COFAMOSA Sugar Cane Project
- Reference: P-MZ-AAA-002
- Appraisal Date: 01/02/2011
- Board Presentation: 22/07/2011
- Status: LendingLEND
- Implementing Agency: MINISTRY OF AGRICULTURE AND FISHERIES
- Location: MOAMBA DISTRICT
Under the COFAMOSA Sugar Cane Project, the Government of Mozambique intends to develop an area of 29,000 ha for irrigated land under sugar cane for sugar and ethanol production. The project area is located in Moamba and Magude Districts of the Province of Maputo Mozambique, and has been selected, mainly, due to the accessibly of water from Corumana Dam on Sabie River, availability of good irrigable soils and the close proximity to potential local and regional markets for sugar and bio-ethanol.
The goal of the project is to reduce poverty levels in the Moamba and Magude Districts of Mozambique through increased exports of sugar and ethanol from Mozambique to the region and beyond. The main objectives of the COMOFSA project are to:
(i) develop 29,000 ha for irrigated land in possibly 3 phases, over a period of ten years (first and second phase 10 ,000 ha each and the third phase of 9,000 ha)
(ii) establish 580 farmers on 50 ha units;
(iii) make use of already existing investment- Corumana Dam and available good irrigation soils;
(iv) create 18,000 jobs (70%) of economically active people in the area) and ;
(v) make permanent impact in districts of Moamba and Magude and the overall Mozambican national economy.
In preparation of this project, COFAMOSA completed a Pre-feasibility Study on July 2003. In November 2006, the GoM granted water and land rights to COFAMOSA for an area 10,000 ha for Phase I of the project. Irrigation water will be provided by gravity from Corumana Dam through Sabie River. Implementation of the second and third phases will require the rehabilitation of the Corumana Dam to provide the additional water needed to irrigate the remaining area of 19,000 ha. The GoM plans to provide the project area with the proper infrastructure in terms of roads, power, and other social and farm services. Sugar cane will be the main crop to be grown in the area to supply cane for sugar/ethanol production. The chain of sugar cane plantation, production, processing and marketing of sugar and/or ethanol will be managed through a Public-Private-Partnership between the GoM, farmers group (COFAMOSA), the Sugar Company (ies), and PETROMOC as the ethanol off-taker. The project has the following main components:
(i) Infrastructure Development which would comprise detailed engineering design, land preparation, drainage system, installation of irrigation head works which include pump stations, main and sub-main pipelines, storage/balancing reservoirs and infield irrigation distribution systems;
(ii) Crop development and farmers support which would mainly be production of sugarcane and food crops, the related farm machinery, and training of staff and beneficiaries;
(iii) Farm and social infrastructure comprising bulk electricity, inter-connector roads, bulk water supply, farmers' and supervising field managers' houses, storage facilities and office space, a school, drinking water facilities and feeder roads;
(iv) Establishment of two private Sugar mills and a refinery. Since the production system for Ethanol and sugar is basically the same, the project will follow the Brazilian model in which the mills may produce both sugar and Ethanol. They switch from one product to other depending on the market; and
(v) Project management including the recruitment of the technical assistance services, HIV/AIDS awareness campaigns and the implementation of the Environmental and Social Management Plan (ESMP), including any resettlement Plan.
The objective of the project is to reduce poverty levels in this part of Mozambique through increased exports of sugar/ethanol from Mozambique to the region and beyond.
The aim of the project is to develop 29 000 ha of sugar cane in three (3) phases. The first and second phase will each consist of 10 000 ha while the third phase will be 9 000 ha.
The Government of Mozambique recognizes that the potential exists for increasing sugar-cane production in the Moamba District of the province of Maputo. The realization of this potential will enable the country to improve its foreign exchange position both through increased sugar and ethanol export earnings. It would support agro-business development and help provide employment for the farmers, improve incomes and food security among the poor, and improve social and physical infrastructure in the rural areas around the project area.
Additional rationale for the project hinges on the following factors: Sugar cane is a proven relatively easy crop to manage compared to the high value crops such as vegetables and fruits. This makes it the best choice for the settlement of inexperienced and sometimes illiterate farmers;
Although a mono culture crop, it can be grown for many years without the problem of soil borne diseases that usually occurs when growing other crops on the same soil year in and year out, an example is tomatoes, cotton and tobacco;
The fact that it is a single channel marketing system ensures that financial management is in place as sessions can be signed with the miller for the direct payments of loans to the financing institutions. The market is also simple for the beginner farmers to understand;
The fact that sugar cane is only replanted once every eight to twelve years, makes the operational costs to be low compared to other crops.
Since the production system for ethanol and sugar is basically the same the project will follow the Brazilian model in which the mills may produce both sugar and ethanol. They switch from one product to other depending on the market;
The project is a multi-purpose one and is expected to provide an enabling economic environment for private sector development and participation. Additionally, the project holds enormous opportunities for Public-Private-Partnership in joint financing for infrastructure development and sugar mills and refineries.
The project supports the Bank Group's strategy which aims to promote economic cooperation and regional integration of RMCs. The project was reviewed and supported by the sector local specialist at MZFO. The Country Economist and Team also endorsed the project as it fits strategically under the country's CSP for 2006-2009 for Ago-Business development.
It is estimated that approximately 400,000 tons of sugar will be produced and approximately 100,000 tons sold into the lucrative South African market in terms of the SADC sugar agreement and 300,000 tons to preferential export markets, namely, the tariff rate quota in the USA and the EU market through the Everything But Arms (EBA) initiative
Additionally the ethanol production from COFAMOSA project could be economically in size to be exported or used locally which will be assesed during the project feasiblity study.Taking into consideration that the market for crude oil remains very volatile and highly sensitive, the Feasibility Study will assess the future of ethanol market prices in Mozambique and at the regional level (e.g. South African market);
At this stage, data is lacking to indicate quantitatively the direct and indirect benefits that the project is likely to generate. While these will be verified during teh feasibility study, the benefits at the farmer, Governments' and investor levels are quite apparent.
TIQUE Cesar Augusto - OSAN3