Report

SITUATION ANALYSIS OF THE BIOFUELS INDUSTRY IN ZAMBIA

By

Frank M. Kayula

(Private Consultant- fmkayula@yahoo.co.uk)

Civil Society Biofuels Forum Zambia 250 Zambezi Rd, Box 35624, Lusaka Biofuelsforumzambia@zambia.co.zm www.biofuelsforumzambia.com

March 2010 i

ACKNOWLEDGEMENTS
I would like to thank the Civil Society Biofuels of Zambia, who contracted me though the Zambia Land Alliance to undertake this research study on the Assessment of the Biofuels Industry in Zambia.

Many thanks are also rendered to Mr. Richard Mwanza and Mr. Gear M. Kajoba for the initial contribution to the writing of the study report. I am grateful also to Mr. Munguzwe Hichaambwa for the data entry and tabulations.

Other thanks go to the different stakeholders in government, Private sector and Civil Society for responding to requests for information relating to the Biofuels Industry in Zambia.

Gratitude is also given to OXFAM GB for coordinating and Finnish Embassy for funding the study.

FM Kayula

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EXECUTIVE SUMMARY
The past decade has seen the biofuel industry raise to greater recognition as a cardinal part of the energy sector in Zambia. Various companies, civil societies and donor organizations have taken different roles and interest in the energy sector to promote bio energy and improved rural livelihoods. This report is a synthesis of data collected and assessed for the status of the Biofuels Industry in Zambia basing on the study conducted in seven districts.

The overall objective of the study was to ascertain the socio-economic impact of the biofuel promotions on the small scale farmers. The study was divided into six main areas of concern as highlighted below:i. ii. To collect and analyse general Information on the biofuels industry in Zambia To establish interventions by government and other stakeholders in the biofuels industry iii. To establish the nature of biofuels out grower schemes with respect to production, processing, marketing, extension services, contracts, organization of the scheme and of the biofuel feedstock. iv. To ascertain the impact of biofuels industry on food security and land use, land rights and land tenure. v. To find out the impact and potential threats of the biofuels industry on the environment and bio diversity vi. To determine gender opportunities and challenges in small holder biofuels production

Data was collected and analysed over a period of six months from September 2009 to March 2010. Districts covered included Chinsali and Mungwi in Northern Province; Mkushi and Mumbwa in Central Province; and Choma, Kalomo and Monze in southern Province. The discussion alludes to findings in other research studies done with the

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support of SNV and HIVOS in Kapiri Mposhi, Solwezi, Kabompo and Zambezi to give a wider perspective of the status of the biofuel industry in Zambia.

The key findings showed that the Zambian bio fuels industry was still in its infancy stages; it was just emerging and characterized by experimentation with feedstock crops and biofuel production models. There were two competing bio fuel production systems, namely biodiesel and bio-ethanol. In Zambia, the proposed feedstock for bio ethanol were sugarcane and sweet sorghum, while palm oil, soy beans and Jatropha were suggested and being used for biodiesel. There was a strong drive to promoting

Jatropha as the main feed stock crop for biodiesel.

The findings further showed that government and other stakeholders had put in place strategic guidelines for engaging in biofuels production. However the guidelines did not seem to be adequate enough to protect the wellbeing of the vulnerable small scale farmers from large companies out to make profit from the industry. In this vein, while stakeholders like the Biofuels Association of Zambia (BAZ) and private investors were advocating that government provides incentives, investment, and policy guidelines to establish the industry, civil society on the other hand was advocating for a pro poor biofuels industry, through the Civil Society for Biofuels Forum (CSBF).

The study also reviewed the controversies that have emerged globally about the impacts of biofuel production on food security and the environment. The analysis concluded that though the evidence on the ground did not show any alienation of significant tracts of land from food crops to jatropha, caution should be taken to avoid over-emphasizing jatropha production, which does not give the small scale farmers comparatively better resilience against food shortages, at the expense of food and cash crops like maize, soyabeans, cotton and tobacco (Freim, 2008:64).

In Zambia, this and other studies have shown that the capacity to produce biofuel does exist. At the time of the study, limited quantities of bio-ethanol were being produced from molasses, but not in sufficient quantities to allow for blending with petrol. In order iv

to meet local demand, it was estimated that by 2010, 428 million litres of bio-ethanol would be required in order to achieve a 20 per cent rate of blending with petrol.

The survey gathered data from eight (8) processing companies operating in the study areas. This was besides the other companies that have produced some biofuel for use in the greater city of Lusaka and other districts. It was observed that over 87% of the companies interviewed in the study areas were local and small while about 12.5 % where foreign and large companies. Unlike big companies that were affected by the credit crunch and reduction in fossil fuel prices on the global market to the extent that a number of them retreated from rural areas, small companies seemed firm and wishing to expand their outreach programmes.

With respect to land tenure, some of the interviewed companies had their own land on which they grew jatropha. However, much of the jatropha was grown on small scale farmers land. This had implications regarding the allocation of land to biofuel crops as opposed to food crops. Although the aforesaid had not occurred in the study area, Kayula and Chitah (2009) did find out that size of land used for biofuels is indirectly related to size of land assigned to food crops as the hectarage increases beyond one. At five hectares, the relationship is inversely tied with land for food crops taking a positive steep up unless were jatropha is grown as sole crop for biofuels.

With respect to the accessing or acquisition of land for biofuel crop production, some companies stated that they got land from the local chiefs, or bought it from other commercial farmers. Some reported that they rented from smallholder farmers or from the community. The buying and renting of land suggested that a rural land market could be emerging. However, the companies had to meet the challenges that hindered further expansion of jatropha production including:inadequate finance; low support from

stakeholders; no market and supply of raw materials; and limited infrastructure.

In terms of biofuel production levels, jatropha was the main biofuel crop and its byproducts produced by the companies. Interviews with the small-scale/smallholder v

farmers revealed that more than 85% small scale farmers interviewed were contracted for less than 2 ha of jatropha. Some of the smallholders indicated that they would consider expanding their jatropha hectarage for various reasons including anticipated increased revenue from the jatropha schemes.

Although the majority of the contracts were for a period of less than 5 years (34.1%); the second bigger chunk (22.5%) had contracts of more than 30 years. These contracts were either written (85.4%) or verbal (14.6%) and the majority (72.0%) of the smallholders were not happy with the nature of the contracts, because contracting companies made no follow up support as per contract and because of the low prices offered for the jatropha grain.

On average, smallholders had not put much land under biofuel crops. Most (85%) of the farmers put up less than 1 ha of jatropha. The fears of farmers converting land for food production to jatropha production did not come out during the study. Rather possibilities to give up jatropha production were more likely due to low returns from jatropha. It could be argued that farmers were careful to avoid putting land that is required for food production to biofuel crops, as strategy to ensure food security.

Although jatropha was said to be labour demanding, 72.9% of those interviewed were of the view that Jatropha production was in fact not labour demanding and that it did not have a negative impact on child labour. In this regard, 70.7% were of the view that biofuel production offered a positive impact on women in terms of income generation.

It was also ascertained that small scale farmers faced various constraints in jatropha production including the following:- Inadequate labour, particularly when it competes with other crops; lack of inputs; inadequate information/knowledge; poor marketing; lack of appropriate technology, and lack of land. This partly explained why the production among small holders was very low (60 Kg/ha) when compared to the potential of about 2-3 mt/ha in Zambia or up to 8 mt/ha elsewhere (Benge, 2008:12).

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A total of 99.2% of the farmers stated that they were not involved in biofuel processing. Fifty percent of the farmers that processed the jatropha into oil sold the oil, while the other 50% used it at home. It was found important to empower small scale farmers to process the jatropha into oil not only to add value and thereby make extra more income, but also to provide access to cheaper and environmentally friendly energy for lighting and soap locally.

In terms of perceived environmental impact of biofuel production, 61.5% of the farmers stated that jatropha production contributed to loss of and /or variation to biodiversity. However, further probing revealed that there hasnt been such changes in the biodiversity. It is possible to lose biodiversity with clearance of large tracts of land for biofuel oil plants. Similarly, 93.8% feared that jatropha growing would lead to pollution of ground and surface water; nutrient depletion, domination of indigenous plants; and deforestation (11.0%). However, like any other crop, jatropha requires replenishment of soil fertility for it to grow well over a longer period as it mines for nutrients to feed itself to grow.

It is concluded that jatropha industry is relatively new in Zambia. Although guidelines have been formulated to regulate the industry, these need to be reworked to include protection for the small scale farmers engaged in jatropha production under out grower schemes. Furthermore, business models that increase real income among small scale farmers while allowing for the large companies and emerging entrepreneurs to make their profits should be formulated. These models should consider availing and access to processing by small scale farmers.

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ACRONYMS
BAZ CARB CFU CSBF EIA ERB GHG GRZ IEA ILUC IPCC LCA MACO MDG MEWD NGO ZDA ZLA PPO PPP PS RFS SNV SPSS UN WTW ZNFU The Biofuels Association of Zambia California Air Resources Board Commercial Farmers Union Civil Society for Biofuels forum Environmental Impact Assessment Energy Regulation Board Green House Gas Government of the Republic of Zambia International Energy Agency Indirect Land Use Change Inter Government Panel on Climate Change Life Cycle analysis Ministry of Agriculture and Cooperatives Millennium Development Goals Ministry of Energy and Water Development Non Governmental Organization Zambia Development Agency. Zambia Land Alliance Pure Plant Oil Public Private Partnership Permanent Secretary Renewable Fuel Standard Netherlands Development Organization Special Package for Social Science The United Nations Well to Wheel Zambia National Farmers Union viii

TABLE OF CONTENTS
CONTENTS ACKNOWLEDGEMENTS ............................................................................................... ii EXECUTIVE SUMMARY ............................................................................................... iii ACRONYMS ................................................................................................................ viii TABLE OF CONTENTS................................................................................................. ix CHAPTER 1 .................................................................................................................... 1 1.0 INTRODUCTION ...................................................................................................... 1 1.1 BACKGROUND......................................................................................................... 1 1.2 OBJECTIVES OF THE ANALYSIS ........................................................................... 3 1.2.1 Overall Objective .................................................................................................... 3 1.2.2 Specific Objectives ................................................................................................. 3 1.3 METHODOLOGY ...................................................................................................... 3 1.3.1Study Tools and Methods ........................................................................................ 3 1.3.2 Target Area ............................................................................................................ 4 1.3.3 Target Group .......................................................................................................... 4 1.3.4 Sample Size ........................................................................................................... 4 1.3.4 Sampling Methods.................................................................................................. 5 1.3.5 Data Validation and Entry ....................................................................................... 5 1.4 CHALLENGES ENCOUNTERED DURING THE ANALYSIS .................................... 5 1.4.1 Unwilling Respondents. .......................................................................................... 6 1.4.2 Obsolete Information .............................................................................................. 6 CHAPTER TWO.............................................................................................................. 7 2.0 LITERATURE REVIEW: OVERVIEW OF THE BIOFUEL INDUSTRY ................... 7 2.1 BACKGROUND INFORMATION............................................................................... 7 2.1.1 Definition ................................................................................................................ 7 2.1.2 Classification of Biofuel .......................................................................................... 7 2.1.3 Feed stock .............................................................................................................. 8 2.2 GLOBAL SPREAD .................................................................................................... 8 ix

2.2.1 Global Trends ......................................................................................................... 8 2.2.2 Biofuel Potential ..................................................................................................... 9 2.2.3 Policies ................................................................................................................... 9 2.3 ISSUES WITH BIOFUELS ...................................................................................... 10 2.3.1Biofuels on Socio-economic Development ............................................................ 10 2.3.2 Environmental Impact and Biodiversity ................................................................ 11 2.3.2 Impact on Land and Land Use ............................................................................. 11 2.3.3 Impact on Women and Children ........................................................................... 12 2.3.4 Impact on Out grower Schemes and Small Scale Farmer Contracts ................... 12 CHAPTER THREE ........................................................................................................ 13 3.0 FINDINGS ON biofuel PROCESSING COMPANIES OPERATING IN ZAMBIA ... 13 3.1 NATURE OF COMPANIES ..................................................................................... 13 3.1.1 Reasons for Engaging in Jatropha Production ..................................................... 14 3.1.2 Common Biofuel Feedstock ................................................................................. 14 3.2 FEEDSTOCK PRODUCTION ARRANGEMENTS .................................................. 15 3.3 SERVICES PROVIDED .......................................................................................... 16 3.3 PERFORMANCE OF BIOFUEL BUSINESSES ...................................................... 17 3.3.1 Biofuel Production Levels ..................................................................................... 18 3.3.2 Benefits of Rural People from Jatropha Programmes .......................................... 21 3.3.3 Impact on Land Use and Tenure .......................................................................... 21 3.4 NATURE AND LEGAL IMPLICATIONS OF CONTRACTS ..................................... 22 3.5 CHALLENGES FACED BY INSTITUTIONS PROMOTING JATROPHA ................ 23 CHAPTER FOUR .......................................................................................................... 25 4.0 INTERVENTION BY GOVERNMENT AND OTHER STAKEHOLDERS IN BIOFUEL INDUSTRY .................................................................................................................... 25 4.1 NATIONAL POLICIES, GUIDELINES AND LEGISLATIVE FRAMEWORK ........... 25 4.2 INSTITUTIONAL LANDSCAPE AND SUPPORT SERVICES PROVIDERS ........... 27 4.3 PROFILES OF SOME BIOFUEL PROJECTS THAT HAVE TAKEN OFF ............... 28 4.4 MARKETING STRATEGIES FOR BIOFUELS ........................................................ 30 CHAPTER FIVE ............................................................................................................ 31 5.0 FINDINGS ON THE OUT-GROWER SCHEMES .................................................... 31 x

5.1 OUT GROWER SCHEMES .................................................................................... 31 5.2 PRODUCTION ........................................................................................................ 32 5.2.1 Biofuel Crop and Varieties Being Grown ............................................................ 32 5.2.2 Period of Growing the Crop ................................................................................ 32 5.2.3 Companies Contracting Farmers and Types of Contracts .................................. 33 5.2.4 Hectares Contracted and Plants Grown ............................................................. 34 5.2.5 Uses of Jatropha Seed ....................................................................................... 35 5.2.6 Expansion Plans ................................................................................................. 35 5.2.7 Benefits of Biofuel Production .............................................................................. 37 5.2.8 Problems Encountered ....................................................................................... 38 5.3 NATURE AND LEGAL IMPLICATION OF CONTRACTS ................................... 38

5.3.1 Length of Contracts with Companies .................................................................. 38 5.3.2 Legal Entitlements in the Contract ...................................................................... 39 5.4 5.5 PATTERN OF GROWING FEED STOCK .......................................................... 40 POTENTIAL CROPS FOR BIOFUELS ............................................................... 41

5.6 PRODUCTION CONSTRAINTS.............................................................................. 42 5.7 CAUSES FOR INADEQUATE PROCESSING AMONG SMALE SCALE FARMERS44 5.8 FARMERS INVOLVEMENT IN DECESION MAKING ............................................ 45 CHAPTER SIX .............................................................................................................. 48 6.0 IMPACT OF BIOFUEL INDUSTRY ON LAND RIGHTS ......................................... 48 6.1 6.3 6.4 CURRENT ZAMBIA LAND TENURE SYSTEM .................................................. 48 FARMERS DENIED THEIR LAND RIGHTS ....................................................... 49 CRITERIA FOR ALLOCATING LAND FOR BIOFUELS ..................................... 49

CHAPTER SEVEN ........................................................................................................ 51 7.0 IMPACT OF BIOFUEL ON ENVIRONMENT AND SOCIAL ECONOMY ............. 51 7.1 7.2 IMPACT OF BIOFUEL CROPS ON ENVIRONMENTS AND BIODIVERSITY ... 51 GENDER OPPORTUNITIES AND CHALLENGES IN SMALL SCLAE BIOFUEL

PRODUCTION .............................................................................................................. 52 7.2.1 Impact on Women and Child Labour .................................................................. 52 7.3 7.4 OWNERSHIP OF BIOFUEL PRODUCTION ...................................................... 52 GENDER ROLES IN BIOFUEL PRODUCTION ................................................. 53 xi

7.5

BENEFITS OF BIOFUEL PRODUCTION ........................................................... 53

CHAPTER EIGHT ......................................................................................................... 54 8.0 CONCLUSION AND RECOMMENDATIONS ......................................................... 54 8.1 8.2 CONCLUSIONS ................................................................................................. 54 RECOMMENDATIONS ...................................................................................... 56

REFERENCES .............................................................................................................. 59 APPENDIX 1: LIST OF ENUMERATORS .................................................................... 63 APPENDIX 2: STAKEHOLDERS INTERVIEWED ...................................................... 64 APPENDIX 3: GM FOR JATROPHA ............................................................................ 65

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LIST OF TABLES Table 1: Organisations Promoting Jatropha Production ................................................ 14 Table 2: Jatropha Farmer Distribution ........................................................................... 16 Table 3: Soap Production List and Quantities ............................................................... 20 Table 4: Bio Fertilizer Production List ............................................................................ 21 Table 5: GM at Fossil Fuel Pump Price ......................................................................... 37 Table 7: Bio Diesel Projections ..................................................................................... 40 Table 8: Projections for Bio-ethanol needs in Zambia ................................................... 41 Table 9: Preferred potential crops for biofuels in Zambia .............................................. 41 Table 10: Sources of Labour ......................................................................................... 43 Table 11: Farmers rating of participation in the Biofuel Industry ................................... 46

LIST OF FIGURES Figure 1: Biofuel Options ................................................................................................ 1 Figure 3: Distribution of Respondents in Districts ........................................................... 5 Figure 4: A Comparison of Out Grower Companies Activities ..................................... 23 Figure 5: Common Challenges Faced by Organisations Supporting ............................. 24 Figure 6: Distribution of Jatropha Hectarage Among Target Group .............................. 34 Figure 7: Use of Jatropha Seed ................................................................................... 35 Figure 8: Reasons for Intension to Expand Jatropha Fields ......................................... 36 Figure 9: Labour Use by Age Group ............................................................................. 44 Figure 10: Reasons for Not Processing Jatropha ......................................................... 44 Figure 11: Process of Acquiring Land ........................................................................ 48

Figure 12: Land Allocation to Food Crops Vs Jatropha ................................................. 49

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CHAPTER 1
1.0 INTRODUCTION 1.1 BACKGROUND

There has been an unprecedented increase in the promotion of renewable energy since the adoption of the Kyoto Protocol in 1997 (UNFCC, 2007:3). The growth in interest in renewable energy has been observed both in developed and developing countries. Similarly, an increase in the number of countries formulating or changing policies to tackle renewable energy issues has been recorded over the past decade. Different governments have opted for a wide range of renewable energy considerations from wind, solar PV, solar hot water and bio fuels. The majority of developing nations involved in renewable energy promotion have opted for biofuels. Governments

have different reasons for promoting these biofuels. Some governments

Figure 1: Courtesy of REN21, 2007

envisage increased use of bio fuels as one of the ways of reducing the continued use of the expensive fossil fuels, thus reducing the costs on crude oil
Figure 1: Biofuel Options(Courtesy of REN21, 2007)

importation. On the other hand, other proponents view biofuel production as an opportunity to pursue environmental agendas such as reduced contribution to carbon footprints. Other governments see the biofuel industry as one means that could be harnessed to reduce rural poverty through increased income.

In Zambia, the biofuels industry has inclined to a two-pronged biofuel production system characterised by feedstock production and promotion on one hand, and biofuel production 1

models on the other. At policy level, Zambia is considering to produce both biodiesel and bioethanol. The proposed feedstock will be sugarcane and sweet sorghum for bioethanol; and palm oil, soyabeans and jatropha for biodiesel. There is a strong drive towards promotion of jatropha as the main feed stock for biodiesel in Zambia. However, due to the infancy of the biofuel industry in the country, productivity and crop husbandry techniques are still largely in the experimental stage. Nevertheless various structured outgrower schemes and extension programmes being developed to support jatropha production among small scale farmers. Civil society and other concerned stakeholders would like to ensure that the small scale farmers benefit equitably from the biofuel industry, unlike what transpired during the previously failed promotions of paprika and castor bean outgrower schemes.

The Ministry of Energy and Water Development (MEWD) has developed a draft Zambian Biofuels Industry Strategy which indicates governments desire to create an industry that meets strategic energy needs while contributing to significant rural development, and to ensure that bio fuel production is carried out in an efficient and sustainable manner so as to derive maximum benefits to the people of Zambia. The Biofuels Association of Zambia (BAZ) and private investors have been engaging government to accelerate the provision of incentives, investment and policy guidelines to establish the industry. In as much as it is the interest of everyone to undertake the biofuel industry from the business point view, Civil Society has taken a cautious step to understudy the implementation of biofuel strategy so that it does not disadvantage the poor farmer. Civil Society on the other hand, has been fragmented until recently when they came together and formed the Civil Society for Biofuels Forum (CSBF), whose goal is to contribute to the development of a pro poor biofuels industry.

To cope with the numerous challenges involved in the biofuel value chain and to formulate strategies that are needed for a pro poor biofuels industry, a comprehensive multi disciplinary assessment of the biofuels industry is required. The Civil Society Biofuels Forum engaged local consultants to undertake an analysis of the current situation of the

biofuels industry in Zambia. This is a report of the analysis which was undertaken from September 2009 to March 2010. 1.2 OBJECTIVES OF THE ANALYSIS 1.2.1 Overall Objective The overall objective for the biofuel analysis was to establish the status of the biofuel industry in Zambia with the view to promote equitable development of the industry amongst all stakeholders including the rural farmers. 1.2.2 Specific Objectives Specific objectives for the analysis are as follows:

i. To collect and analyse general Information on the biofuels industry in Zambia ii. To establish interventions by government and other stakeholders in the biofuels industry iii. To establish the nature for biofuels out grower schemes with respect to production, processing, marketing, extension services, contracts, organization of the scheme and of the biofuel feedstock. iv. To ascertain the impact of biofuels industry on food security and land, its use, rights and tenure. v. To find out the impact and potential threats of the biofuels industry on the environment and bio diversity vi. To determine gender opportunities and challenges in small holder biofuels production 1.3 METHODOLOGY 1.3.1Study Tools and Methods Major methods used for data collection were Focused Group Discussions, Key Informants Interviews, Individual Household Interviews and Literature Review (study reports, manuals and policy documents). Questionnaires were the main tools for data collection. Two questionnaires were developed; one for small scale farmers and the other for biofuel 3

processors. The questionnaire for small scale farmers was pre-tested by the trained enumerators (see appendix 1) and adjusted accordingly.

The field work commenced with the training of enumerators in conducting interviews to the sampled smallholder farmers. The training provided an understanding of the data collecting instruments and processes. The purpose of the training was to reduce on errors in data collection.

All the above-mentioned data collection tools were employed to provide for triangulation of information collected. Focused group discussions were used to get a general view of the socio-economic status of the biofuel industry in the target areas.

1.3.2 Target Area The survey purposively selected the Northern, Central and Southern provinces for data collection. A total of six districts were selected as outlined below: Chinsali and Mungwi in Northern Province Mkushi and Mumbwa in Central Province Choma and Monze in Southern Province

1.3.3 Target Group The target group for the analysis were farmers, processors and key informants from government official, traditional leaders and Civil Society (see appendix 2). Government officials were included in the study to give an understanding of policy that related to promotion of the biofuel industry. Traditional leaders weld a lot of influence over their subjects through power allocate of and alienate land. 1.3.4 Sample Size The total sample size for the study was determined at four hundred and thirty two (432), i.e., seventy two respondents per district. 4

1.3.4 Sampling Methods Sampling for the district was done purposively while farmer respondents were selected by simple random sampling. The target provinces and districts as well as the key informants and participating companies were chosen for their active participation in biodiesel activities. 1.3.5 Data Validation and Entry A total of two hundred and seventy three (273) respondents were interviewed. The data was coded, cleaned and entered into the Statistical Package for Social Scientists (SPSS) by an experienced data entry clerk. The data was finally analysed by a professional and experienced consultant in SPSS. Qualitative data tables were generated for analysis by the researchers.

Figure 2: Distribution of Respondents in Districts (Source: Field Survey data, 2009)

1.4 CHALLENGES ENCOUNTERED DURING THE ANALYSIS The analysis was faced with a number of challenges that made data collection difficult. The most pressing are as highlighted below: 5

1.4.1 Unwilling Respondents. Some key informants like the Ministry of land and the Zambia National Farmers Union could not give information and or officers were not always available to give information. This made the data collection difficult as some of these were key in the understanding of the biofuel situation in the country. 1.4.2 Obsolete Information When the small scale farmers were interviewed, they were expectant and unless one probes, they gave information that obtained in the early stages of the jatropha outgrower programme in Zambia when large companies were available to give full support. Such information was not only obsolete but unreliable.

CHAPTER TWO
2.0 LITERATURE REVIEW: OVERVIEW OF THE BIOFUEL INDUSTRY 2.1 BACKGROUND INFORMATION 2.1.1 Definition Biofuels have been defined in several ways depending on what is the most common understanding within a locality or the scientific understanding of the issues involved (Solway, 2007). The definition has also depended on the subject matter inclination of the concerned organization or individuals. Environmentalists have referred to biofuels as any fuel sourced from living matter with a view to preserve the environment while providing human needs from the ecology. The Alternative Energy News Network (www.alternativeenergy-news.info/technology/biofuel ) for example accepts any fuel as biofuels only when sourced from at least 80% renewable materials. Many industrialists refer to biofuels as any solid, liquid or gaseous source of energy produced from bio-renewable or combustible renewable feedstock (Demirbas, 86:2009; Scragg, 62-136:2009). The Worldwatch Institute (2007) definition states that biofuels are liquid fuels made from organic matter typically crops. This report restricts itself to the Worldwatch definition as this is more contemporary and pertinent to the country of study.

2.1.2 Classification of Biofuel Biofuels can be classified according to form as solid, liquid or gas (Demirbo, 2009:286). They may also be classified according to the primary source (materials they are derived from) as first generation- derived from raw materials that could be used as food; second generation whose primary source is non-food crops or inedible food wastes, third generation- principally made from algae and fourth generation- a latest inclusion into the biofuel classes sourced from genetically improved plants for efficient carbon dioxide (CO2) uptake and synthesis for energy and microbes that efficiently make fuel. The technology for 7

the fourth generation biofuels was muted by British researchers that sought to improve CO 2 up take and sequestration by plants (Clark, 2008; Trapp, 2009:39).

The most populous classification of biofuels has been according to intended use; as bioethanol- a target replacement for petrol/gasoline or as biodiesel- a target replacement for fossil diesel. Bio-ethanol is derived from sugars found in crops while biodiesel is derived from oil crops.

2.1.3 Feed stock Feedstock used for the biofuels depends on whether the energy required is biodiesel or bio ethanol. Generally, oil crops like soyabeans,

groundnuts, palm oil, and jatropha are used for biodiesel while crops and substrates with

carbohydrates and sugars are used for bio ethanol worldwide. Picture 1 shows the nursery for a Chinsali small scale farmer.
Picture 1: A Jatropha Nursery in Chinsali

2.2 GLOBAL SPREAD 2.2.1 Global Trends Biofuels have spread very fast across the globe due to their promise for clean energy and as a replacement for climate threatening and expensive fossil fuels. The Worldwatch Institute (2007:139) lists among others Brazil, USA, Pakistan, South Africa, Ukraine and the Caribbean as lead producers of biofuels. However, development as well as production and use of biofuels has spread to many European, other Asian and African countries. Recognizing the importance of implementing bio-energy, there are international organizations such as IEA Bio-energy, established in 1978 by the OECD International Energy Agency (IEA), with the aim of improving cooperation and information exchange 8

between countries that have national programs in bio-energy research, development and deployment. The U.N. International Biofuels Forum is comprised of Brazil, China, India, South Africa, the United States and the European Commission.

2.2.2 Biofuel Potential The Renewable Energy Network 21 (2007) reports an incredible increase in biofuel use between 2000 and 2007, with bio-ethanol production reaching a staggering 40 billion liters production worldwide. Scragg (2009) and Demirbas (2009) postulates that the biofuel industry may take over the fuel industry if well managed. With an estimated 46 billion liters of biofuel produced over a short period of time worldwide, biofuels technology is said to be a single largest contribution of biotechnology to human development in the recent couple of decades (Olssen and Ahring 2007:98). It is not an underestimation that biofuels are on an increase worldwide and may overtake fossil fuel supplies with time. The future is open for biofuel development and with the increasing acceptance of the biofuel as alternative fuel source to fossil fuels, the looked for fuel security may not be farfetched. However, as Furfari (2008:39-41) cautions, care has to be taken in implementing biofuel production as theories and postulates do not always turn into reality. Potential for biofuel growth of production and for income generation is high. 2.2.3 Policies With regard to policies, there are many lessons to be learnt from the forerunners in the biofuel industry like Brazil which has the oldest example of biofuel experiences (Olssen and Ahring, 2007:98). Other countries like South Africa, the EC and the US have advanced technologically and offer good source of information on policy and technology on biofuels.

There are great opportunities for the public and private sector synergies that helped Brazil to pick up on biofuels supply. Public sector policies including subsidies play a critical role in establishing the biofuel industry (Olssen and Ahring, 2007; Vertes, Qureshi, Blaschek and Yukawa, 2009:56-64). Vertes, et,. el (2009) also suggest policy focus on solutions to local challenges that impede establishment of a viable biofuel industry. 9

2.3 ISSUES WITH BIOFUELS Without doubt there are both positive and negative arguments about impact of biofuels on various human endeavors and their environment. Among the most discussed include biofuels impact on food security and the environment, land and water. Another dimension is the impact of biofuels on the social and economic welfare of people. While some support biofuels as environmentally friendly, others think biofuels are environmentally unfriendly. Others still argue that biofuel can be used to fight poverty. 2.3.1Biofuels on Socio-economic Development The importance of fuel energy to development cannot be overemphasized. The most common areas of debate under this discussion are issues relating income and food security. Biofuels and Food Security One of the most contentious issues on biofuels is its impact on food security. Beggs (2009:80) contend that the 2007 escalation of food prices in the US were due to shift of some land from food production to corn for biofuels. It has been argued by many development experts that cultivation of biofuel feedstock cannot avoid taking up land previously used for food production as the farmers do not always look for virgin land to cultivate biofuel crops (Kayula and Chitah, 2009). Biofuels and Income generation Prices of commodities are affected by fuel energy as much as they are affected by other input costs. Biofuels no doubt require agriculture resources to be diverted from production of food (Tabak, 2009). In this regard a change in the socio activities is inevitable as biofuels have their own set of activities that are done in a specific way. For example, the value chain may require a change in the way farmers cooperate with each other to have the finished product for sale. Tabak further alludes to the economic disruption that trails falling supplies of fuel energy. On the other hand, Freim (2008) concludes that Zambian farmers stand to gain from the jatropha programme to the extent of reducing poverty. 10

2.3.2 Environmental Impact and Biodiversity Biofuels derive their feedstock from crops grown on new land or land previously put to other crops. The effect of biofuels on the environment may be observed from its role in climate change fight and during production of feedstock. Biofuels and Climate Change. Some professionals argue that biofuels are not all roses when related to the science of climate change because production of the biofuels energy makes use of climatically condemned fossil fuels i.e. 0.77 units of fossil fuel is used to produce 1 unit of ethanol, and 0.4 units for biodiesel energy (Beggs, 2009:79). However, many agree that as long as a favorable carbon balance towards environmental sensitivity is maintained in the growing and production of biofuels, then the biofuels are climate friendly (Maphosa, 2008). Environment and biodiversity It is almost inevitable that biofuel production disturb the environment and biodiversity. As Tabak (2009) argues, production of biofuel will either use land previously used by other crops and purposes or will use newly cleared land opened solely for the production of biofuel feedstock. When new area is cleared off the vegetation, biodiversity is lost and the area is predisposed to other weathering processes that contribute to the loss of natural niche for stable ecosystem.

Regarding invasion of land areas by some biofuel crops, the Biofuel Association of Zambia contends that Jatropha, the crop used extensively for biodiesel in Zambia, is not invasive and that it in fact helps to stabilize the soils through its root system BAZ (2007:7-8). . 2.3.2 Impact on Land and Land Use In his analysis of available land for biofuels production in Europe, Furfari (2008:31-42) argues that Europe does not have adequate land to produce enough biofuels for the needs of the European market. He further argues that it is unavoidable for biofuel production to make use of parts of the land that was once used for food production. Biofuels crops are not always produced on newly opened land that has not been used for production of crops for 11

other use. Countries should be weary of the requests for big tracts of land for other use. In Tanzania, there have been requests for 50 100,000 hectares of land when only 5 25,000 hectares have been in use (Green Facts, 2010). Although land is an issue in developed and some developing countries, Professor Sinkala (2009) and the Biofuels Association in Zambia argue that there is sufficient land for Zambia to meet biofuel need and this can be produced wholly in the country. In this regard caution should be practiced when getting appeals for large tracts of land for biofuels production. Rather than rush into agreements that will just meet raw material needs for foreign countries, the benefits for the local people should be considered too. 2.3.3 Impact on Women and Children There isnt much study done on impact of biofuels on gender. Rossi and Lambrou (2008) indicated in their FAO commissioned study that biofuels impact gender through changes they exerted on the environment and socio-economic structures. The large scale clearance of land and processes of oil production may be a source of employment and income, but they may also replace land for food production thereby infringing on the food security in rural areas. Rossi and Lambrou (2008) argue that due to differentiated roles men and women have in production and due to unequal access to land between men and women, biofuels may exert pressure on those with access to land to reallocate pieces of land given to women for biofuels.

2.3.4 Impact on Out grower Schemes and Small Scale Farmer Contracts There is little literature that succinctly discusses the working of outgrower schemes in biofuel feedstock production. Freim (2008) and FAO (2008) encourages outgrower schemes as means for reaching out to many small scale farmers.
Picture 2: Jatropha seedlings nursery on a commercial nursery

12

CHAPTER THREE
3.0 FINDINGS ON BIOFUEL PROCESSING COMPANIES OPERATING IN ZAMBIA This chapter gives a brief background to the biofuel companies in the study areas in Zambia. It also analyses the operations of these companies and their interaction with the smallholder farmers that are involved in the biofuel industry. Emphasis is made here that all the companies interviewed focused their promotions on jatropha production as the main feedstock for biofuel. 3.1 NATURE OF COMPANIES The companies involved in biofuel production were motivated to go into the industry for profits because of the emerging messages about great wealth hidden in green fuels.

The survey identified eight organizations operating in the study areas classified as community based cottage industries; community based women and youth associations; medium scale commercial processors and large-scale commercial processors. There is an interest in the industry by both indigenous and foreign investors. However, some respondents indicated having links with other large-scale commercial out-grower companies such as Marli Investment, Oval Biofuels and D1 Oils.

Land holding under organizations promoting Jatropha is varied. 25% of the organisations have their land under 99 years leasehold, 37.5% under customary, 25% have rented land from either smallholder farmers or from the community and 12.5% unknown

Land under Jatropha production from six (6) organisations covered a total of 395 hectares. Southern Bio Power had the largest with a total of 250 hectares, followed by Moskas with 35 hectares, as shown in table 1.

13

Table 1: Organisations Promoting Jatropha Production Organisation Location Hectare No. Of Farmers Bruno Jatropha Limited Lusaka in Lusaka Moskas Southern Bio Power Wamalema Enterprise Ifyishali Enterprise Twasanga Youth and Mungwi Women Association Mulondolwa Enterprise Mungwi 100 50 4 15 Lusaka Choma Chinsali 35 250 2 15 3000 40 4 -

Fintu Chinsali

TOTALS
(Source: Field Survey, 2009)

395

3.1.1 Reasons for Engaging in Jatropha Production The survey found out that eighty eight percent (88%) of the organizations were involved in the promotion of jatropha production to extract oil for local consumption. This does not tally with the profit orientation that permeates the push for jatropha promotion by most biofuel organisations all over the globe. However, experiences in other areas show that some companies have scaled down their support to producers due to low returns from jatropha out-grower schemes. This confirms the fact that companies are in biofuels (jatropha production) for money. This then is reason enough to be cautious on how these companies treat small scale farmers engaged to produce feed stock for biofuels.

3.1.2 Common Biofuel Feedstock All the 8 organisations in the study areas were producing and/or promoting the production of Jatropha as the preferred feedstock for biofuel 14

However, large-scale promotion of jatropha production is very recent in Zambia. Although there has been ardent promotion of jatropha, much of that was based on what has been read or heard about jatropha and its potential. For most of the companies interviewed, they had more theoretical knowledge than experience on jatropha production. Most of what the organisations

promoted was based on what they had heard other than what they had really experienced. This finding is congruent with the fact that jatropha production on a large organised Picture 3: Jatopha Seed scale is relatively a new feature in Zambia. Therefore, caution should be exercised in the credibility (scientifically) of the source and use of Jatropha information before full-scale dissemination to small-scale farmers is effected.

3.2 FEEDSTOCK PRODUCTION ARRANGEMENTS Most of the organizations (62.5%) in the target area had contracted local small-scale farmers to produce jatropha for them. The contracts were done under out-grower scheme arrangement. Other organizations grew their own Jatropha.

Table 2 shows distribution of farmers among the organisations promoting jatropha production

15

Table 2: Jatropha Farmer Distribution Farmers Organization Moskas , Lusaka Southern Lusaka Wamalema Chinsali Ifyishali Chinsali Twasanga Youth and 15 0.5 Fintu Enterprise, Enterprise, 40 1.3 Bio Power 3,000 96.2 contracted 15 Percent 0.5

Women Assoc. Mungwi Mulondolwa Mungwi TOTALS

(Source: Field Survey, 2009)

Enterprise, 50 3120 1.6 100

3.3 SERVICES PROVIDED Services provided by companies varied with the contract and depending on the capacity of the contracting organisation to finance the programmes. As figure 3 below presents, the following services were indicated in contracts to be provided by the companies in the study areas: training and extension (37.5%), input/seed supply (37.7%), marketing (12.5%), grants (12.5%). However, provision of seed/inputs exceeded the anticipated by 17.3%.

16

Figure 3: Services Provided by Companies (Source: Field Survey, 2009)

Although the organisations felt they had rendered adequate services, farmers felt that they were not well supported, especially in terms of extension visits and learning, an indication of poor service provision. The survey also reveals that farmers need the following services: loans (37.5%), support for market outlets (12.5%), training (12.5%), and chemicals (12.5%).

3.3 PERFORMANCE OF BIOFUEL BUSINESSES Although the organisations interviewed remained in the business of promoting and processing of Jatropha, 62.5% indicated that the business was not doing fine and only (37.5%) saw their biofuel businesses as expanding.

The findings confirmed the trend among large-scale commercial processing organizations like Marli Investment, D1 and Oval biofuels, which have scaled down or closed down. The

companies

that

indicated

activity

expansion

referred to an increase jatropha seedlings/plants 17

Picture 4: Rampress for small scale processing

and perceived increase in jatropha production among local organizations from Chinsali and Mungwi. Most of these were small scale producers and processors of jatropha. Small scale jatropha processing provides one opportunity for increased jatropha crude oil production. The crude oil may then be sold to emerging large green oil industries for final processing into usable oil. Southern Bio-Power on the other hand was scaling down on the jatropha business because of reduction in fuel prices, low GRZ support and high Investment Costs. Other organisations that saw the business scaling down mentioned lack of seeds (local company from Chinsali) inadequacy of the hand oil press used for processing jatropha (local company from Mungwi) and perceived government poor support to the sector by government. Figure 4 shows outlook of jatropha organisation performance.

Figure 4: Jatropha Organisations Performance (Source: Field Survey, 2009)

3.3.1 Biofuel Production Levels The main biofuel product produced by the companies reviewed in the study is bio oil. The following are the products recorded from the survey by quantity:

18

i.

bio-oil which totalled 5,150 litres in 2008 and 13,431 litres in 2009 with a total projection of 120,570 litres in 2010. Southern Bio Power produced most of this oil (74.5% in 2008 and 97% in 2009)

ii.

soap which totalled 352 tablets in 2008, 5, 096 tablets in 2009 with a projection of 420,120 tablets in 2010. Malondolwa produces most of this product (94.2% in 2009).

iii.

Insignificant quantities of fertiliser are produced by two companies

As figure 5 below illustrates, a drastic drop in biofuel oil production was observed in the study areas. The trend was incongruent with the nations plans to increase production to levels that can allow for a 10% blending ratio by 2010. The drop in the oil production was seen more among big companies than smaller ones.

Figure 5: Trends in Jatropha Bio Oil Production (Source: Field Survey, 2009)

The low quantities of jatropha oils produced is indicative of the diminishing investment by big companies in the industry. The output may also be a result of low productivity and/or low hactarage allocated to the production of jatropha seeds in the country. The production trend was in fact reminiscent of the general trend in bio fuel production in the country since the 19

pump prices started showing a downward trend. D1 oils, which has a record holding of 25% of the total jatropha fields globally (http://www.d1plc.com/news.php?article=176), has closed down production in Zambia and has remained only with research.

It was interesting to note that soap and fertiliser production among the small companies was increasing and gave huge leaps in estimates for 2010.

Picture 5: Bars of soap locally made from jatropha

The local small scale farmers in Northern province of Zambia have learnt to process the jatropha into different product like soap shown in picture 5 above.

Table 3: Soap Production List and Quantities Organisation Product Soap Mulondwa (tablets) Soap Twasanga (tablets) Soap Ifishalifintu Totals (tablets) Soap totals 0 352 180 5080 420500 100 100 500 252 4800 420000 2008 2009 2010

(Source: Field Survey, 2009)

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Table 4: Bio Fertilizer Production List Organisation Twasanga Ifishalifintu Product Fertiliser (kg) Fertiliser (kg) Fertilisers Totals total 60 17.5 200 2008 50 10 2009 2.5 15 2010 0 200

(Source: Field Survey, 2009)

3.3.2 Benefits of Rural People from Jatropha Programmes The organisations interviewed stated that men (62.5%) benefited more than women and children (37.5%) from the current engagement of local people. The main benefits to farmers include: employment, input support, guaranteed markets and grants for community projects. Although local people and organisations promoting jatropha talked of increased income among local people, it was difficult to prove this because there was not costing exercises done to show that local farmers made any profit from growing Jatropha.

There is no doubt that a well organised and pro-poor biofuel industry would benefit the local people. However, such programmes must assure the rural communities equitable pricing structures and markets for the produce. Assertions of increased income were more rhetoric than real.

3.3.3 Impact on Land Use and Tenure While organizations land and some owned others small-scale for Jatropha there was 21

contracted farmers

production,

Picture 6: Jatropha on marginal lands

little indication of abuse of local peoples land rights in the study areas. The little indication arises from the fact that some of the organizations own land under customary land tenure. However, the contracts signed by some companies with the local farmers, bound the farmers to the contracting companies for long periods of up to thirty years. This could meant that the land would be put to no other use than jatropha production regardless of whether the crop gave profits to the land owner or not. Although no company had imposed its contractual benefits to any defaulting farmers on this point, this was only because the companies were the first ones to withdraw or scale down on jatropha production. The thirty years plus contracts inherently takes away the right to land from the local legal owners for the period the contract is in force. Precaution needs to be taken in this regard to ensure that small-scale farmers, most of whom do not appreciate the consequences of such long contract on land, are protected from possible future abuse.

The study found some foreign investors seeking land in large portions purportedly for the production of biofuels. However, there was no chiefdom in the study area that had given any huge tract of land by the time of the study. 3.4 NATURE AND LEGAL IMPLICATIONS OF CONTRACTS Figure 7: below shows different ways in which the contracts are signed between farmers and companies. While some companies offer guaranteed market (62.5%) others have arrangements where growers produce to sell exclusively to contracting companies (37.5%), on a large scale but offered by relatively fewer companies (12.5%), is the out-grower arrangement in which the companies supply inputs and extension services to the contracted farmers.

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Figure 3: A Comparison of Out Grower Companies Activities (Source: Field Survey, 2009)

The following are the implications to the company if a company does not meet obligation within the contractual arrangements: farmers would complain to government (12.5%), farmers would sell elsewhere (12.5%), would just end contracted partnership (12.5%), farmers would complain to the local chief (12.5), farmers would complain to local authority (12.5%) and 37.5% would do nothing. On the other hand the companies will do the following if farmers failed to meet their obligations: non applicable (50%), nothing (25%), complain to the chief (12.5%) and sue (25%)

It was however found that no company has ever taken legal actions, nor taken any other action against the farmers because the programmes were fairly new and had not established to levels where such actions could be taken. 3.5 CHALLENGES FACED BY INSTITUTIONS PROMOTING JATROPHA The study found the following as the main challenges faced by the organisations involved in biofuel production in the study areas: inadequate finance (12.5%), low support from stakeholders (12.5%), no market and supply of raw materials (12.5%), inadequate land for expansion (12.5%), limited infrastructure (37.5%) and others (12.5%). See figure 8.

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Figure 4: Common Challenges Faced by Organisations Supporting Jatropha Production (Source: Field Survey, 2009)

Limited infrastructure was the challenge faced by most companies promoting production of biofuels. The infrastructure included such physical items as roads, storage and bulking facilities, plant and extractive equipment, as well as communication systems. Poor roads presented one of the greatest barriers to expansion of jatropha production into the rural areas.

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CHAPTER FOUR
4.0 INTERVENTION BY GOVERNMENT AND OTHER STAKEHOLDERS IN BIOFUEL INDUSTRY There are a number of institutions participating in the biofuel industry in Zambia. For this study only the following institutions were contacted and visited to obtain some information on biofuels and the roles they play: Ministry of Energy and Water Development; Ministry of Agriculture and Cooperatives; Ministry of Lands; Ministry of Tourism, Environment and Natural Resources (Forestry Department); Ministry of Commerce, Trade and Industry; Energy Regulation Board (ERB); Zambia Development Agency (ZDA); Biofuels Association of Zambia; and Zambia National Farmers Union.

The institutions visited contributed to the understanding of the role of government and policy issues affecting the biofuel industry in Zambia. The findings have been divided into five sections relating to policies, institution landscape, project profile, marketing and government fiscal investment.

4.1 NATIONAL POLICIES, GUIDELINES AND LEGISLATIVE FRAMEWORK The Zambian government has shown interest in the biofuel sector as seen from its public statements, participation in biofuel programmes and formulation of guidelines. The Ministry of Energy and Water Development (Policy dialogue, 2009) divulged that government had initiated and created an enabling environment for the Biofuel sector to grow. The interest of the Zambian government in biofuels stems from its desire to have a substantial reduction in fossil fuel imports and the hope that biofuels could contribute to poverty reduction among rural communities. The governments interest in the biofuel industry has been practically supported by its revision of the 1994 Energy Policy and replacing it with National Energy Policy (GRZ, 2008), which is unequivocal on its concerns in biofuels. In the new policy, which was published in 2008, government recognized the utilization of biofuels as a viable option of 25

meeting some of the countrys energy requirements. Government further hopes that the biofuel industry could be a part solution to the improvement of incomes among rural smallscale farmers. Thus, the national energy policy states among other things that government will support investments in biofuels through appropriate incentives so that energy crops are cultivated by farmers and local investors from which ethanol and bio-diesel may be produced.

Furthermore, the energy policy aims at providing a regulatory framework for the biofuel subsector, so as to maintain standards and ensure environmental protection. In this vein the Government of the Republic of Zambia passed a Statutory Instrument No. 42 in 2008 which legalizes biofuels and in which the Energy Regulation Board (ERB) is to set guidelines, standards and regulations in this sub-sector.

It is hoped that if the biofuel industry takes off, with sufficient feed stock being produced in the country to meet requirements for blending ratio of about 10%, costs of importing fossil fuels may be cut down (ERB Newsletter, 2008:17). Notwithstanding the interest in biofuels, practical situation as found by the study could not support fuel blending ratio beyond five percent (5%) for biodiesel. The governments future plans are that ethanol be used as a blend with petrol, while biodiesel would be used either as a fuel on its own or as a blend with fossil diesel. To this end the Executive Director of ERB confirmed (ERB Newsletter, 2009) that standards of both ethanol and bio-diesel have already been developed, and that the ERB would regulate the production of 25,000 liters or more per month of biofuel. However, the current trend of pricing biofuels against the pump price of fossil fuel may make realization of these targets difficult and expensive .

26

4.2 INSTITUTIONAL LANDSCAPE AND SUPPORT SERVICES PROVIDERS

Apart from the Ministry of Energy and Water Development, there are other institutions that are giving support to the promotion of the biofuel industry. The Ministry of Commerce, Trade and Industry does not a specific policy on biofuels, but rather follows that national Energy Policy and biofuel strategy under the Ministry of Energy and Water Development. The ministry promotes investment into the biofuel sector, and entices investors to participate in the sub sector.

While the Forestry Department promotes the planting of tree crops by small-scale farmers, survey revealed that the planting of Jatropha was not being promoted by the department since the questions on environmental effect of the crop were raised during the tenure of the former and late president Dr. Patrick Levy Mwanawasa SC. At that time, there were fears that Jatropha takes up most of the soil nutrients and this could undermine the quality of soil for indigenous tree crops. Therefore, the department was not promoting the biofuel crop in question until extensive research was undertaken to clear the air.

An interview at the Ministry of Agriculture and Cooperatives (MACO) revealed that the Ministry was promoting the cultivation of biofuel crops as well as food crops. Although there was no specific policy on biofuel crops, the Ministry under its National Agricultural Policy (NAP), promotes biofuel crops as part of income generation for the small-scale and commercial farmers.

However, it was stated that MACO is taking a cautious approach towards the promotion of Jatropha since the extension workers do not fully know how the biofuel crop could impact the environment. At the moment, small-scale farmers are being encouraged to grow the crop on a small-scale basis of up to one hectare, especially as hedges in their fields, and around their villages.

The need to be cautious is also necessitated by fears that small-scale farmers may adopt the growing of Jatropha on a large-scale that could create competition with the growing of 27

food crops. If such competition occurs, then MACO fears that household food security of the small-scale farmers would be threatened. However, this fear may be short-lived as small scale farmers are likely to revert to other crop production (including food crops) when they continuously get no greater benefits than promised. The current price levels of 1000 to 3000 kwacha per kg are extremely low for the farmers and any further increase would be too high for support companies to make any meaningful profits.

The Zambia Development Agency (ZDA) promotes investment by facilitating access to land by investors. The agency facilitates visitations for potential investors to investment

destinations as well acquisition of land for investment.

Revelations are that the interest of the Ministry of Lands is not just in the allocation of land for the promotion of biofuels but also for other social and economic purposes. The role of the Ministry of Lands in the promotion of the biofuel industry cannot and should not be underestimated. Although the Ministry of Lands claims less responsibility over biofuel industry concerns because they give land for general purpose (Permanent Secretary MoL, 2009).

Similarly, information with ZNFU was difficult to obtain because no staff was available for consultations. The stance of the two important institutions was an indication of the little concern and the sensitivity allotted to the biofuel industry in Zambia. 4.3 PROFILES OF SOME BIOFUEL PROJECTS THAT HAVE TAKEN OFF According to the Chairperson of the Biofuels Association of Zambia, the industry has taken off but is experiencing teething problems. He explained in an interview that both smallscale and commercial farmers have started planting biofuel crops, although the economic recession has prevented those that had hoped to invest large sums of money from doing so.

The Energy Regulator Newsletter of 2008a, stated that Oval Biofuels was the only company in Zambia which was producing bio-diesel from Jatropha, before it closed down due to the 28

recession. But when it was producing bio-diesel, it obtained most of its Jatropha seed from out-grower schemes mainly from the Eastern Province; and the company had a total of 6,000 ha. of Jatropha. The going under of Oval Biofuels and other big companies like BP D1, left the farmers in the cold. It may be difficult to re-engage the farmers again.

Oval Biofuels used to purchase the seed and then transport it to the factory in Lusaka where oil was extracted. At the plant the company had capacity to refine 3,000 litres of biodiesel per day using a bio-diesel Ageratech machine though this was not utilized to full due to low supplies of jatropha.

The ERB reported (ERB Newsletter, 2009) that nothing was wasted from the biofuel extraction process, as the company was able to obtain other by-products from jatropha, such as bathing soap, glycerine and candles. The remaining cake was used as manure and was usually distributed back to the out growers. The bio-diesel that was obtained was then distributed to the company clients who used it on a trial basis in various light vehicles and generators. It was reported that the company did not experience any problems with the company vehicles that were using the bio-diesel that it was producing.

Other stakeholders have shown interest in biofuel production.

It was reported that

Kansanshi Mine in Solwezi has embarked on the bio-diesel project involving surrounding communities as out growers. So, far, a total of 390 participants are receiving Jatropha plants free of charge; and it is expected that 407,600 trees will be planted (Sunday Mail, July 5-11, 2009).

In Central and Northern Provinces, another biofuel company, Mali Investments from South Africa in association with Dar Farms, contracted small-scale farmers to plant Jatropha. There was concern in Kabwe that Mali Investments advised farmers to remove cassava from their fields and then plant Jatropha. Incentives were promised but they were not implemented.

29

4.4 MARKETING STRATEGIES FOR BIOFUELS GRZ hopes that companies providing the out grower schemes would in the short run provide market for the jatropha that they are promoting (Principle Tree Officer at Ministry of Agriculture, 2009). If this is done, then small-scale farmers will benefit from participating in out-grower schemes through income generation.

With respect to the role of government in providing coordinated marketing strategies for biofuels, it could be argued that should the biofuel industry take off, the private sector will have to rise to the occasion and play its role, as long as government gives incentives and guidelines to regulate the sector through the Energy Regulation Board.

30

CHAPTER FIVE
5.0 FINDINGS ON THE OUT-GROWER SCHEMES The status and dynamics of Biofuels crop production are the focus of this chapter. The chapter analyses how production is organized and managed to reach out to the small-scale farmers. It also analyses production levels, contracts, processing and marketing of biofuel crops with emphasis on jatropha. 5.1 OUT GROWER SCHEMES The production of biofuel feedstock is generally done through outgrower schemes that can be classified into three major categories namely: i. Small scale out grower schemes. These are individuals that may or may not be registered as companies, but have identified gaps in the production chain of jatropha. They either provide seed and/or some extension support to their clients ii. Medium Scale out grower schemes. These are run by small companies and are mostly local Zambian by origin and support not more than 50 farmers. Medium Scale out grower schemes are characterized by low investment dependent on loans from lending institutions iii. Large Scale Out Grower Schemes. These are leading among the out grower schemes for jatropha in Zambia. They include companies like Marli Investment, Oval Bio Fuels, BP/D1 Oils, and Southern Bio Power. Most of these large-scale outgrower scheme managers are multinational companies and have had heavy investment in the schemes. These are expected to offer a wide range of services including input distribution, extension services, marketing arrangements and processing points for the bought jatropha. However, the assessment revealed that these services are not being provided to the contracted small-scale farmers in the areas assessed. The assessment also revealed that abandonment of contracted farmers by out grower scheme managers is common across the assessed areas.

31

5.2 PRODUCTION 5.2.1 Biofuel Crop and Varieties Being Grown In Zambia, two sets of crops have been identified as biofuel feedstock depending on whether the crop is for bioethanol or biodiesel. Oil crops like soya beans; sunflower, groundnuts, palm oil and jatropha have been identified as potential feedstock for biodiesel. On the other hand starchy and sweet crops like sweet sorghum and sugar cane have been identified as potential feedstock for bio-ethanol. The assessment established that Jatropha is currently the main feedstock being grown. Two cultivars have been propagated in Zambia, a locally domesticated cultivar and a Cape Verde cultivar. None of the cultivars grown is a hybrid, explaining another reason why productivity is low among jatropha growers. Although 88.2% of the farmers interviewed indicated that they grew only one variety of Jatropha, they did not know the variety.

The current yield levels are not lucrative enough to enable small-scale farmers make a living from Jatropha. Improving productivity has a bearing on whether jatropha will be profitable for the small-scale farmers under out-grower schemes. D1 Oils Plant Science is investigating one variety called E1 for potential yields and localization in Zambia. This is also sourced from Cape Verde Island. 5.2.2 Period of Growing the Crop A total of 23.5% of the farmers have been growing jatropha for less than one year, 27.5% for 1 to 2 years, 23.1% for 2 to 3 years, 17.1% for 3 to 4 years and 8.9% for 4 years and above. Although the study revealed that most of the companies interviewed had been around for about two years, during this short period, companies like Marli Investment, Oval Oils and BP biofuels had been in the areas of study but had already withdrawn support to the small-scale farmers because of various reasons explained earlier. Due to the

experimental nature of how most Jatropha out-grower schemes have been implemented, not a single company interviewed could concretely indicate in real terms pros and cons of Jatropha production. However, they could only give an indication of expected output of oils and the projected financial return. 32

5.2.3 Companies Contracting Farmers and Types of Contracts The assessment revealed that 57% of the small-scale farmers that grew Jatropha did so under contracts, the rest did not have contracts but had Jatropha under production. Figure 9 below shows the distribution of contracted farmers by companies. From the distribution, it can noted that Marli Investment, Oval Oils, D1 Oils and Southern Bio Power had the majority of farmers under contracts.

Figure 9 : Distribution of Contracts by Company (Source: Field data, 2009)

A total of 1.8% of farmers had contracts that allowed the companies to rent their land, 44.1% of the farmers had contracts to grow the crop, 3.3% had contracts to produce seedlings, and 3.7% stated other arrangements. A total of 47.1% did not say what

arrangements they have with Outgrower companies. The contracts were either on individual basis (81.7%) or group basis (18.3%).

33

5.2.4 Hectares Contracted and Plants Grown The study areas gave a total of 3100 hectares of Jatropha fields. Other data collected during the survey, however, indicated that there could be a total of 10,000 hectares planted of Jatropha Zambia.

Figure 5: Distribution of Jatropha Hectarage Among Target Group Source: Field Survey, 2009

As may be seen from figure 5 above more than 80% of the farmers grew less than 2 ha of jatropha. This is typical of the scale of land put to jatropha production in other study areas in Zambia (Kayula & Chitah, 2009; Kayula, 2009). The size of land allocated to jatropha has generated concerns that would end up giving up the entire small pieces of land they own to jatropha at the expense of food production. On the contrary, land allotted to jatropha acts as an experimental plot. If the returns are low, farmers tend to neglect the jatropha fields. This tendency coupled with the withdrawal of services by biofuels companies has led to a drop in land allotted to Jatropha in some areas.

Spacing has been a critical concern in jatropha production. Whereas, the study brought out spacing of up to 7 metres apart, generally, spacing has been a matter of experimentation by many bio fuel companies. D1 Oils Plant Science has recommended 2m x 3m for pure stands while 3m x 4m is ideal for inter cropping. ZNFU/CFU have recommended much closer spacing for the hedges. 34

5.2.5 Uses of Jatropha Seed It was discovered that 34.4% of farmers sold Jatropha seed, 9.4% processed the seed into oil, 1.6% gave as seed to other farmers and 54.7% of the farmers had either not started harvesting or did not know what to do with the seed. It is unfortunate that only 9.4% of the farmers processed jatropha seed into other products like oil before disposing off the products. Of the farmers that sold the seed, 21.6% sold to processing companies, 21.6% sold to other farmers and 56.8% sold to other buyers. See figure 10 for use of seed among small-scale farmers.

Figure 6: Use of Jatropha Seed (Source : Field Survey, 2009)

5.2.6 Expansion Plans A cardinal question to assess intent for increased production of jatropha among small-scale farmers gave a surprisingly overwhelming (87.3%) positive response. Only 12.7% of the jatropha farmers interviewed indicated the intension of not wanting to expand jatropha production. Most of the responses revealed that despite the crop not being profitable at the time, the farmers hoped that this venture would be lucrative in future.

There are several reasons why farmers would like to expand their jatropha hectarage (see figure 7) and the following were some of the reasons mentioned by a number of farmers: to 35

make more money, economic potential, economic benefits, income generation, more profitable in future, to have many plants, growing industry in Zambia and guaranteed market.

Figure 7: Reasons for Intension to Expand Jatropha Fields (Source: Field Survey, 2009)

On the other hand some farmers indicated lack of willingness to expand jatropha fields due to the following reasons: did not find any benefits, there was no market, no support, the inadequate information, uncertainty of people involved and disappointments from previous engagements.

36

Table 5: GM at Fossil Fuel Pump Price

Item Income Seed sales Oil (lit) T Income Expenses Seed Fertiliser Labour Transport Packaging Land Preparation Unit Kg Small Scale Qty Unit Cost Cost 500 Improved Qty Unit Cost Cost Commercial Qty Unit Cost Cost 0 ZMK 6100 ZMK ZMK 3000 270000 10000 2000 2000 300000 ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK 6 344 000.00 6 344 000.00 15 000.00 1 350 000.00 1 500 000.00 320 000.00 320 000.00 300 000.00 3 805 000.00 2 539 000.00

500 ZMK 250 000.00 5000 650 ZMK 250 000.00 3000 0 0 2000 2000 200000 ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK 15 000.00 40 000.00 40 000.00 200 000.00 295 000.00 -45 000.00 5 4 100 100 100 1

0 ZMK 8000 6100 ZMK 3 965 000.00 1040 ZMK 3 965 000.00 3000 270000 10000 2000 2000 270000 ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK 15 000.00 1 080 000.00 1 000 000.00 200 000.00 200 000.00 270 000.00 2 765 000.00 1 200 000.00 5 5 150 160 160 1

Kg 50 Kg Mandays Lampsome No. Ha

5 0 0 20 20 1

Total Cost Gross Margin

Table 6 shows the comparison between traditional farming method and improved management and commercial methods where there jatropha is processed on farm. (Source: Adapted from Freim, 2008)

As may be noticed from the gross margins in table 6, it is difficult to make profit from jatropha production when it is priced at 8% of the fossil fuel pump price. In fact the table analyzed reveals that Jatropha production at small-scale level is not as profitable as is promoted by some outgrower companies. If biofuels would be used to improve the livelihoods of the small-scale farmers it will largely not be from the profits from sale of jatropha grain. As may be seen from the improved and commercial levels, jatropha begins giving returns when processed into other products.

Zambia will make strides in the biofuel sector if small-scale farmers are encouraged to process the crop or when the crop is produced on large scale by biofuel companies. The second option entails moving small scale farmers out of the jatropha production picture altogether. 5.2.7 Benefits of Biofuel Production According to the farmers, most of the benefits have not yet been realized because the industry is still in its infancy. However, some farmers indicated that they had experienced 37

the following benefits: business prospects (12.8%), Jatropha does not need a lot of fertiliser (2.6%), financial empowerment (0.4%), sale and domestic use of soap, lighting oil and organic fertilizer (21.6%). A total of 22.0% stated no success, 7.7% have not yet seen success and 32.2% of the farmers did not state. 5.2.8 Problems Encountered There are a number of challenges faced by farmers in the bio fuel production. The following were the main problems: 20.1% of the farmers stated that labour constraints particularly when demand for labour clashes with the labour demand for food crop production, 31.5% cited termites attacks on jatropha and 34.8% cited difficulties in weeding. Other issues pattern to prevalence of bush fires (0.4%), inadequate technical knowledge (0.4%), inadequate machinery for processing (0.4%), inadequate information on suppliers of inputs and markets (0.7%), lack of hybrid seeds for improved yields (0.7%) and inadequate support from government (0.4%). 5.3 NATURE AND LEGAL IMPLICATION OF CONTRACTS

5.3.1 Length of Contracts with Companies A total of 34.1% farmers interviewed had contracts of less than 5 years, 21.0% had contracts of 6 to 10 years, 15.2% had contracts of 11 to 20 years, 7.2% had contracts of 21 to 30 years and 22.5% had contracts of more than 30 years.

The nature of the contracts was either written (85.4%) or verbal (14.6%).

The survey has

revealed that although the majority of the farmers (72.0%) were not happy with the contracts, 22.7% were happy with the contracts and 5.3% were very happy with the contracts. Of those farmers who were not happy 94.6% of them had concerns with lack of follow ups by contracting companies and 0.9% cited low prices offered by companies. Others (0.9%) felt there were very little consultations with the contracting companies.

It can be seen that the contracts were mostly one-sided favoring the contracting companies. The contracts were designed by the contracting companies generally to safeguard their investments. The contracts had an implication on the land use in that, for five to thirty years, 38

contracting companies, had authority to insist that the farmland be put to jatropha production for the period of the contract regardless of the economic benefits to the farmer. 5.3.2 Legal Entitlements in the Contract The out grower managers endeavored to include in the contract clauses that were meant to protect their investment as well as take care of major complaints by the farmers. The following are some of the major issues covered by the contracts:

i. ii. iii. iv.

Farmers produce to be sold exclusively to the contracting company (82.2%) Contracting company to provide extension services (27.0%) Contracting company to provide inputs (21.7%) and Contracting company to provide cash allowance if a farmer grows more than 5ha (55.4%)

The contracts also carry the penalties to be imposed on any one side that fails to keep to the contents of the contract. These penalties include:

i.

The farmer to sue the contracting company (17.2%), though it was clear that farmers did not know how to effect litigation measures against contracting companies

ii.

The farmers to complain to government (30.5%), even though government takes time to act and may have little jurisdiction

iii.

The farmer to complain to the local chief (0.7%), though the chief would have little power over the companies that were resident outside the kingdom

iv.

Companies would on the other hand sue the defaulting farmer (56.1%), or seize the farmers assets (3.3%)

v.

The companies were also obliged to withdraw support where farmers defaulted on the contract (4.9%)

A total of 83.3% of the farmer respondents reported that their contracting company had failed to fulfill the obligations on the contracts and the affected farmers failed do take any action against the defaulting companies. 39

5.4

PATTERN OF GROWING FEED STOCK

Land Under Biofuel Crops At the moment, there is no accurate information on the total amount of land under biofuel production. On average, the farmers interviewed had less than 1ha put to jatropha. Women had slightly larger hectarage than men on average. Whereas those under out grower programmes planted pure crop stand, others planted hedges to fence off other crops or homesteads.

The Ministry of Energy and Water development (Biofuel strategy, 2005) projects about 64 million liters of bio diesel and about 40 million litres of bio-ethanol consumption per year by 2010. (See table 6 & 7 respectively).

Table 6: Bio Diesel Projections Year Diesel Sales Volume 5% Blend 10% Blend 15% Blend 20% Blend

Million Litres 2004 2005 2006 2007 2008 2009 2010 311.880 327.482 343.856 361.049 379.102 398.102 417.960 15.594 16.374 17.192 18.052 18.955 19.902 20.898 31.188 32.748 34.385 36.104 37.910 39.805 41.796 46.783 49.122 51.578 54.156 56.865 59.708 62.694 62.377 65.496 68.771 72.209 75.820 79.611 83.592

Source: Bio Fuels Strategy for Zambia, 2005

40

Table 7: Projections for Bio-ethanol needs in Zambia

Year 2004 2005 2006 2007 2008 2009 2010

Petro Sales Volume 159.777 167.765 176.154 184.961 194.209 203.92 203.92

10% Blend 15.977 16.776 17.615 18.496 19.42 20.392 21.411

15% Blend 23.966 25.164 26.423 27.744 29.131 30.588 32.117

20% Blend 31.955 33.553 35.23 36.992 38.841 40.784 42.823

Source: Bio Fuel Strategy for Zambia, 2005

5.5

POTENTIAL CROPS FOR BIOFUELS

There are a number of crops that can be used as biofuel feedstock in Zambia. Table 8 below shows different potential crops for biofuel.

Table 8: Preferred potential crops for biofuels in Zambia Crop Jatropha Soya beans Palm Oil Sugar cane Sweet Sorghum Cassava Biofuel Type Diesel Diesel Diesel Petrol Petrol Petrol Comment Preferred, non edible High oil content, but edible Edible Edible Edible Edible and substitute for maize as food security crop Sweet Potatoes Petrol Edible and substitute for maize as food security crop
Source: Biofuel Strategy, 2008

It may be noticed that 83% of the preferred proposed crops are edible. Crops like cassava and sweet potatoes are the best local alternatives for the staple food (maize) for food 41

security. The possibilities of diverting food crops to biofuel production are high, especially if the biodiesel industry is seen as more lucrative. However, deliberate emphasis has been placed by government on Jatropha for biodiesel and sweet sorghum and cane sugar for bioethanol, as feedstock. 5.6 PRODUCTION CONSTRAINTS Production of biofuel feed stock is stalked by a number of constraints that made development of the sector very slow. The study revealed that the following concerns were more critical for improved productivity and production of biofuels:

i.

Inputs: 6.2% of the farmers indicated that the inputs required for biofuel production were not easy to come by. Improved seed varieties and planting materials were not available for jatropha for example. The use of recycled seed was rampant and contributed to low productivity.

ii.

Information/knowledge: 23.9% of the farmers cited information or knowledge about biofuels as being scanty and not reliable. Each biofuel promoting agency had its own standards of production and a set of recommended crop husbandry practices.

iii.

Marketing: 6.2% of the farmers said that the marketing of jatropha was very poor to the extent that many months after harvest, small scale farmers were still looking for markets for their produce. The withdrawal of big companies like Oval Biofuels, D1/BP Biofuel and Marli Investment in some areas led to abandonment of the crop by many small-scale farmers

iv.

Technology: 5.3% of the farmers cited that appropriate technology was not available and accessible to small scale producers to process jatropha and other biofuel feed stocks.

v.

Land: 0.5% of farmers indicated that land was a constraint. They had to make a choice between producing food and producing jatropha seed. 42

vi.

Labour: 52.2% of the farmers indicated that labour was a major concern as it was also required for other farm operations. Freim (2008) reports that jatropha, when grown with other crops, creates strain on demand for labour as the farmer tend to be busy throughout with little time for rest. For some farm operations labour needs coincided with jatropha while at some operations it follows other crops giving little rest for farmers. The availability of labour for energy crops was rated very adequate (25.4%), adequate (58.3%) and not adequate (16.2%). The availability of labour for harvesting energy crops was rated very adequate (23.2%), adequate (62.1%), and not adequate (16.2%).

Labour for energy crops was mostly sourced from the family (95.0%), a bit (3%) from hiring and others sources (2%). Similar trends were recorded for labour sourced for harvesting as shown in table 10. Although 98.2% denied employing labour below the age of 15 years of age, as figure 9 below shows, 1.8% admitted to using the under 15 for labour in jatropha production. Unfortunately, a somber 2.3% admitted to using the under 10s in jatropha production. The trend has to be checked because 2.3 percent in such a small sample may translate into huge numbers for the population involved in agriculture production.

Table 9: Sources of Labour Variable/Response Labour source Family Full-time hired Casual hired Other Source of labour for Family harvesting Full-time hired Casual hired Other
Source: Field Survey, 2009

Total 95.00% 0.80% 2.90% 1.30% 96.60% 0.00% 2.30% 1.10%

43

Figure 8: Labour Use by Age Group (Source: Survey data, 2009).

5.7 CAUSES FOR INADEQUATE PROCESSING AMONG SMALE SCALE FARMERS A total of 33.1% of respondent farmers were not involved in processing because of lack of equipment, 25.8% did not produce enough, 12.3% lacked knowledge and skills, 0.6% were not interested and 28.2% did not indicate their challenges in processing. See the data in table 10.

Figure 9: Reasons for Not Processing Jatropha (Source: Field Survey, 2009)

44

For the farmers that had access to processing equipment, the major types of equipment used were hand oil press (25.0%) and machine press (62.5%) obtained mostly (45.8%) on loan.

The farmers viewed the accessibility of the equipment as very accessible (6.8%), accessible (14.8%), not accessible (78.4%). The following were the reasons for not

accessing the equipment: not available in local market (4.5%), no cash to purchase (89.7%), did not know where to buy from (3.4%) and others (2.3%). Constraints faced in processing also included lack of knowledge and information (46.2%), lack of equipment (14.%), others (15.4%) and none (23.1%).

From the foregoing findings, it may be deduced from the above that inadequate capital and insufficient knowledge hold back farmers from adding value to their jatropha crop. Going by the low of gross margins levels generated when there is no value addition to jatropha, It is important that small scale farmers are helped to process their produce at least into jatropha oil before it is sold to outgrower scheme companies. Either companies promoting jatropha production or government should help the small scale farmers access processing equipment. A business model where processing plants are made available to some entrepreneurs at village or district level as is the case with harmmer mills for maize and rice, will help small scale farmers earn better monies from jatropha growing than they are currently earning.

5.8 FARMERS INVOLVEMENT IN DECESION MAKING The majority of farmers (96.0%) as shown in table 12, are not involved in decision making because they are not consulted (17.5%), dont know (46.1%), not yet marketing products (25.7%) or are not in any committee (4.4%). A paltry (6.3%) did not indicate their position on decision making. For those involved in decision making (4%), their involvement was in the following: price negotiation (20.0%), policy formulation (56.7%), demand and supply projections (3.3%), marketing (3.3%) and others (16.7%). Some farmers knew other

45

farmers who are involved in decision mainly through CFU (25.3%), fellow farmers (22.7%), and MACO (1.1%).

It was not surprising to get few acknowledging adequacy of farmer involvement in decision making. The rating of farmers involvement in biofuel trade was considered to be very adequate (3.3%), adequate (49.3%) and not adequate (47.4%). On a good note, the trend of farmers participation in biofuel was rated as increasing (67.7%), decreasing (11.5%) and the same (20.0%).

Table 10: Farmers rating of participation in the Biofuel Industry Parameter Involved in decisions Response Yes No Pricing Policy formulation Demand and supply projections Involved in marketing own products Why Not Involved Other Not consulted Dont know how Total 4.00% 96.00% 20.00% 56.70% 3.30% 3.30% 16.70% 17.50% 46.10% 25.70% 4.40% 6.30% 46.20% 0.40% 25.30% 0.40% 22.70% 0.40% 0.40%

Not marketing products yet Not in the committee Other Source of information for None knowing other farmers Book involved CFU Coordinator Fellow Farmers Friend Jathropa Group Farming 46

Lupando Mwape Maco Mali Investments Mpinda Mwelu Mungwi Biofuel Association Mungwi District Bio Fuel Association Rating of farmers Very adequate Involvement in Biofuel Adequate Trade Not adequate Trend of farmers Increasing participation in Biofuel Decreasing Same
(Source: Field Survey, 2009)

0.40% 1.10% 1.50% 0.40% 0.40% 0.70% 3.30% 49.30% 47.40% 67.70% 11.50% 20.80%

47

CHAPTER SIX
6.0 IMPACT OF BIOFUEL INDUSTRY ON LAND RIGHTS 6.1 CURRENT ZAMBIA LAND TENURE SYSTEM

The land cultivated by farmers for food crops is governed by customary law (97.7%), leasehold (2.3%). For those that under leasehold, the length of lease averages 83 years. The land under biofuel is governed by customary (96.9%) and leasehold (3.1%). The length of lease averages 50 years. Male farmers stated an average of 42 years and female stated an average of 99 years. The difference in average period between males and females significantly shows the recent measures taken to allow females to own land.

Most of the land in the rural areas was acquired by allocation by headmen (49.8%), given by parents (25.9%) or inherited from ancestors (10.9%). A few (1.6%) bought the land while others where keeping for others, squatting or not just sure of the status of land. The land tenure system and processes of acquiring land was sometimes not helpful for rural investment.

Figure 10: Process of Acquiring Land

(Source: Field Survey, 2009)

48

Most (75.6%) of the foreign companies obtained land from the Commissioner of Lands and the chief (15.6%). Some rented from local people (2.2%) and the rest could not divulge (6.6%). It was interesting to note that females inherited most of the land from ancestors or relative than men. It was also important to note that men bought land where no women did so. 6.3 FARMERS DENIED THEIR LAND RIGHTS

The data collected during the survey did not show indication of abrogation of land rights of any individual. None of the farmers interviewed was aware of anyone who was displaced to allocate land to other investors in the biofuel industry.

6.4

CRITERIA FOR ALLOCATING LAND FOR BIOFUELS

The majority of famers (88.7%) had no criteria that they used for allocating land for biofuel production. Land was allocated according to availability (4.8%), advise by MACO (0.4%) or depending on interest (1.5%) at the time of making the decision. A few (0.4%) allocated land that was considered to have poor soils, but where food crops and trees grow well.

Figure 11: Land Allocation to Food Crops Vs Jatropha (Source: Kayula & Chitah, 2009)

49

It was common, however, for the farmers to consider the food crops that they needed in making decision on what land was used for what crop. As Kayula and Chitah (2009) highlight, the land allocated to jatropha vs food crops was inversely related among farmers with small land holdings. But as the land size increased jatropha was increasing allocated less land regardless of what size of land was allocated to the food crops.

50

CHAPTER SEVEN
7.0 IMPACT OF BIOFUEL ON ENVIRONMENT AND SOCIAL ECONOMY 7.1 IMPACT OF BIOFUEL CROPS ON ENVIRONMENTS AND BIODIVERSITY

The research study found out that 70.4% of the respondent farmers did not know whether biofuel crops had any negative effect on the environment and the biodiversity. This result could be an indication of inadequate information on biofuel crops among small scale farmers. It could also indicate the difficulties farmer s have to associate some of the crops which are in fact food crops to bad effects these crops could have on the soil and the biodiversity. Of the remaining 29.6 %, total of 22.0% indicated that biofuels had positive and negative impact on the environment and 7.6% stated biofuels had no positive and negative impact on the environment.

The study brought out the following as the positive impact of biofuels on environment as learnt from promoters of biofuels: i. ii. add soil fertility (21.6%), charcoal, income generating (17.6%), didnt know (16.8%) with more women not knowing (26.7%), and none (24.0%).

Negative impact of biofuel on environment included i. ii. soil pollution (19.6%), nutrient depletion (58.7%) with more women (76.4%) stating this impact than men, others (21.7%).

It was also learnt during the study that large scale producers of biofuel crops, posed the following potential and threats to environment: i. ii. iii. adds soil fertility (1.1%), Contributes to air and pollution (0.4%), bush fires (0.4%), 51

iv. v.

deforestation (11.0%), dominates indigenous plants (23.1%)

Major risk linked to biofuel development in Zambia were depletion of biodiversity, pollution of ground and surface water, deforestation and soil pollution. It was , however found that jatropha had positive impacts on the environment like improving soil fertility

It was also interesting to note that the majority (87.5%) of organisations did not undertake any environmental impact assessment (EIA) on the land before using it for biofuel production. This could mean that concern for the environment among jatropha was considered not important. In the light of unsubstantiated fears about jatropha harming the environment, measures should be put in place to ensure EIA are done at the beginning of projects and during implementation of the jatropha projects. 7.2 GENDER OPPORTUNITIES AND CHALLENGES IN SMALL SCLAE BIOFUEL

PRODUCTION 7.2.1 Impact on Women and Child Labour Women found jatropha production in a positive sense in that it was perceived as easy to plant, demanded less labour in the long run as there is no annual field preparations, had other bi products like soap and oil for lighting. The cop was also looked at negatively because of increased labour demand during land preparations and . harvesting.

The study found that children were used to provide cheap labour in various stages of crop production like planting weeding and harvesting. It was further found that child labour increased illiteracy and low economic returns due to low quality work.

7.3

OWNERSHIP OF BIOFUEL PRODUCTION

Discussions and the questionnaire results of the study revealed that biofuel production was considered as a mans (34.9%) crop than a woman (18.3%) crop due to anticipated high incomes. Consequently men spent more time and labour for producing jatropha seed. 52

7.4

GENDER ROLES IN BIOFUEL PRODUCTION

In biofuel production, female participated highly during land preparation (2.2%), planting (2.9%) and supervision (3.7%. Men played the following functions like land preparation (27.5%), planting (12.5%), plough (4.4%), supervise (4.4%), weeding (32.2%)

Children perform the following functions: cultivate (5.1%), everything (0.4%), nothing (7.7%), planting (9.2%), spacing (1.1%), weeding (63.7%), didnt say (12.8%).

It is observed that women and children perform more weeding functions than men and children do more weeding than women.

7.5

BENEFITS OF BIOFUEL PRODUCTION

The study found that both men and women benefited in various ways from the biofuel production. The benefits included, but not limited to socio networking, input supply to

support income for food crops, and for those among whom oil was extracted locally, oil for lighting. These benefits were however not adequate to the satisfaction and improvement of local livelihoods.

53

CHAPTER EIGHT
8.0 CONCLUSION AND RECOMMENDATIONS 8.1 CONCLUSIONS

This study, that involved making an assessment of the status of the Biofuels industry in Zambia has shown that the Zambian government through its National Energy Policy (GRZ, 2008), has put in place a regulatory framework to guide the development of the sub-sector. The energy policy states among other things that government will support investment in Biofuel production through appropriate incentives so that energy crops are cultivated by farmers and local investors from which Bio-ethanol and bio-diesel may be produced. This is seen as one way of reducing dependency on the costly fossil fuels.

The survey also shows that the Zambian biofuels industry is still in its infancy stage and production of biofuel crops by smallholder farmers and the processing of the crops by investors or processors, is also in its infancy, as only small amounts of oil and soap have been produced in the past two agricultural seasons.

The research has shown that the fears that have been raised globally about the possibility of smallholders diverting land meant for producing food crops to biofuel production, have not yet been realized in the study area, as only small amounts of land have so far been put under Jatropha production. Furthermore, the survey has also shown that in the study areas where interviews were held, there is no evidence of the displacement of smallholders, so that land may be used for biofuel crops. There is also no evidence to suggest that women farmers have lost land that should be used to produce food crops, in order to cultivate biofuel crops.

With respect to land access, the survey shows that processors or investors access land that they own under leasehold titles for 99 years as well as land which they bought from other commercial farmers, and rent from communities (and individuals) under customary tenure. 54

The buying and renting of land suggests that a rural land market could be emerging and will give value to rural land with the passage of time and with increased demand for biofuel crop production.

The study shows that the contracts which processors and small-holder farmers enter into, could be beneficial to both parties. While the processors are able to procure the biofuel crops from the farmers, they also provide a service in terms of guaranteed markets, provision of input support, creation of employment and support to the communities. However, there is room for improvement as the smallholders stated that they were not happy with the contracts because there were few or no follow up measures and the prices offered for their crops were low.

The survey and the review of literature shows that the capacity exists in Zambia for increased production of biofuel crops and the development of the biofuel sector. In this regard, smallholders were of the view that they would like to expand their production as it was a profitable income generating activity. However, costings show that small scale farmers cannot make profits from jatropha production under the current pricing mechanism of jatropha seed. If local processing is encouraged on the other hand, small scale farmers may make some profit. It is important to note that even large scale farmers will benefit with appreciable profits from jatropha production by processing the product on farm than selling unprocessed seed.

Even though land seem to be gaining value in rural areas due to biofuel crops, government should tread softly in land allocation for biofuels so that small scale farmers do not lose out on the land they currently own. It is also important that relevant authorities ensure that producers should undertake Environmental Impact Assessments (EIAs) in order to ensure that production is done in a sustainable manner without damage to the environment. Subsequent EIAs should be done during production period to ensure producers adhere to environmentally friendly practices.

55

8.2

RECOMMENDATIONS

In view of the assessments and the conclusions that have been made above, the following are the recommendations:i. There is need for harmonization of focus and purpose in the biofuel sector. This can be achieved by having coordinating body for the biofuel sector that should include the private sector, Civil Society and the government.

ii.

The biofuel sector is relatively new in Zambia. To enhance adoption of credible and proven methodologies and practices, government should take leadership of the sector to give needed guidance. This recommendation does not preset government as the only source of credible knowledgeable and information about biofuels. Rather the recommendation is set to call on government to protect its citizens from opposing views that are promoted by various stakeholders among small farmers yet all the views are presented for implementation like they are the only proven views. The biofuel sector should be coordinated through three relevant specialized

subcommittees to look at and spearhead areas like production of feedstock and land issues, fuel processing and standards and marketing of both feedstock and other products.

iii.

The government should continue to promote the development of the Biofuels industry through the Public Private Partnerships (PPPs), in order to broaden participation in the subsector

iv.

Whereas the Ministry of Energy and Water development has developed and still improves on the standards for the liquid green fuels, the Ministry of Agriculture and Cooperatives (MACO) should in the same vein develop standards for jatropha and other biofuel crops production practices. Furthermore, MACO should develop standards for out grower scheme management. This will help alleviate experimenting with small scale farmers whose resource base is precarious.

56

v.

Government should consider giving incentives to companies that encourage local processing of biofuels as this is the best way to help small scale farmers get more money out of the biofuel industry using jatropha as feedstock. Value adding is a sure way of empowering the rural communities through biofuel crop production.

vi.

Land in the rural areas and in Zambia as a whole is slowly getting some value. This trend should be recognized so that when land is allocated for large scale jatropha production, any persons resettled should be adequately compensated. In fact, government should provide plain guidelines resettling families displaced to pave way for large scale biofuel crop production.

vii.

There is need for intensive and in-depth study on the impact of biofuels on the environment and biodiversity. In fact this report identifies several gaps in the biofuel industry that need detailed research among which the following should take precedence: agronomic practices, best outgrower model, blending ratios, Pricing mechanisms, Impact of biofuels on socio-economic well being of locals, impact on the environment and best synergy among players.

viii.

Land access should be made more readily available to both processors (investors) and smallholder farmers in farm blocks that should be established by the government so as to promote out grower schemes for smallholder farmers.

ix.

There is need for the government to spearhead the establishment of a Biofuel Production Investment Fund for processors and smallholder farmers involved in the production and processing of biofuel crops, in order to overcome financial, labour and technical constraints that are being faced by these stakeholders.

x.

Increased efforts have to be made at the community level to empower women with secure tenure to land so that their participation as smallholders is enhanced, in order to raise household incomes and reduce rural poverty.

57

xi.

Use of below age persons should needs to be established in details and checked before the trend becomes hyper.

From the field survey, out-grower organisations perceive that they have endeavored to provide the promised services in the contract. However, the farmers do not share this perception. This phenomenon could further be due to lack of adequate standards covering all support areas in the biofuel industry. There is need for government to interpose in the service provisions by providing minimum standards in the industry.

There is need for documentation at the Ministry on what land and how much of it was being allocated for different purposes including Biofuel production. This study could not conclusively understand what the Ministry of Lands was doing regarding biofuels because of the negative response from the custodian of information at the Ministry. However, it is known that the Ministry of lands does not know how much land is allocated for different use. A land audit would be a worthwhile exercise for the Ministry of Lands

It is equally important to sensitize small-scale farmers to ensure that they continue to grow their food crops in addition to the cultivation of Jatropha and other biofuel crops other than concentrate on pure jatropha crop fields. Furthermore, the farmers should not convert their foods crops (like maize and sorghum) into bio-diesel, and thus experience hunger and food shortages.

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REFERENCES

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APPENDIX 1: LIST OF ENUMERATORS SN 01 02 NAME Nsama Kalambo Albert Ngwira ORGANISATION Climate Focus Network Development People to People 03 Zinidilikani Daka Organisation Development Southern Province Aid STUDY AREA Southern Province from Southern Province

and Community Based Trust 04 05 06 Francis Sana Edward Lange Kufekisa Mukamba Steadfast Association Development 07 08 Nchimunya Himunyanga Parret Muteto Organisation Central Province Development Central Province for Southern Province Central Province Land Central Province

and Community Based Trust 09 10 11 12 Nsama Nsemiwe Clive Chibule Shula Mwamba Anita Chikowi Zambia Land Alliance Green Living Movement Climate Focus Network Steadfast Central Province Northern Province Northern Province Northern Province

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APPENDIX 2: STAKEHOLDERS INTERVIEWED SN 01 02 03 04 05 06 07 08 09 10 STAKEHOLDER Ministry of Energy and Water Development Ministry of Agriculture Ministry of Agriculture and Cooperatives Ministry of Lands Ministry of Natural Resources and Tourism Ministry of Commerce Energy Regulation Board (ERB) Zambia Development Agency Biofuel Association Zambia National Farmers Union REPRESENTATIVE Energy Officer Director of Extension Principle Trees Officer Permanent Secretary Chief Forestry Officer Nil Chairperson Business Development Officers Chairman Nil

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APPENDIX 3: GM FOR JATROPHA

ESTIMATED COSTS AND INCOMES (in ZKW) THROUGHOUT THE FIRST TEN YEARS FOR ONE HECTARE OF JATROPHA Planted through Nursery/seedbeds 1 OUTPUT Yield Kg INCOME VARIABLE COSTS Seed Basal Fert Insecticide LABOUR COSTS 1 Prepare seedbeds 2 Cracking and improving seeds 3 Sow and nurse seedlings in beds 5 Transplanting 6 Weeding twice a year 7 Pruning once a year 8 Spraying against pests/insects 9 Harvesting 10 Peeling TOTAL VARIABLE COSTS GROSS MARGIN Break Even Yield GM Return on variable costs % Break Even Price Accumulated Gross Margin Mar-10 0.00 ZMK 2 0.00 ZMK 3 4 5 6 7 8 9 10

ZMK

1000.00 3000.00 6000.00 6000.00 6000.00 6000.00 6000.00 6000.00 750 000.00 ZMK 2 250 000.00 ZMK 4 500 000.00 ZMK 4 500 000.00 ZMK 4 500 000.00 ZMK 4 500 000.00 ZMK 4 500 000.00 ZMK 4 500 000.00

ZMK 5 000.00 ZMK 150 000.00 ZMK 9 045.00 ZMK ZMK ZMK ZMK ZMK ZMK ZMK ZMK 14 800.00 345.00 3 750.00 29 300.00 96 700.00 ZMK 2 450.00 ZMK 4 350.00 ZMK

9 045.00 ZMK

9 045.00 ZMK

9 045.00 ZMK

9 045.00 ZMK

9 045.00 ZMK

9 045.00 ZMK

9 045.00 ZMK

9 045.00 ZMK

9 045.00

96 700.00 ZMK 96 700.00 14 000.00 ZMK 312 500.00 4 350.00 ZMK 4 350.00 ZMK 256 500.00 ZMK 218 500.00 ZMK 315 740.00 ZMK 124 095.00 ZMK 897 595.00 ZMK -315 740.00 ZMK -124 095.00 ZMK -147 595.00 851.10 -100% -100% -16% ZMK 897.60 ZMK -315 740.00 ZMK -439 835.00 ZMK -587 430.00

ZMK 96 700.00 ZMK 312 500.00 ZMK 4 350.00 ZMK 769 000.00 ZMK 655 000.00 ZMK 1 846 595.00 ZMK 403 405.00 2333.20 22% ZMK 615.53 ZMK -184 025.00

ZMK ZMK ZMK ZMK ZMK ZMK ZMK

96 700.00 312 500.00 4 350.00 1 538 500.00 1 310 000.00 3 271 095.00 1 228 905.00 4232.50 38% ZMK 545.18 ZMK 1 044 880.00

ZMK ZMK ZMK ZMK ZMK ZMK ZMK

96 700.00 312 500.00 4 350.00 1 538 500.00 1 310 000.00 3 271 095.00 1 228 905.00 3815.86 38% ZMK 545.18 ZMK 2 273 785.00

ZMK ZMK ZMK ZMK ZMK ZMK ZMK

96 700.00 312 500.00 4 350.00 1 538 500.00 1 310 000.00 3 271 095.00 1 228 905.00 3815.86 38% ZMK 545.18 ZMK 3 502 690.00

ZMK ZMK ZMK ZMK ZMK ZMK ZMK

96 700.00 312 500.00 4 350.00 1 538 500.00 1 310 000.00 3 271 095.00 1 228 905.00 3815.86 38% ZMK 545.18 ZMK 4 731 595.00

ZMK ZMK ZMK ZMK ZMK ZMK ZMK

96 700.00 312 500.00 4 350.00 1 538 500.00 1 310 000.00 3 271 095.00 1 228 905.00 3815.86 38% ZMK 545.18 ZMK 5 960 500.00

ZMK ZMK ZMK ZMK ZMK ZMK ZMK

96 700.00 312 500.00 4 350.00 1 538 500.00 1 310 000.00 3 271 095.00 1 228 905.00 3815.86 38% ZMK 545.18 ZMK 7 189 405.00

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