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18 Jun 2008 08:45
The role of biofuels in soaring food prices is not straightforward and needs closer examination when it comes to the role they can play in South Africa, say experts.
While countries like the United States have been heavily criticised for diverting corn production towards the manufacture of ethanol, proponents of biofuel argue that the industry has resulted in developing countries getting more equitable prices for their produce because of the boom in alternative energy.
“Previous low food prices have harmed developing regions that have massive agricultural production potential,” the Central Energy Fund (CEF) spokesperson Mandla Tyala told the Mail & Guardian.
“These low world prices were largely due to First World massive agricultural subsidies. Higher prices for agricultural commodities can be positive for Africa overall, as Africa has by far the world’s greatest underutilised agricultural capability.”
The massive subsidisation of the industry in the US, however, resulting in its use of land meant to cultivate food, for growing biofuel feedstocks is regularly held up as an example of bad biofuels.
Last year the Global Subsidies Initiative, based in Geneva, reported US government support for biofuels reached about $6,3-billion to $7,7-billion in 2006, the majority of which was directed to ethanol.
“Total support is projected to reach about $13-billion this year and almost $16-billion by 2014. Under existing policies, the industry will, in aggregate, obtain subsidies worth more than $92-billion over the 2006-2012 time frame,” said the report.
The contribution of biofuels to the increase in food prices was hotly debated at the United Nations conference on world food security, held in Rome earlier this month. Figures on the contribution of biofuels to food inflation vary widely, from a reported 3% to as much as 30%.
Brazil, a biofuel success story produces about 40% of the country’s fuel needs through ethanol produced from sugar cane. The US policy of biofuels being made from maize rather than sugar is controversial, however, as maize yields less energy than sugar and requires more energy to convert starch into ethanol.
For a country like South Africa, however, biofuels have the potential to stimulate development in under-developed areas.
Biofuels have been identified as a priority sector under the accelerated and shared growth initiative of South Africa (AsgiSA). But no large-scale biofuel production plants are under way.
Late last year the biofuels industrial strategy for South Africa was released. It outlines an initial phase, which will see a 2% penetration of biofuels into the liquid fuel market. This is down from 4,5% initially outlined in the draft document.
“The decrease was primarily introduced to reduce risk of competing with food supply,” Tyala said.
The CEF puts our country’s lack of production down to the priorities of the strategy.
“Supply is focused on expanding South African agricultural supply by using new, currently underused agricultural lands, primarily being in the former homelands,” Tyala said, “This takes longer than diverting surpluses from existing commercial lands.”
He said: “Investment in major biofuels plants requires clarity on investment incentives. This is not yet finalised in South Africa.”
But the longer the roll out takes, the further off the benefits of biofuels will be for South Africa.
J&J Bioenergy is looking at the feasibility of two biofuel projects, the first in the Umgazana area in the former Transkei and the second in neighbouring KwaZulu-Natal.
Both projects would encompass a minimum of 20 000ha of land for growing cane, along with the establishment of a bio-ethanol plant.
One plant can produce about 100-million litres of ethanol, says Steven Collins at J&J Bioenergy, and will take about R1-billion to build.
The projects will achieve a number of things should they go ahead, says Collins.
Both target underused, but arable land, and meet broad-based black economic empowerment standards as the communities will have a stake in the plant, as well as retain ownership of the land. The factories will also buy the cut cane from locals, and “pay a fair price” for it further adding to the their income streams, says Collins.
As both plants will be located in the heart of the growing regions, the cost of transporting the cane to the factory will be greatly reduced.
Under the former Transkei government, about 10 000ha of cane were being grown. This dropped to current levels of 4 000ha, says Collins, mainly because of transport cost increases.
The situation is much the same in KwaZulu-Natal, he says. In the Umzimkulu region it costs farmers R90/ton to transport cane to the closest mill. The mill pays R200/ton for the cane. As a result, farmers are switching from cane to other crops.
“In a place like Umgazana [Eastern Cape] there is nothing at the moment,” he says ” A factory would kick start development.”
It could produce power for sale to the national grid or, failing that, to power local homes and businesses.
The environmental impacts on the area are also minimal he argues. The entire region, covering both proposed projects is rain-fed, and would require no irrigation.
Given practices in cane farming, one employee is required for every four hectares of cane. Between the two projects, they could easily employ 6 000 people for each, along with 100 people working in each plant.
But, argues Collins, J&J has no wish to create indentured labour. The project would ideally mechanise harvesting, “to get the most value from the land”. Since the communities own the land increased profitability in operations would mean more money in their pockets at the end of the day.
Depite all these accolades, feasibility will only be decided on towards the end of the year and, should all go well, production will only begin in about 2012.
In addition to this Collins says the project will not solve South Africa’s fuel problem.
With both plants on line, it would only contribute 1% to South Africa’s target of a 2 % biofuel mix.
“But it could stimulate great social investment,” he argues.
Collins says South Africa simply does not have the right amount of arable land and not nearly enough water to source all its fuel needs from ethanol. He acknowledges that biofuels have contributed to the increase of food prices, but says that debate around their value is far “more complex than it appears”.
“Because of Brazil using cane for biofuels, the sugar price has increased,” he says “But in many developing countries producers were losing money growing sugar cane. But now they are receiving a fair price.”
To protect local food security the Industrial Strategy has ruled out maize as a feedstock for biofuels, The Southern African Biofuels Association (Saba) says that biofuels are not the cause of increased food prices.
“The opposite is the case,” says Erhard Seiler, chief executive at Saba.
Biofuel products interact quite intensively with food production, he argues. “With present technologies about 60% to 70% of the volume stream related to biofuels ends up in food production, adding to the food volume produced.”
Saba believes South Africa can achieve more than the 2% outlined in our industrial policy and argues that this would allow for increased private participation in the industry.
‘Saba always proposed 5% bio-diesel and 10 % bio-ethanol mix,” says Seiler. “These ratios are possible and beneficial for South Africa, [they] allow private sector participation and [promote] sustainable — food production and job creation in rural areas”
Seiler believes that given current demand and production rates, maize is a viable and sustainable feedstock for biofuels. As a result of increased demand on maize its production will increase this year, without the additional pull of biofuel production in South Africa, he says.
Seiler says South Africa uses about eight million tons of maize annually, of which only 45% is for staple food consumption.
“The harvest forecast is about 11 million tons for 2008. I believe that shows everybody the true story and the real potential for the country,” he argues.
The CEF agrees with Saba: “As long as the supply for the biofuels plants comes from land that would not have been planted (in the absence of the biofuels plants) and there are no major crop failures, then the Saba view is probably correct.”
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