The Sunday Mail
Kuda Bwititi and Faith Mhandu
Green Fuel, the joint venture company running the Chisumbanje Ethanol Plant in Chipinge, has come under increasing pressure to align its shareholding structure with the country’s indigenisation laws following indications that the State invested a larger stake in the project.
Government — through the Agriculture and Rural Development Authority (Arda) — invested US$36,7 million in land and immovable assets while the investor, Macdom Investments, injected capital.
Macdom, owned by multi-millionaire Mr Conrad “Billy” Rautenbach, holds a 90 percent stake in Green Fuel while Government owns the remainder.
Indications that the project value stands far below the US$600 million previously stated has led to vigorous attempts to ensure compliance with indigenisation regulations.
Negotiations among the concerned parties have already opened, although differences in approach on the shareholding determinants have emerged at the centre of the discussions.
Government says shareholding should be based on ceding equity while the investor insists on asset valuation. In terms of the indigenisation law, defiant companies risk having their licences revoked. It would, however, not be in the interest of Zimbabwe to shut down the plant as it employs thousands and has vast potential to cut huge fuel import costs.
Youth, Indigenisation and Economic Empowerment Minister Francis Nhema told The Sunday Mail that authorities have ordered Green Fuel to comply with the law.
He said the law was clear that Government should retain 51 percent shareholding, especially considering the land value of an area such as Chisumbanje.
“We have taken a position that they should comply with the law. Currently, their shareholding is not compliant, so we have said they should transfer 51 percent shareholding to Arda in line with the law.
“The law says if they do not comply, the relevant ministry, which is the Ministry of Energy (and Power Development) has the right to revoke the company’s licence.
“The law is very clear. An area such as Chisumbanje is a precious resource because it is not only the land; there are also several resources that were on that land such as forestry, animals, fisheries and others. All of these made way for the ethanol project.
“So, it is fair that in line with the indigenisation law Government retains 51 percent.
“It is different from a project such as manufacturing where the land value is lower.” Energy and Power Development Minister Dzikamai Mavhaire said the original arrangement compels Green Fuel to cede a stake.
He said negotiations between Government and the company would continue.
“On the basis of a written assurance from Green Fuel that they were agreeable to the setting of a 51-49 joint venture with Government, a mandatory blending licence was issued by Government. This formal undertaking by Green Fuel constitutes the basis for the current and future relationship between Green Fuel and Government,” said Minister Mavhaire
“The challenge that has arisen is how to realise the 51-49 equity shareholding in the joint venture.
“Whereas Government is insistent on equity cede, Green Fuel prefers a progressive process based on asset evaluation.”
Appearing before the National Assembly portfolio committee on youth, indigenisation and economic empowerment a fortnight ago, Green Fuel officials said Government had to pay commercial value for the shares.
Green Fuel general manager Mr Graeme Smith said: “Macdom and Green Fuel agreed to enter into a joint venture with the Government of Zimbabwe on commercial terms so as not to prejudice the shareholders and put the financiers at risk. This commitment has been communicated to the Government through the Ministry of Agriculture, Mechanisation and Irrigation Development.
“In line with such directives, Green Fuel, Macdom and Arda — who represent the Government of Zimbabwe — entered into a joint venture based on commercial value of contribution brought to the project to date.
“At present and in consultation with the Minister of Agriculture (Mechanisation and Irrigation Development), the parties are exploring various commercial and substantive options to increase Arda shareholding in the joint venture.
Depending on the commercial value of these options to the project, Arda may attain 51 percent.”