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06 Dec 2007 16:14
South Africa will not include maize in the initial stages of the country’s biofuels policy in order to keep a lid on high food prices, the Department of Minerals and Energy said on Thursday.
The decision followed the South African Cabinet’s approval of a long-awaited biofuels plan, which officials hope will revive the ailing agriculture industry.
Maize farmers, who have in the past struggled to stay profitable as bumper harvests pushed maize prices to multi-year lows, have also pinned their hopes on biofuels.
But critics fear using maize as a source of alternative energy could drive up prices of the staple food.
“This is largely due to food security concerns, fears around price increases and the fact that maize is a staple food source for the majority of the poor in the country,” the department said.
Addressing reporters via video conference from Pretoria, South African Minerals and Energy Minister Buyelwa Sonjica said the first phase of the five-year project would run from 2008 to 2013, after which targets will be reviewed.
The blending targets are 8% for ethanol and 2% for biodiesel.
However, Sonjica agreed the country needed to be more ambitious and increase this percentage as it sought to expand its nascent alternative-fuels sector amid rising global oil prices and concerns over greenhouse-gas emissions.
Sonjica said incentives in the form of fuel-levy exemptions would apply, as the country made use of soya beans, canola and sunflower as fuel stock for biodiesel, and sugar cane and sugar beet for its bioethanol production.
She said the exemption for biodiesel will increase from 40% to a previously proposed 50%, with bioethanol being entirely exempted.
South Africa’s central bank chief Tito Mboweni has warned that the global trend of using maize as a source for ethanol had stoked food prices and posed a big problem for domestic inflation, which has become a headache for monetary authorities.
CPIX (consumer inflation less mortgage costs) inflation—which the central bank watches for monetary policy—has exceeded the bank’s 3% to 6% target range for seven months in a row.—Reuters
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