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Swiss Commodities Trader Expands Into Ethanol in Africa

Wednesday, June 15, 2011

Originally published by The New York Times


By Matthew Saltmarsh

June 15, 2011


GENEVA — Jean Claude Gandur, a Swiss commodities trader, made a fortune during the 1990s buying oil concessions in Africa that others did not want or could not hold.

Now a billionaire, he is poised to swim against the tide again with a major expansion into ethanol in Sierra Leone, the West African country still recovering from a decade-long civil war that ended in 2002.

One of his companies, Addax Bioenergy, was set to sign a loan agreement Thursday with six international lenders including the African Development Bank, the Netherlands Development Finance Company and the German Investment Corporation.

The 258 million euro ($366 million) project near Makeni, in central Sierra Leone, will convert sugar cane into bioethanol for European and domestic markets.

The move again has stirred controversy as ethanol is being partly blamed for rising food prices. And it comes at a time of renewed criticism from advocacy groups worried about an exploitation of developing countries amid the global scramble for resources as food prices climb.

The Oakland Institute, a social development group based in California, warned this month in a report of a “land grab” under way, whereby investors including hedge funds are driving farmers off their land in Africa to make way for new industrial farming projects to profit from rising food prices.

Mr. Gandur said that despite concerns about the effects on farm markets, he thought that ethanol had a viable and profitable future, if managed properly.

The Addax project will be the largest investment so far in Sierra Leone’s agricultural sector and includes a new sugar cane estate, an ethanol refinery and a biomass power plant for the refinery and the national electricity grid.

Construction begins this year, and the project is expected to be operational in 2013. It employs over 500 people and will create more than 2,000 jobs, according to Addax. The land will be leased from local landowners and tribal chiefs.

According to Addax Bioenergy, the deal follows evaluations of the social, environmental and economic effects with the government and local nonprofit groups. The memorandum of understanding was ratified by Sierra Leone’s Parliament last November, and according to local news media reports, it was supported by the political opposition as well.

Mr. Gandur is no stranger to controversy, having worked in commodities trading and mining throughout his career in places where others tread warily, like Nigeria and Kurdistan.

He built his oil unit, Addax Petroleum, from scratch before selling it in 2009 to Sinopec, the Chinese oil company, for 8.4 billion Canadian dollars, or $8.6 billion at current exchange rates, taking $3.5 billion himself.

Addax says that it complies with social and environmental standards from the African Development Bank, the World Bank’s International Finance Corporation and the European Union. These include commitments on child labor, setting aside part of the estate for food production and sponsoring a farmer-training program developed with the United Nations.

“That’s why I don’t feel guilty of doing anything immoral,” he said during a recent interview. “On the contrary, if other countries cope with the same model, we can give a chance to Africa to employ people. Without being naïve, it’s a good way to bring back agriculture in Africa.”

But according to the Oakland Institute, by early 2011, close to 500,000 hectares, or 1.2 million acres, of farmland in Sierra Leone had been leased to or were under negotiation for lease by foreign investors, representing almost 10 percent of 5.4 million hectares of land suitable for farming by small landholders, which employs about half the population. It also cited food security risks and questioned the level of genuine interaction between the project and illiterate local farmers.

“The conditions surrounding agricultural investments in Sierra Leone are ripe for exploitation and conflict,” the institute said.

Duncan Pruett, an adviser on land rights at Oxfam, said that generally, biofuel production in poor countries “is a double blow for poor and hungry communities.” Land, he said, was often given away to investors or governments on abusive or unfair terms, and large-scale plantations often created little employment or food for local consumption. And diverting food into biofuel production “is also a key driver of high and volatile food prices, which spell hunger for millions of men, women and children,” he said.

Mr. Gandur is not shy about saying his intent is to make a profit, not to be a charity. But he said that by operating under the “watch and auspices of international bodies,” he thought his project could “be used as a model for other companies.”

In any case, Mr. Gandur, 62, said he expected the bet on ethanol would be among his last major business forays. An avid collector of antiquities and postwar European paintings, he has turned his attention to finding a home for his collection.

Mr. Gandur’s family, which has been referred to as the Rothschilds of the Middle East, has rich European roots. His father was a doctor, whose family emigrated to Egypt in the early 19th century. They had Italian ancestry and were ennobled in Austria in 1863. His mother’s side had Ukrainian-Georgian roots. In 1921, they fled Russia, where they had run the Odessa docks, for Constantinople, before resettling in Paris.

In 1961, when Mr. Gandur was 12, the family fled Egypt for Switzerland after the second wave of nationalizations under Gamal Abdel Nasser. They lost much, though they had previously shifted wealth to Europe.

Mr. Gandur initially studied Egyptology, but around age 25, he joined the commodities trading firm Philipp Brothers. In 1987, he started the Addax & Oryx Group, named after two African antelopes, with partners.

The group grew fast, buying oil concessions in Nigeria, under the government of Gen. Sani Abacha; Kurdistan, after the toppling of Saddam Hussein; the Ivory Coast; Gabon; Cameroon and Benin. It also held gold mining concessions in Tanzania.

“In 1995 and 1996, nobody wanted acreage in Africa,” he said. “Oil was $9 and upstream was not in fashion,” he said, referring to exploration.

He has been wounded by insinuations that he had to grease dictators’ palms to succeed. “I didn’t build Addax on getting acreages from governments under the table,” he said. “We have never paid money to anyone to get acreage in Africa, never.”