Land claim threatens an energy project

Face-off between two policies

A LAND claim brought against South Africa’s largest sugar farmer threatens to stop a R1.1 billion renewable energy project that will produce electricity by burning leftover cane leaves and tops.

Charl Senekal Suiker Trust, which has 5 000 hectares of irrigated cane land and is a grower for Tongaat Hulett, is part of a group that plans to build a 16.5 megawatt biomass facility in KwaZulu-Natal, according to a presentation on the National Energy Regulator of SA’s website.

Talks to settle claims by four communities bordering part of his farm would take place today, Charl Senekal, the owner, said on Wednesday.

The government is promoting agriculture and providing access to land as part of its redistribution policies. At the same time, the country is turning to renewable energy as it struggles to meet power demand after failing to invest in generation even as the government expanded supply to millions of households.

“The whole project can collapse if they don’t accept our offer,” Senekal said, declining to give details because they were private. “We’ve made a very reasonable proposal to the government and we hope that this will be successful. I am sure it will be accepted. It’s a great project.”

Community

Work on the plant in Mkuze was scheduled to start in August if all the communities agreed to the offer, with the first electricity to be produced 22 months later, Senekal said. It might create about 400 jobs, and the project would be able to repay its debt in eight years, he said. All four of the community groups needed to support the plan for it to go ahead, he said.

The development should continue regardless of the outcome of the claim, Dumisani Myeni, the chairman of Silwane Trust, established to handle the claims, said from Mkuze. Community groups would be open to leasing the land should the claim succeed. The groups include the Myeni, Ngwenya and Zulu tribes.

“Most of the community doesn’t have power,” Myeni said. “The project will help. Senekal will just need to be a bit flexible. We definitely want to work with him and any developers who come here. We won’t chase anyone away from the land, we just want partnerships. We will reach agreements and work with them.”

Electricity

A claim against the land was dropped in November 2010 after studies commissioned by Senekal found the area had been occupied by white people since 1880, the Beeld newspaper reported. The land claims office in Pietermaritzburg did not immediately respond to emailed requests for comment it said on Tuesday would take two weeks to be processed.

South Africa had raised R140bn from private investors for 3 900MW of power as part of a renewable energy programme, President Jacob Zuma said on February 13.

Eskom has instituted rolling power cuts since November, curbing production.

Eskom had suspended four executives while the government started an inquiry into the business, chairman Zola Tsotsi said yesterday. There was a “very high probability” of blackouts yesterday evening, the utility said.

Senekal’s trust will own 30 percent of the project, Building Energy Development Africa 3 SRL, a technical partner, a 51 percent stake, and local communities 2.5 percent, according to the presentation to regulators, dated February 2014. H1 Capital, a group of black investors, will hold the balance. The project will be 60 percent funded by debt and 40 percent equity.

Senekal, whose farms produce about 360 000 tons of sugar a year, said: “It’s in the interests of the area, the province and the country that this power plant come off the ground.” – Bloomberg INVESTORS skittish about Nigerian assets as plunging oil prices pummel the nation’s economy are casting their eyes across the continent to Kenya.

Yields on Kenya’s 10-year Eurobonds, which were 128 basis points higher than comparable Nigerian debt when they were sold in June, are now 57 basis points lower, according to data. Kenya’s local currency securities have returned 0.4 percent in dollar terms this year, compared with an 8.3 percent loss on naira debt.

The World Bank raised its growth forecast for Kenya on March 5, saying oil prices that have tumbled 48 percent since June would boost the economy of the nation, a net importer of crude. By contrast, Nigeria was set to slow, the International Monetary Fund said the same day. The continent’s biggest oil producer is struggling with falling export revenue and a loss of investor confidence after it postponed elections amid the insurgency by the Islamist group Boko Haram in the country’s north-east.

“Some investors think it makes more sense to be overweight Kenya versus Nigeria,” Mahan Namin, a money manager at Insparo Asset Management, which sold its Nigerian sovereign bonds last year and has bought more Kenyan debt in 2015, said on March 10. “The divergence with Nigeria is a case of Kenya’s revenue base being more diversified and oil prices being lower.”

Creating jobs

Kenya, with 41 million people and a gross domestic product of $55 billion (R677.5bn), is the biggest economy in East Africa, with tea, coffee and tourism among its main sources of foreign exchange. Investments in infrastructure, agriculture and manufacturing are creating more jobs and should increase growth to 7 percent by 2017, the World Bank said after upgrading this year’s projection to 6 percent from 4.7 percent.

While Nigeria dwarfs Kenya with its $520bn economy and population of 170 million, it relies on oil for 90 percent of export earnings and 70 percent of government revenue. The plunge in oil prices will slow growth to 4.8 percent in 2015, compared with 6.3 percent in 2014, the IMF said.

“Kenya has managed to diversify,” Lamin Manjang, the chief executive of Standard Chartered’s East Africa unit, said on March 9. “It is not a commodity-driven economy” like Nigeria, he said.

Morgan Stanley and Aberdeen Asset Management were among investors that said they sold all their Nigerian local bonds in the past six months as the naira weakened 18 percent against the dollar, the most