Impact of Sugar Production Projects - Essay Example

Technology, Sustainability and Society, 2. Name Institutional Affiliation Date Table of Contents Table of Contents 2 Introduction 3 Background. 4 Sugarcane resources. 4 Contributions to development. 4 History of sugar production in Kenya. 5 Sugarcane project. 5 Analytical framework. 6 Baseline scenario (biodiversity conservation project). 7 Agriculture 7 Water resources. 8 Tourism. 8 Forestry and wild animals. 9 The value of biophysical resources. 9 Net present value. 10 Sugar production project. 10 Financial analysis. 10 Costs of the project. 11 Benefits of the project. 11 Net present value analysis. 12 Negative implications of the project sugar project 13 Recommendations 14 Alternative one 14 Alternative two 14 References 15 Technology, Sustainability and Society, 2. Introduction In the coastal region of Kenya, sugar production project can be implemented in the Tana delta region that covers approximately 20,000 ha of land for infrastructure, out-growers farms, sugarcane plantation, and other facilities. Such a project has several benefits that include sugar and ethanol production, and electricity generation. On the other hand, the project will require the use of River Tana water for irrigation, domestic uses as well as industrial use. In the end, the project would interfere with the natural biodiversity of the region as well as the economic activities carried out in the area, such as agriculture and tourism. The environmental impact of the project includes loss of the existing environmental services as well as the ecological functions. For the project to proceed or stop there is a need for cost-benefit analysis against the economic benefits of the existing cultural, environmental, ecological and biodiversity values. One of the objectives of the cost-benefit analysis of the sugar project is to weigh the benefits and costs of the project. Another objective is to weigh the likely negative impacts on the ecological, biological, environmental, cultural and social values of the Tana Delta region. The third objective is to establish the best land use option for the region based on the likely long-term impact on the local livelihoods, environmental and sustainability considerations. In the end, the analysis would provide recommendations to help ensure sustainable development and balanced environmental conservation. Background. Sugarcane resources. Sugarcane plants contain high levels of biomass energy. The plant is most widely distributed in the tropics where it has been traditionally used in sugar production without many industrial applications. The energy by-products of sugarcane such as bagasse, cane trash, ethanol and methane gas can be used in energy production for industrial and home uses. On the other hand, the non-energy by-products of sugarcane can be used in feed, food, fibre and fertilizer production (MULWA, 2006). Contributions to development. Sugarcane resources have demonstrable potential contributions to ensuring sustainability in Kenya’s economic development. One of the development benefits likely to accrue from the sugarcane project is the simulation of the emergence of local social amenities near the sugar industries. Another likely contribution is the reduction in the oil import volumes because of the contribution of the energy by-products of sugar in electric power generation. Sugarcane promotes the production and use of renewable energy (CORNLAND, 2001). This aspect creates international appeal from the consideration of the concerted world efforts in carbon emissions reduction. It also helps ease the population pressure on the forests because of the ever-increasing demand for the forest-derived biomass. History of sugar production in Kenya. Kenyan farmers have in the history had to endure various negative forces in the sugar production industry such as delayed payments, corruption, poor pay and mismanage. The first sugarcane mill was established in 1922, and not much growth has been observed because of poor infrastructure and political interference in the sugarcane production areas (CORNLAND, 2001). As a result, most farmers have abandoned the practice, particularly the coast region of the country that collapsed in the 1980s. However, other areas as Rongo, Busia, Mumias, Migori and Nyando have taken up the production leading to the production of between 400,000 and 500,000 tons per year (MULWA, 2006). Currently, Kenya faces stiff competition in sugar production from its neighbours- Tanzania, Sudan, Mauritius and Uganda. Sugarcane project. In the Coast region, the project is implementable in Lamu and Tana River districts around Tana Delta. The total area that can support the product is 20,000 ha, of which 16,000 ha/4,000 ha dedicated to nucleus/out-grower farming respectively. This level of farming would consume around a third of Tana River’s volume leading to destabilization of the river’s ecological functions. The project would produce an estimated 10,000 TCD of sugar every year, 75 KLPD of ethanol and 34 MW of electricity. Besides, the project would create various employment opportunities to the local and national communities. The total investment of the project is KES 2.377 billion. Around 71% of the total investment will be used in land levelling. At the steady stage, the annual operating cost amounts to KES 874 million that constitutes 30% machinery and 45% agricultural consumables. Besides, the operating and the capital costs at the same stage of transport and field mechanization amounts to KES 84 million and 608 million respectively. The annual sugar production in year n+8 is estimated at 32,000 tons. Also, the cane price is estimated at KES 1,170, and the operating and capital expenditure is estimated at KES237 million and KES728 million respectively (HVA INTERNATIONAL, 2007). Even though the project is likely to bring sustainability in the development of the region, it is likely to have various negative impacts on the local ecology. Tana River is a designated area for Important Bird Area that has a rich ecosystem of mangrove forests. The proposed project is likely to cause environmental pollution through industrial effluents, residues and silt. Besides, the project is proposed supports pastoralism among the local communities. The ecology also supports the local communities through timber, construction materials, medicine, honey and other indigenous functions. If implemented, the project will impact the local livelihood system of the pastoralists as well as put a lot of pressure on the remnants of the local natural resources (MULWA, 2006). Analytical framework. The analysis of the valuation of the project is based on the feasibility study findings as well as the reports of environmental impact analysis results. Similar projects have been undertaken in Zambia, and the related studies provide a benchmark for this project. The results of this report are informed by the net present value analysis. The analytical approach employed to generate this report considers the technical, environmental, economic and social aspects of the project to identify and assess the alternative to sugar production. The alternative project to sugar production is baseline scenario. The recommendation of the report derives the logic from the Net-present-value analysis of the baseline scenario and the sugar production project. Baseline scenario (biodiversity conservation project). Agriculture Tana Delta region is currently under various agricultural activities. One of the activities is livestock rearing where the pastoral communities rear various farm animals. The local communities keep cattle, camels, goats, sheep, ducks, chicken and donkeys. On the other hand, the local communities are involved in crop farming where various varieties are grown (RAMADHAN & KAVEN, 2011). Such crops grown by the local communities in the project site include bananas, beans, green grams, beans, rice, maize, rice, mangoes, kales, tomatoes, onions, sugarcane, vegetables, cabbages, melons, pawpaw, tomatoes, cassava and cowpeas. The local communities produce these crops for sale and family consumption. The site also has fisheries resources and supports several families including Claroteidae, Mochokidae, Protopterdae, Clariidae, Schilbeidae, Alestidae, Cyprinidae and mormyridae. The area has also been found to support 44 species of fish. These resources provide food to the coastal communities as well as other communities in Nyanza, Western and Nairobi. Water resources. River Tana has its catchments in the central highlands of Kenya. The river provides water resources to irrigation projects and the seven folks power stations located in the upper regions of the sugar project. The River provides water for irrigation, livestock, domestic, recreation, and industrial functions (RAMADHAN & KAVEN, 2011). The implementation of the proposed project should not cause water abstraction or pollution that would compromise the current and the future ecological functions. Sound plans need to be erected in order to prevent the negative impacts of the wastewater from the project. The environmental assessment of the area also indicates that abstraction of the water in the area would have negative impacts on the downstream ecosystems. Besides, the reduced volume of water in the area would cause loss of the river competence and the resultant higher sedimentation rates. Tourism. The Tana Delta region is a designated biodiversity conservation area dubbed as Important Birds Area. The area houses various endangered species and various unique species like Basra Reed-warbler, Malindi Pipit as well as Tana River Cisticola. The Delta also houses mangrove forests, hippos, fisheries and crocodile proliferation resources. The rich biodiversity of the area makes it an important tourist destination that is located between Lamu and Mombasa. It creates a potential tourism resource that can benefit the local communities if harnessed. A sugar project can degrade the resource through pollution (RAMADHAN & KAVEN, 2011). Forestry and wild animals. The delta area is forested. It provides forestry resources such as timber, charcoal, firewood and medicines to the local communities. The lower part of the Delta has indigenous plants that provide homes for two endangered primates, namely the Crested Mangabey and the Red Colobus. Besides, the forest is recognized as a home to around 25 species of primates (MITTERMEIER & NASH, 2009). There are around 345 bird species supported by the delta’s mangrove forest. Other wild animals housed by this forest include amphibians and reptiles. The value of biophysical resources. Currently, studies indicate that the current value of the biophysical resources located in the Tana Delta area is KES3.7 billion (HVA INTERNATIONAL, 2007). The estimated value is broken down as shown in the list below: Activity/resource Estimated value Livestock 1,450,000,000 Water 600,000 Fisheries 500,000 Agriculture 150,000 Pasture 100,000,000 Forest services 250,000 Tourism 500,000 Total 3,700,000,000 Net present value. Sugar production project. Financial analysis. The financial analysis of the project seeks to establish the economic viability of the sugar production project. The assumptions of the analysis are oblivious of the specific conditions of the area because they are based on the general information. Also, the analysis does not address the Kenyan economic situation that is likely to increase in volatility (HVA INTERNATIONAL, 2007). Costs of the project. The initial investment concerns the pre-production cost, contingencies, mitigation and the initial fixed investments. The pre-production cost of the project includes the cost of surveys, feasibility study and the overall project supervision. The fixed investment would entail such issues as sugar factory, flood protection, ethanol factory, housing, livestock activities, cogeneration plant and agricultural development. The contingencies provision stand at 5% whereas mitigation costs, on the other hand, stand at 1%. Initially, the project working capital will require provision but after establishment that aspect will be addressed by the cash flow. The other costs of the project include interest, salvage value, land and water (HVA INTERNATIONAL, 2007). Benefits of the project. The first benefit of the sugar project is related to sugar, cogeneration plants and ethanol production. The steady rate of production is likely to be achieved after eight years from the start date, but around 90% of the production is likely to be recorded in the first four years. The sugar produced from the project is likely to cost at least KES58, 660 per tonne when sold to the local market. The molasses produced by the project will be sold at KES1, 000 per tonne (HVA INTERNATIONAL, 2007). The project will produce at least 80, 000 metric tons per year. The alcohol will amount to around 23 million litres and if it is exported to the European countries it will amount to KES 667 million worth of economic value due to the difference in production cost of the commodity between the tropics and subtropics (JOHNSON & SEEBALUCK, 2012). Currently, Kenyan factories sell electricity to the national grid at KES 3.95 per KWH. If the project produces an excess of 170 million kWh and sells it to the national grid at KES 3.95 per Kwh, the co-generation plant would inject KES 510 million to the profits. The operations of the factory will create jobs to the local community and the total wage bill per month will stand at KES 4,766,930. Other financial benefits of the project are summarized in the table below. Detail Benefit/average (KES) Earnings for out-growers 939,200,000 Poverty reduction (improved purchasing power and increased earnings) 1,3000,000,000 Labour benefits 293,500,000 Petroleum substitution. 532, 000,000 Sugar importation substitution 2,350,000,000 Net present value analysis. Negative implications of the project sugar project Sugar project will cause various implications that can be classified as socio-economic and environmental implications. The process activities of the sugar production include fertilizer application, land clearing, cane milling, road paving, chemicals and by-products. The implications of these activities include soil acidification, biodiversity loss, water eutrophication, ecological changes, and deforestation, amongst others. If implemented, the project will lead to over-exploitation of the grazing areas for the local communities. Besides, it will reduce the arable land for the local communities. The impact will include loss of food security as well as income for the members of the local communities (HVA INTERNATIONAL, 2007). The flood protection dykes will restrict silts to the downstream plains leading to the disruption of the ecological cycle. The clearance of the forest will lead to loss of forestry resources. Recommendations Alternative one Tana River delta is an important ecological system that suits biodiversity conservation. As a result, the sugar project would disrupt the ecological functions of the area. The sugar project should be suspended in favour of biodiversity conservation and support for tourism, forestry, fishing, and small-scale farming. Alternative two The estimated NPV of the sugar project does not include the compensation and resettlement of the local communities. Besides, the environmental conservation cost is also not included. The inclusion of these costs makes the project unviable. References CORNLAND D.W. (2001) Sugarcane Resources for Sustainable Development: A case study of Luena, Zambia (report) HVA INTERNATIONAL (2007). Feasibility Studies for Tana Integrated Sugar Project Report HVA INTERNATIONAL (2007). Tana Integrated Sugar Project EAI Study Report JOHNSON, F. X., & SEEBALUCK, V. (2012). Bioenergy for sustainable development and international competitiveness: the role of sugarcane in Africa. New York, Earthscan. MITTERMEIER, R. A., & NASH, S. D. (2009). Primates in peril: the world's 25 most endangered primates 2008-2010. Arlington, VA, IUCN/SSC Primate Specialist Group, International Primatological Society, Conservation International. MULWA, R. M. (2006). Economic and environmental performance of sugarcane production in Kenya: non-parametric frontier approaches. Weikersheim [Germany], Margraf. RAMADHAN, K., & KAVEN, F. (2011). Participatory science restoration & sustainability of the Tana Delta. [Nairobi], Communityimages. Read More