Biofuels given a new lease on life

2013-04-07 10:00

Dormant plans to establish a local biofuel sector – earmarked to create up to 50?000 jobs and save the country at least R8.9?billion in foreign exchange payments – could be given a new lease on life before year-end when government hopes to have financial incentives for prospective producers in place.

The creation of such an industry was, on Thursday, shown as an example by the Minister of Trade and Industry, Rob Davies, of the potential outcome of government’s industrial policy action plan (Ipap).

At least two prospective manufacturers, one led by the Industrial Development Corporation (IDC) and a privately owned firm, are waiting only on the finalisation of the financial incentives before they start on the construction of their plants.

These plants would typically be located in investment-hungry rural areas and create a new market for agricultural produce, especially for sorghum and soya beans.

Government published its biofuels strategy as far back as 2007, when it said all petrol and diesel sold in South Africa should contain a biofuel mix of at least 2% by the end of this year.

While this deadline could no longer be met, a Government Gazette notice of August 2012 did state biofuels blending would be made compulsory, without giving a new deadline.

The original strategy had also made mention of a start-up incentive for producers that would be phased out over time.

Davies said an interdepartmental team has finally agreed on a design of such an incentive, of which a draft would be published before the end of the second quarter.

A final set of guidelines is expected to follow by the third quarter, and the programme is to be launched by year end.

Finance Minister Pravin Gordhan already indicated during his budget speech the incentive would be financed by an additional fuel levy.

Davies said: “The 2012 Ipap (last year’s update of the strategy) signalled a focus on sectors where significant domestic capacity and opportunities exist.”

These included biofuels, an agri-competitiveness investment fund that approved projects to the value of R76?million, as well as a R150?million soya bean facility and other investments in agri-subsectors.

Davies said that, apart from the benefits in relation to South Africa’s balance of payments and jobs creation, the country would also reduce its CO2 equivalent emissions by 498?000 tons.

The biggest spin-off for jobs would not be at the manufacturing plants themselves, but in the cultivation of the feedstock grains.

Mabele Fuels, a prospective producer of ethanol biofuel from sorghum in Bothaville, Free State, is one manufacturer waiting on the details of the incentive scheme. The IDC’s plant is earmarked for Cradock in Eastern Cape.

Mabele CEO Phil Bouwer said a 2% biofuel mix would imply production of about 280?million litres per year, enough to grow demand for sorghum to 10 times the size of the current market for it.

Sorghum is cultivated in South Africa’s traditional summer grain areas, like the eastern Free State and the eastern parts of North West.

Bouwer said: “Sorghum probably is the most ideal crop for biofuels. It can withstand droughts and works well on marginal soil.”

According to him, Mabele would be able to erect a plant in two years and is hoping to start producing biofuels by 2015.

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