Biofuels industry in South Africa

petrol pumpSeven years after a government feasibility study showed a biofuels industry in South Africa could create tens of thousands of new jobs, the paperwork needed to establish it remains outstanding.

Briefing MPs on Wednesday, the energy department’s chief director for clean energy, Mokgadi Modise, said the original target of producing 400 million litres of biofuels a year, from the 2013 financial year on, “will be missed”.

However, the country was set to produce biofuels “in excess of the originally-set annual target when the overall enabling and supporting framework… takes effect”.

This framework included mandatory blending regulations and a pricing framework. Modise said the latter – including the development, by National Treasury, of a biofuels support mechanism – was at an “advanced” stage.

“A number of outstanding issues [and] deliverables are still work in progress due to the required technical investigation.”

Biofuels include bioethanol, produced from sugar and starch crops such as corn or sugarcane; and biodiesel, produced from vegetable oils.

Incentives offered by government to attract investors include the exemption of bioethanol from fuel tax; a 50% general fuel levy rebate on biodiesel; and, a three-year “accelerated depreciation allowance” for such renewable energy projects.

Modise told MPs these incentives had not proved enough.

“These incentives have proven not [to] be sufficient to lure investments in the biofuels sector, hence the need to establish a more enabling and supportive regulatory framework,” she said.

According to a document tabled at the briefing, eight companies – with a total annual capacity of more than one billion litres – have been granted licences, or provisional licences, to produce either bioethanol or biodiesel.

But asked after the briefing if these facilities, planned for the Eastern Cape, Free State, Gauteng and KwaZulu-Natal, had actually been built, she confirmed they existed only on paper.

South Africa’s biofuels strategy is mainly aimed at stimulating the production of suitable crops, such as sorghum, sugarcane, soybeans and canola, among others, in so-called “under-utilised agricultural areas” of the country, including in the former homelands.

According to the document, the government is also mulling options when it comes to blending biofuels into conventional petrol and diesel supplies.


Regulations in this regard were published in the Government Gazette in August last year.

They stipulate that the minimum concentration of biodiesel in diesel is 5% by volume, and the permitted range for bioethanol in petrol between 2% and 10%.

An implementation date for the regulations has yet to be set.

Under consideration is whether such blending is done at the country’s existing six refineries, at depots, or at both refinery and depots. These options would require capital investments of R278m, R459m and R421m respectively.

MPs at Wednesday’s briefing raised concerns about, among other things, the security of supply of feedstock crops for the biofuels sector, the cost of transporting feedstock to biofuels manufacturing facilities, and the application of incentives for producers.

Modise said estimates in a 2006 feasibility study, conducted by her department, showed the production of 400 million litres of biofuels a year, representing two percent of the country’s annual liquid fuel requirement, “can create about 25 000 jobs”.

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