An industry analysis of the South African biofuels industry

Abstract

Biofuels have been used as an energy source for heating and cooking since the beginning of time. However, recent changes in the demand for energy, and in particular, renewable energy, have spurred the growth of liquid biofuel industries in developed countries. Many developing countries, including South Africa have the potential to produce biofuels with benefits extending into the economic and social spheres. Despite government commitments and targets, the South African biodiesel and bio-ethanol industries have stalled in the starting blocks. This research aims to assess the reasons why. South Africa does not have the climate to compete with Brazil in bio-ethanol production and the scope for bioethanol is limited by environmental factors. However our neighbours show significantly more promise in this area. Biodiesel production is more likely to be commercially viable due to the country’s ability to grow oil crops and the need for the by-products. Despite the availability of land for cultivation of energy crops, the required technology and suitable infrastructure, progress has been slow. Uncertainty, high risk and misdirected government interventions have hampered investment in the sector and those involved in biofuel projects are very negative about the government’s ability to stimulate the industry. Consequently, they are looking towards importing feedstock material and exporting the biofuel. This will create a limited number of jobs, but will be energy and carbon negative, and will not aid rural development. Currently there is no medium or large scale virgin oil to biofuel producer operating in the country and the start-up dates for projects are beyond 2013. The WVO biodiesel industry has grown rapidly in the last five years but is limited to small scale operators with limited benefit potential. With the exception of Brazil, other world leaders in biofuels are facing heavy criticism and the mechanisms used to initially boost the industry have very limited application in South Africa. The benefits of biofuel production in South Africa are plentiful and align well with social need and development goals.