Why Ghana is popular for investments in biofuels

By Emmanuel K. Dogbevi



Ghana has become a major centre of attraction for the cultivation of biofuels in Africa for a number of reasons, even though some of these reasons are hard to tell.

Currently, the country features prominently on the radar of alternative energy interests, especially in the cultivation of the non-food plant jatropha for the production of biofuels.

Ghana, Thailand and Uruguay have been identified by a study conducted by the University of Wisconsin-Madison Nelson Institute for Environmental Studies in 2007, as becoming the leading producer countries of the emerging renewable fuel known as biodiesel.

One of the factors that put Ghana among the leading league of nations with a high potential for biodiesel production is the fact that large volumes of the product can be produced at low cost.

Overall, the study ranked Malaysia, Thailand, Colombia, Uruguay and Ghana as the developing nations most likely to attract biodiesel investment, not only because of their strong agricultural industries, but also due to their relative safety and stability, lack of debt, among other economic factors.

Ghana is ranked high in Africa as a politically stable country, with a growing culture of democracy. Labour is also believed to be cheaper in Ghana than in most African countries, even though some investors disagree on that score.

One investor in the biofuels sector in Ghana argues that the cost of labour in Ghana is not cheap after all, because in his view, “the Ghanaian worker is not efficient as compared to the Chinese worker.”

While an employer might be paying a Ghanaian worker what is estimated to be low wages, the Ghanaian worker is proverbially known “to pretend to be working, while the employer pretends to be paying him.”

Indeed, this is not only a notion but a fact, because most employers in Ghana pay very low wages, irrespective of qualifications, experience or job description. Most Ghanaian workers are therefore, not motivated to give off their best. Substandard work performance has become a norm in Ghana.

Ironically, however, this belief that wages are low in Ghana also makes the country a choice destination for industries, especially the biofuels businesses.

There are companies from Brazil, Italy, Norway, Israel, China, Germany, The Netherlands, Belgium and India investing in the area in Ghana.

They are cultivating fields in the Volta, Brong Ahafo, Ashanti, Eastern and the Northern regions of Ghana. The main non-food crop that these companies are planting is jatropha.

Jatropha has oil-rich seeds that can be used to produce biodiesel.

While its supporters argue that it can be grown on semi-arid land and so poses less of a threat to food output than other biofuel feedstocks such as grains and vegetable oils, its opponents argue that investors are taking away productive agriculture land from poor local farmers for the purpose.

Currently, there is an ongoing debate, accusations and counter-accusations of land grabbing between NGOs, Action Aid and FoodSPAN on one hand and Rural Consult, a consultancy firm on biofuels on the other.

One of the companies, Agroils of Italy is currently cultivating jatropha on 10,000 hectares of land in Yeji in the Brong Ahafo region of Ghana for biofuels.

Israeli company, Galten has acquired 100,000 hectares of land and an Indian company is requesting for 50,000 hectares of land from the Ghana Investment Promotion Council (GIPC), to cultivate jatropha.

A company from the Netherlands has started a pilot project on 10 acres in the northern region and the Chinese are also doing a pilot project.

Gold Star Farms Ltd., is cultivating five million acres of land to plant jatropha for the production of biofuels for export.

A Norwegian company ScanFuel Ltd., has started operations outside Kumasi in the Ashanti region to produce biofuel. The company aims to start initial cultivation of jatropha seeds on 10,000 hectares of land.

The company which has a Ghanaian subsidiary, ScanFuel Ghana Ltd., says its Ghanaian unit has contracted about 400,000 hectares of land, with up to 60 percent reserved for biofuel production, “not less” than 30 percent for food production and the remainder for biodiversity buffer zones.

Another Norwegian company, Biofuels Africa Ltd., the only one among the about 20 biofuels companies cultivating jatropha to receive an Environmental Impact Assessment (EIA) permit from Ghana’s Environmental Protection Agency (EPA) which covers 23,762.45 hectares of its project area is operating in two locations.

Steinar Kolnes, CEO, Co-founder and director of BioFuel Africa Limited has told ghanabusinessnews.com by email that the company is currently operating in two locations in Ghana. The company has a 300 hectare test farm in Sogakope in the Volta region and a 10,696.32 hectares in Yendi in the Northern region.

According to him, the company has planted a total of 660 hectares of jatropha on its projects.

One of the complexities that might confront the growing biofuels industry in Ghana is the challenge of land acquisitions. There is a plurality of land tenure and management prevailing in Ghana.

There is the state/public system and the customary system. These systems have been poorly articulated over the years leading to increasing conflicts associated with land.

Public lands in Ghana fall into two main categories: land which has been compulsorily for a public purpose or in the public interest under the state lands Act 1962 (Act 125) or other relevant statute; and land which has been vested in the President, in trust for a landholding community under the Administration of Stool Lands Act, 1962 (Act 123.)

While government is working to streamline the land tenure system in the country, there are some advocating for a land bank system to make land acquisition smoother and beneficial to all.

Ghana is certainly attractive for investments, especially in the biofuels sector.

But the question some observers of the biofuel sector are asking is why is the country so enthusiastic about biofuels when it has found oil in commercial quantities?

Others are also asking why an agriculture country where only 16 per cent of arable land is used for food production would not rather concentrate on developing the food crop sector, but is diverting resources and labour in agric for the cultivation of non-food crops for biofuels.

Ghana goes biofuel despite evidence of effects on food prices

By Emmanuel K. Dogbevi

Ghana is set to begin biofuel production very soon, despite mounting evidence of biofuels' effects on the current global food crisis.

Two weeks ago, the government of Ghana gave approval for a Norwegian biofuels firm ScanFuel to start production early 2009. The company’s Chief Executive Officer (CEO), Thor Hesselberg said on Friday November 21, 2008 that the company is expected to produce 5000 barrels per day of crude oil equivalent by 2015.

According to reports the ScanFuel’s operation is located outside Kumasi in the Ashanti region. ScanFuel will initially cultivate Jatropha seeds, considered high oil-yielding on 10,000 hectares of land.

The company which has a Ghanaian subsidiary, ScanFuel Ghana Ltd says the Ghanaian unit has contracted about 400,000 hectares of land, with up to 60 percent reserved for biofuel production, "not less" than 30 percent for food production and the remainder for biodiversity buffer zones.

The development is curious, particularly so, when it is happening in a developing and agriculture based country like Ghana.

And that is notwithstanding the fact that it has now been established that the production of biofuel is a major contributor to the current worsening global food crisis.

Indeed, the use of productive agriculture land for the production of crops for ethanol has been identified as a factor that is pushing world food prices up to 75%.

Other factors identified for the crisis include growing populations, shortfall in production, high demand for animal feed and consumption patterns. Climate change and rainfall patterns have also been blamed.

Sir James Wolfensohn, former President of the World Bank has identified “a growing middle class in India and China” is one of the factors that have contributed to the food crisis.

This emerging middle class he said demand more food and more resources which are all driving food and fuel prices up.

The middle class in India and China he said is expected to grow to about 1.5 billion in the next 15 years.

The Guardian newspaper in London in July 2008 published a leaked World Bank report which says biofuels have forced global food prices up by 75% - far more than previously estimated. Indeed, the report is a sharp contradiction of the US government’s claims that biofuel contributes less than 3% to the food crisis.

According to the Guardian, the unpublished report, authored by Don Mitchell, a senior economist at the World Bank, is a detailed, month-by-month analysis of the surge in food prices, and allows much closer examination of the link between biofuels and food supply. There are even suspicions that the report which was completed in April has not yet being published to avoid embarrassing the US government.

The Guardian report says since April, all petrol and diesel in Britain has had to include 2.5% from biofuels. The EU has been considering raising that target to 10% by 2020, but is faced with mounting evidence that that will only push food prices higher.

Early in May this year, the UN’s top adviser on food security, Olivier de Schutter made a scathing criticism against the investments that are being made in biofuel by some countries. In an interview with the BBC, he described the investment in biofuel as “irresponsible” and a “crime against humanity.” He went ahead to call for an immediate freeze of the policy and asked for restrain on investors whose speculation he says is driving food prices higher.

Ghana has not been left out in the biofuel scramble. The country is eagerly investing in biofuel with the help of Brazil, the world’s leading biofuel producing country.

While in Ghana for the United Nations Conference on Trade and Development (UNCTAD XII) meeting in April, 2008, Brazilian President Luiz Inacio Lula da Silva signed an agreement with the Ghana government to grow sugarcane for bio-ethanol in Ghana. During the signing ceremony, da Silva said, "in Ghana we are developing a project that will result in growing 27,000 hectares (of sugarcane) for the production of 150 million litres of ethanol per year that are destined for the Swedish market."

President da Silva who is encouraging farmers in his country to grow biofuels including sugarcane, castor beans and corn, instead of traditional food crops, says rising fuel prices and not biofuels are responsible for the high cost of food.

The World Bank report meanwhile pointed out that biofuels derived from sugarcane, which Brazil specializes in, have not had any dramatic impact on food prices.

At a World Bank Dialogue Series recently in Accra, Ghana, Arnold McIntyre of the IMF said countries are turning to biofuels in response to current global fuel crisis, adding that by 2005, the US overtook Brazil as the largest producer of ethanol. In the EU, he said, Germany is the largest producer of biofuel.

He moreover said, biofuel production in the US which is corn based, is less cost effective than the sugarcane based in Brazil. He also called for policy change to address biofuel production and suggested that it is necessary to do more research in second generation biofuel production.

Ghana, a developing country, which has about 70% of its population in the rural areas involved in agriculture, ironically imports over 40% of its food needs.

Another interesting angle to Ghana’s agriculture dilemma is the fact that while agriculture contributes nearly 40% to the country’s GDP, only 10% of the national budget is allocated to the sector.

Ghana has the capability to lead a ‘green revolution’ in Africa, in this critical moment, but sadly not much is being done to shore up the agriculture sector. Only about 16% of Ghana’s arable land is used for farming.

And the prices of food have more than doubled in Ghana since the crisis.

Ghanaian food crop farmers need support in the forms of investments in inputs, fertilizer, training and access to markets. These could potentially boost agriculture in the country and contribute to job creation and economic growth.

This unrestrained interest in biofuels should be viewed against the background of Ghana’s struggling agriculture industry, or else the country could be heading to an unknown destination, which consequences could be socially and economically painful.