significant portion of gross imports, a drain on their economies. In Kenya, for example, oil imports are equal to the value of its annual trade deficit. Countries like Namibia, Ghana, and Zambia are in a similar situation.

Biofuel could change this equation, say its advocates.

"In the long run, this money will stay in the country and will end up in the hands of the growers and manufacturers," said Gregor von Drabich-Waechter of Green Power East Africa Ltd., a biodiesel producer in Kenya.

"Energy is Africa's and the world biggest debt burden. . . . Once we are out of this cycle . . . we are in a better position," said Edward Okello of Biodiesel Technologies, another Kenyan company specializing in automotive biodiesel.
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Biofuel could not completely replace petroleum fuels, says von Drabich-Waechter, but could offer the continent an alternative that, in addition to being environmentally friendly, would improve farmers' lives.

Proponents agree Africa is well suited for biofuel production because of its vast uncultivated land and low-cost agriculture.

Fifty-five percent of the African population ekes out a living from agriculture. Agriculture contributes 40 percent of the continent's gross product and 60 percent of its export income. However, the agriculture sector so far has not succeeded in transforming the lives of African farmers.

For one reason, African produce is usually in unprocessed form, which commands lower world market prices. In addition, African agricultural productivity is low, averaging one ton of produce per hectare per year, in comparison to three and five tons in Asia and Western Europe, respectively.

According to the African Union's New Partnership for Africa's Development, Africa's agriculture sector would require an investment of $251 billion to begin transforming living standards on the continent.

Actis, a British investment fund operating in emerging markets, is keen to be part of the solution. The company recently announced a $1 million African agriculture fund, most of which will be invested in the production of biofuel.

Actis Partner Michael Turner confirmed that the project is targeting a trend toward increased global biofuel consumption, driven by initiatives such as the European Union's goal to switch 20 percent of its fuel consumption to biofuel by 2020.

"This is a great opportunity," said Turner. "The EU has no vast lands to grow the required crops from which this fuel will be extracted. We believe Africa has the potential to be a major producer."

Brazil's success with biofuel production could be a model for Africa. According to a United Nations Development Programme study, ethanol production in Brazil has helped reverse migration to large urban areas and increased the quality of life for rural Brazilians.

While many factors work in favor of biofuel production in Africa, some emphasize that there is a need to ensure the continent's rural population benefits from the nascent industry.

Multinational corporations are already investing in Africa's land and, with their ability to influence policy, individual farmers risk being left out of the production process, Okello says.

Meanwhile, the development of the oil industry in Africa continues apace. Nigeria, Algeria, Libya, Angola and Egypt are Africa's top oil producers, accounting for 80 percent of the continent's production, according to the Africa Development Bank. Joining them are Sudan, Uganda, Equatorial Guinea, Gabon, Chad, and Cameroon, among others, who have commercially viable deposits.

But while some African countries, like Libya, will enjoy an oil boom for the next 70 years, others, like Angola, have less than 20 years worth of reserves.

Catholic Relief Services (CRS), a humanitarian relief organization, estimates that sub-Saharan African governments will receive more than $200 billion in oil revenues over the next decade. But historically, petrodollars have not helped developing countries reduce poverty and oil revenues have actually exacerbated the problem in many cases, the group warns.

Most of Africa's oil producing nations have failed to diversify their economies or prepare for a post-oil future, and they are characteristically authoritarian regimes.

The big question is whether biofuel could help change this.

Agricultural economist Peter Kegode believes so. Because African farmers will be key raw material suppliers in a biofuel industry, and because most of the continent's farmers are small scale, the industry's benefits will be widespread, he said.

"Farmers will also have an option of using their harvest to boost food security or sell to energy producers, whichever pays better," he said.

What's more, because the sector will have wide participation, corrupt governments won't be able to misappropriate revenues, as they have historical done with oil proceeds.

"Because the politicians will not directly access this money to carry on their authoritarian adventures, you can expect [demands] for better governance from economically empowered citizens," said Rachael Achieng, a Nairobi-based political scientist.

Steve Mbogo is an investigative journalist based in Nairobi, Kenya.

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