Biofuel: South Africa gearing up for a Biobased Economy

B.B. Marvey


Oil prices continue to rise and have more than doubled over the past year apparently due to rising demand in fast-growing economies and supply disruptions in the Middle East and Nigeria. Some analysts are in fact predicting that oil production levels should hit their maximum soon after 2010 thus causing prices for petrol and other fuels to reach disastrous levels. In the mean time South Africa (SA) has been experiencing disruptions in electricity supply causing huge losses for local businesses and creating a situation best described as a "national emergency" by the Public Enterprises Minister Alec Erwin. As reserves for fossil fuels (oil, natural gas and coal) run out, eco-friendly fuel substitutes should fast be phasing in. The major alternative renewable energy sources capable of meeting large-scale needs and saving the world of what could become a global energy disaster are biomass, solar, wind and water, according to some experts. However, due to inherent limitations associated with each technology, more research is still needed to make these alternative energy sources viable as replacements for fossil fuels.

According to SA’s biofuels industrial strategy, a 2% penetration level of biofuels is planned for the first five years and this translates to about 400 million litres of biofuel per annum. Biofuels (bioethanol and biodiesel) have lately been getting increasing amounts of news coverage as green and renewable alternatives to petrol and diesel; what one could probably call a comeback since the days of Rudolf Diesel (100 years ago) when he developed the first engine to run on peanut oil as he demonstrated at the World Exhibition in Paris in 1900. Since then vegetable oils have been used only when demand dictated as in the days of the energy crises in 1973 and 1979. In SA bioethanol (from sugar cane) was used in petrol as early as 1920’s until the 1960’s but was discontinued when international crude oil prices went low.

Unlike fossil fuels whose reserves are dwindling, biofuels come from field crops such as maize and soya bean which can be grown on demand. For biofuel production in SA the following crops have been proposed: sugar cane and sugar beet for bioethanol, and sunflower, canola and soya beans for biodiesel. For food security reasons basic food crops like maize have been excluded in the initial stages of a biofuel drive and additional land for growing biofuel crops will come from the 14% currently under utilised arable land which is located mainly in the former homelands. Therefore in addition to addressing pressing energy needs, the biofuel strategy seeks to boost the agricultural sector in farming areas previously marginalised by the apartheid system and to create sustainable income-earning opportunities especially for the rural poor. It is estimated that a 2% biofuel penetration level will create 25 000 jobs which is a reduction of rural unemployment by 0.6% and a boost to economic growth by 0.05%.

This image illustrates the main routes from biomass to biofuel.

Companies that have shown interest to invest in SA’s biofuel project include the Australian-owned Rainbow Nation Renewable Fuels (RNRF), Ethanol Africa, Sasol (SA’s largest fuel producer), to name a few. RNRF is in the final stages of securing a government license to manufacture soya-based biodiesel at a Coega-based plant (Eastern Cape) with an initial investment of R1.5 billion. The plant would be the biggest in Africa producing an estimated 288 million litres of biodiesel per annum which is around 3% of South Africa’s diesel fuel needs and creating about 350 new direct jobs and 725 indirect jobs. According to Geoff Mordt, the managing director of RNRF, negotiations are already underway with interested transport and mining companies and with local agricultural corporations and farmers. Predictions indicate that the plant should be operational by September 2009 and apparently the process of switching to biodiesel will not be a major challenge since the great majority of modern passenger and commercial vehicles are able to run on B5 diesel which is a blend made from 5% biodiesel and 95% petroleum diesel.

The East London Industrial Development Zone (ELIDZ) has in the mean time identified canola as fuel for its refinery. Ethanol Africa announced in 2006 of its plans to build maize-to-ethanol plants in SA at a cost of $1 billion. The company planned to build eight biofuels plants near Bothaville south of Johannesburg but then stopped construction to assess funding options and government support. According to Greg Jones of Sterling Waterford Holdings Ltd which owns a stake in Ethanol Africa, the project is on hold until government finalizes its policy on biofuels strategy.

Bioethanol is an alcohol-based fuel obtained by fermenting starch or sugar in a wide variety of crops. In the USA most cars on the road can run on bioethanol-petrol blends of up to 10% ethanol, and the use of 10% ethanol petrol is mandated in some cities where harmful levels of auto emissions are possible.

Meanwhile Sasol is reviewing its plans to put up a soy-based fuels plant due to its dissatisfaction with government support towards the biofuel project. Sasol had earlier indicated its intentions to produce 80 000 tons per annum of biodiesel from 400 000 tons of soya beans. The project would require about 300 000 hectares of extra soya beans to be grown each year for it to run at full capacity.

In Deutsche Bank Research Joseph Auer says farmers are likely to receive lower subsidies in the early stages of the biobased economy, a scenario which is likely to improve as the use of bioenergies gets more widespread approval. Policy-makers are to create a framework which is reliable and objective-oriented for the greater integration of bioenergies to be successful, says Auer. While there may be uncertainties and risks involved in switching to a biobased economy, most analysts and sceptics will agree, however, that the potential for an energy crisis has never been higher.

According to Williams and Alhajji (2003) the same indicators and warning signs that existed prior to the energy crises of 1973 and 1979 exist today with various energy security measures (domestic production capacity, dependence on imports, the degree of import concentration, petroleum inventory relative to imports, ability to second source petroleum imports in the event of an interruption from one or more suppliers) indicating that the potential for global energy shortage is high. With the petroleum age nearing its end, bioenergies are gradually taking centre stage as economic drivers in generating electricity and heat and producing fuels. “Moreover, bioenergies reduce the vulnerability of entire economies to price increases in crude oil and natural gas as well as heating oil and fuels”, Auer said. Indeed to ensure energy security and to pledge a support for reduced greenhouse gas emissions and the promotion of sustainable development, governments around the world will have to show strong commitment for the biofuel industry through their policy regulations and incentives.


October 2008