STAFF NEWS & ANALYSIS
Africa Becoming a Biofuel Battleground
By - September 11, 2008

Western companies are pushing to acquire vast stretches of African land to meet the world's biofuel needs. Local farmers and governments are being showered with promises. But is this just another form of economic colonialism? Everything will turn out alright. Correction: everything is going to get better. There will be new roads, a new school, a pharmacy, even a proper water supply. Most of all, there will be jobs-5,000, at the very least. "If there are jobs for us, then it's a good thing," says Juma Njagu, 26, who hopes to be able to leave his meager existence as a planter and charburner behind soon. Njagu lives in Mtamba, a village of about 1,100 souls in Tanzania's Kisarawe district, about 70 kilometers (43 miles) south-west of Dar es Salaam, the capital and largest city. Mtamba, accessible by dirt road, is a place where people scrape by on a bit of farming, a bit of fishing and the production of charcoal. There isn't much else in Mtamba. That could change if the British firm Sun Biofuels goes ahead with plans to produce biodiesel fuel from "Jatropha curcas," an energy plant with a high oil content, which it hopes to plant on Kisarawe's farmland. The Tanzanian government has granted the British firm the use of 9,000 hectares (22,230 acres) of sparsely populated farmland, or enough land to cover about 12,000 soccer fields, for a period of 99 years-free of charge. In return, the company will invest about $20 million (€13 million) to build roads and schools, bringing a modicum of prosperity to the region. Sun Biofuels is not alone. In fact, half a dozen other companies from the Netherlands, the United States, Sweden, Japan, Canada and Germany have already sent their scouts to Tanzania. Prokon, a German company known primarily for its wind turbines, has already begun growing jatropha curcas on a large scale. It expects to have 200,000 hectares (494,000 acres)-an area about the size of Luxembourg-under cultivation throughout Tanzania soon. A gold rush mentality has taken hold-not just in East Africa but across the entire continent. In Ghana, the Norwegian firm Biofuel Africa has secured farming rights for 38,000 hectares (93,860 acres), and Sun Biofuels is also doing business in Ethiopia and Mozambique. – Der Spiegel

Dominant Social Theme: Africa is necessary again.

Free-Market Analysis: Stay with us on this. We need to begin with a macro analysis – one that, as always, involves the element at the top of the economic food chain, the central bank.

You can argue as many do that central banking is a benign and necessary activity. Our take is that central banking is a destructive force because central bankers never know how much money is too much. And because the central bank always prints too much money, it eventually generates a boom that is bound to turn into a bust. The boom lifts some boats, but not all. The bust hurts just about everyone but a lucky few.

There are other consequences, most of which have to do with the extraordinary growth of government in countries that maintain powerful central banks. Add in a graduated income tax – a seemingly inevitable corollary of a central bank – and you end up with an economy that is inflated by increasingly worthless paper, the assets of which are worth less than they seem to be and an industrial infrastructure that is increasingly out of date and rundown.

This sort of cycle has happened over and over again in countries that have the three symptoms mentioned above – a central bank, a graduated income tax and virtually limitless government growth. The lethality of the structure is amply reflected in the "Asian flu" of the 1990s, the various ruined countries of South America and even, to a degree, the United States and Europe, given the current mess.

Central bankers and others who help organize and build the world's financial engines are quite aware of the problems that fiat money, taxes and overlarge governments engender. Of course, being who they are, it apparently never occurs to them to do something productive like returning to a gold standard. No, in our opinion they embark instead on extraordinarily energetic and well-planned-out campaigns to ensure an ample supply – a steady flow – of buyers for worthless Western paper. In the 1980s and 1990s, the buyers were found in Japan, Asia and South America, to the eventual detriment of countries involved. In the 2000s, India and China and to some extent Russia have served as buyers of last resort. But now we have reason to believe the powers-that-be have set their sights on Africa.

Why Africa? As we just explained, there always has to be another country or region being groomed for "growth." China is a good example of such a country. The Chinese need to export to the West to keep the economy going, and the government is thus willing to continue to buy inflated American paper. But eventually China, and India, too, will grow to a point where they will not be able to provide a role as a buyer of last resort for Western central banks. Another vast, exploitable region will be needed – and that region likely will be Africa.

Of course it is not simple. In order for a region to be useful to the current consortium of central banks, it must be industrialized to a point where it can generate capital to purchase the requisite paper. It must also, as a region, be able provide at least rudimentary goods and services. While China and to a lesser extent India have been able to make the transition on their own to buyers "of last resort," it is likely that Africa will need a little more help.

If Africa can be converted to a region that regularly produces a necessary commodity like biofuel, then there is a good chance that it can eventually become the next India or China. It will seem just in the nick of time for the rest of the world – in need of another engine within the next few decades to do what China and India are doing now, for the West and its central banks.

After Thoughts

The idea that Africa can be industrialized and turned into an engine of world growth likely seems absurd at this point in time. But one only has to think of China and India 30 years ago to see that countries and even continents can turn around quickly. What is needed is industrialization. If biofuels can provide the necessary industry, especially under Western control, then the chances are that Africa can eventually emerge as a new industrial power over time.

We're not making any sort of moral judgment here – just observing. Look for increased talk about an African Union – along the lines of a European Union if this happens. Africa's tribal disunity will generate, no doubt, the same endemic corruption and misery that marked the last great wave of colonialism. And of course, great fortunes will be made. And great swathes of Western paper will be purchased.

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