Background to the Land
Green Fuel’s sugar cane is grown on two estates, Chisumbanje and Middle Sabi, both of which are situated in Chipinge in the South-Eastern area of Zimbabwe.
In 1953, the Ministry of Agriculture established the Chisumbanje Experiment Station for the purpose of evaluating the agricultural production potential of the soils under intensive irrigation within the Chisumbanje area. In 1964, the Research Station confirmed a potential 40,000 hectares of irrigable soils and, thereafter, the Chisumbanje Development Company (Pvt) Ltd was registered in 1966 to promote the mandate of irrigation and development on the 40,000 hectares.
In 1979 an American based consultant company, E.L Bateman Inc, was appointed to undertake a study for the development of a 15,000 hectare sugarcane estate. The study was finalised, however the proposed project was halted by the commencement of the war.
After the liberation war (1981-1982) the Ministry of Agriculture established the Agricultural and Rural Development Authority, (ARDA), with the primary mandate to plan, coordinate, implement, promote and assist with agricultural development in Zimbabwe. ARDA was given ownership over a number of properties around Zimbabwe and entered into lease agreements with the Local Rural District Councils over others and began to develop and farm the land in line with its mandate. These properties included Chisumbanje, which ARDA has leased from the Rural District Council since the 1980s, and Middle Sabi, which is owned by ARDA. Thanks to this fantastic initiative, by 1988, ARDA farmers were producing 10% of the country’s wheat and 25% of its cotton.
Keen to exploit the agricultural potential in Zimbabwe, the Government at the time instructed ARDA to commission various studies in the Greater Chisumbanje Area, not only for agricultural purposes but also for the establishment of an ethanol plant.
The most comprehensive study was carried out by Atkins Consulting Engineers (UK) in 1983, which was accepted, at the time, as the blueprint for future expansion. The Report estimated that an area of approximately 35,700 hectares would be available for agricultural purposes, after making allowances for settlement villages and infrastructure. This area was surveyed and pegged however, due to Zimbabwe’s hyper inflationary environment, ARDA fell into a long period of dormancy and nothing was done with the land.
In 2008, ARDA embarked on a turnaround strategy and drive to find investment partners to rehabilitate their properties and pursue a vibrant social responsibility agenda for the benefit of the rural population, which to date has been successful.
As a result, ARDA entered into Build, Operate and Transfer arrangements (BOT) with private investors Macdom Investments (Pvt) Limited and Rating Investments (Pvt) Limited on the Chisumbanje and Middle Sabi Estates.
Initially wheat was planted on the basis that new hybrids and technology, together with an improved irrigation system, could make this a viable project. Unfortunately the environment was not conducive to wheat agriculture and, as the area had historically shown, did not produce cost effective wheat farming. For example, only 4 tons per hectare could be achieved as opposed to a location such as Mazoe where 8 tons per hectare were harvested at the same costs. In addition, a solution to the extreme power outages experienced in the area was needed in order to undertake the necessary irrigation required to grow any crop in the area.
After much deliberation, the decision to turn to sugarcane agriculture was made jointly with ARDA. ARDA agreed to produce food crops on their other estates, leaving the Lowveld free to produce sugarcane – which was traditionally grown in this area for many years.
The introduction of sugarcane and highly mechanized farming techniques resulted in 3,500 hectares under cultivation in Middle Sabi (with a target of 9,500 hectares) and approximately 6,000 hectares in Chisumbanje (with a target of 36,000 hectares provided that investment is made available). Within an 18 month period the Macdom (Chisumbanje) and Rating (Middle Sabi) Estates were transformed into successful sugarcane estates. As a result, significant investment was made into the infrastructure of the estates, including pump houses, roads and buildings.
As such, all land that the Chisumbanje Estate occupies (currently around 9,375 hectares) falls within and under the ambit of the BOT held with ARDA and within the 40,000 hectare concession that is under a valid lease agreement between ARDA and the Rural District Council.
In response to the initial success of sugarcane cropping on the Estates, Green Fuel (Pvt) Ltd, another wholly owned Zimbabwean company, was subsequently set up in early 2010 to do away with the necessity and cost of transporting the sugar cane to Triangle/Hippo Valley (over 80km away from the Estates) for processing and thereby providing a viable market for the sugar cane grown by Rating and Macdom.
Rating and Macdom secured off-take agreements with Green Fuel (Pvt) Limited and this offered the investors and ARDA a secure market for the sugar cane together with ensuring a constant power supply for irrigation. Green Fuel started purchasing sugarcane from Ratings and Macdom in 2011, when the first ethanol was manufactured by the factory.
In 2012, the Government of Zimbabwe directed ARDA to convert the Chisumbanje BOT into a Joint Venture, and to include Green Fuel within the Joint Venture. In line with this directive, Green Fuel, Macdom and ARDA (who represent the Government of Zimbabwe) entered into a Joint Venture Agreement based upon the initial commercial value of the contributions brought to the project to date.