20091222
allafrica

Maputo — The Mozambican government on Tuesday announced that it has cancelled the contract signed in 2007 with the company Procana to produce ethanol from a proposed 30,000 hectare sugar plantation at Massingir, in the southern province of Gaza.

The initial investor in Procana was the London-based Central African Mining and Exploration Company (CAMEC). In August 2008, CAMEC set up Bioenergy Africa, which took 94 per cent of the shares in Procana. Bioenergy later changed its name to Sable Mining, and is registered in the Caribbean tax haven of the British Virgin Islands.

Procana should have involved investment of over 500 million US dollars, and was to have been the first major biofuels project to come on-stream in Mozambique. When the contract was signed, in 2007, the plans looked very attractive. The factory would produce sugar and ethanol, and the by-products would be used to produce fertiliser and generate electricity.

Construction of the factory was to begin in 2010 (after the plantation of at least 15,000 hectares of sugar cane), and production of 320 million litres of ethanol a year would have begun in 2012.

In fact, Procana did next to nothing with its 30,000 hectare concession. The government spokesperson, Deputy Education Minister Luis Covane, told reporters the contract was cancelled because Procana did not comply with its contractual obligations.

"In the two years since the provisional authorisation in 2007, only 800 hectares of land was cleared", said Covane. "The company made no use at all of the remaining 29,200 hectares".

Furthermore the activities of corporate social responsibility that Procana promised also did not happen. Procana promised to drill 10 boreholes to provide water for Massingir communities, but to date it has drilled just one. Procana promised 7,000 jobs, but in the two years since the contract was signed, only 150 people have been involved.

"This is an embarrassing situation, because what was promised is not happening", said Covane. "The jobs were not created and this shows that they are not investors who deserve the trust of the Mozambican government".

The government had cancelled the contract because the situation was unsustainable. "The government is not satisfied, and the investors are incapable of implementing the project", said Covane. "Now we have to look for other investors inside the country and abroad".

"The terms and conditions of the project authorisation, laid down in the investment contract, were not complied with, and nor were the deadlines fixed in the investment timetable", stressed Covane. "So the government is revoking, with immediate effect, the resolution that authorised the Procana project. This means the investment contract is cancelled, and any rights, duties or obligations binding the Mozambican state to the project or to the investors cease".

He warned that the government will cancel any investment contract when the investors fail to comply with provisions of the contract.

Procana was always controversial because of fears that a huge sugar plantation in Massingir would deprive peasant farmers in Gaza of water.

The government insisted that there was enough water in the Limpopo valley for both Procana and peasant food production, but farmers on the lower and middle Limpopo were unconvinced - particularly since the Massingir dam, located on the Elephants river, the main tributary of the Limpopo, suffered severe damage last year, and its full water storage capacity has been compromised.