A controversial plan by a Chinese company to start a tobacco plantation in the Zambezi region may not go ahead after the Chinese investor failed to meet key conditions set by the Cabinet before the project kicks off.
Swapo’s coordinator for the Oshikoto region, Armas Amukwiyu, co-owns the company.
Minister of agriculture, water and land reform Calle Schlettwein confirmed that the project will not proceed.
“The investor for the tobacco project in the Zambezi region could not agree with the conditions as approved by the Cabinet. The project therefore did not proceed,” Schlettwein said.
The company – previously known as Namibia Oriental Tobacco Corporation CC – applied for land measuring 10 000 hectares at Liselo, outside Katima Mulilo in north-eastern Namibia in April 2013.
The company is now known as Zambezi Modern Agriculture Plantation (Pty) Ltd, and applied to lease the land for 99 years.
Details of the Cabinet’s terms and conditions on this project are included in a Cabinet Committee on Trade and Economic Development (CCTED) report dated 10 September 2020.
The document contains conditions set out by the Cabinet, the investor’s responses to the said conditions, and recommendations by the committee.
The conditions include the reduction of the lease period to 25 years with an option of renewal, depending on the performance of the project.
The Chinese investors wanted 99 years.
Another recommendation from the Cabinet was for the government to consider using land as equity participation in favour of the Mafwe Traditional Authority.
“The investor must enter into a joint venture with other Namibian companies to allow more participation of Namibians, and increase the share of the Mafwe Traditional Authority,” the Cabinet report said.
According to the report, value addition of the proposed plant – up to the final product – would be completed in Namibia, but 100% of the tobacco produced would be exported and sold outside the country.
“The Ministry of [Industrialisation and] Trade established a partnership with the investor to process the timber harvested from the said project locally.”
HARDBALL
The Chinese company indicated it would not accept most of the Cabinet’s conditions, citing issues of investments that have been fully committed to by Chinese banks.
“Zambezi Modern Agriculture Plantation (Pty) Ltd does not accept a proposal of reducing a lease period from 99 years to 25 years – even with an option for renewal as renewal is not guaranteed,” the company is quoted as stating in the same report.
The company said investing in a 25-year lease period is too risky.
“As an investor in agriculture, one should ‘think in generations’, a biological process initiated to improve resilience, safeguarding and sustainability of our investment. The investor wants at least a 50-year lease period,” the company said.
The Chinese firm said it won’t accept a reduction in the project.
“The investor does not accept an increase of shares from 5% to 10%, because various Chinese banks, which will be investing in the project, will be shareholders. Taking on additional shareholders is not part of their project plan,” the report reads.
According to the company, it does not want to enter into a partnership with any party to avoid conflicts and disputes usually accompanied by partnerships and joint ventures.
The company said tobacco farming is extensive and expensive with high risks involved.
“Several Chinese banks will invest various forms of financing to aid us in our operation. In order for the Chinese banks to be confident in the venture, a longer lease period is needed that will aid as mitigation for financing purposes,” the report stated.
The Chinese company said the equipment required for the project is costly, and would be technically designed for long-term use.
“Thus obtaining such equipment for short-term use is not advisable or viable. Without equipment it would also not be possible for sufficient operation of the project,” the company stated.
The plantation idea has been widely criticised, while some Cabinet ministers have endorsed it.
The report further states that although the Mafwe Traditional Authority has given its blessings, the Zambezi communal land board does not recommend the project.
The project has been dragging on for over seven years, despite the Cabinet having approved it in June 2019.
Amukwiyu, who co-owns the company, said it is unhappy with the government’s conditions.
“It is not only about leasehold which they have reduced. There is now also a fight over land which the government has cut from 10 000 to 5 000 hectares. The investors are coming into the country next month so that we can discuss the government’s position and the committee report.
“Although we are not happy with the conditions, the commitment is still there,” he told The Namibian yesterday.
WAY FORWARD
The project was set to create jobs, according to the governor of the Zambezi region, Lawrence Sampofu.
Sampofu said although he has noticed a delay in the project, he is still waiting to be officially informed by the agriculture ministry.
“I have noticed that the project could not proceed, but we have not been informed about any activities going forward. So, we are still waiting for the ministry of agriculture to brief us,” Sampofu said.
The Cabinet Committee on Trade and Economic Development consists of Schlettwein, minister of economic planning Obeth Kandjoze as chairperson, trade minister Lucia Iipumbu and minister of finance Iipumbu Shiimi.
Other members include minister of environment, forestry and tourism Pohamba Shifeta, minister of public enterprises Leon Jooste, minister of mines and energy Tom Alweendo, minister of fisheries and marine resources Albert Kawana and attorney general Festus Mbandeka.
The agriculture ministry says some communities in the Zambezi region have requested for the project not to proceed as a tobacco-growing scheme, but rather as a food-production initiative.
Meanwhile, the Mafwe Traditional Authority has made several additional pieces of land available for agricultural production, while the ministry says it has already started evaluating the land to determine which is best suited to agricultural production.