South African sugar producers will be reluctant to invest in biofuels until the government finalises a long-delayed biofuel policy, the chairman of an industry body has said.
Rodger Stewart, chairman of the South African Sugar Asociation (SASA), said until there was a definitive policy on biofuels the local industry would invest little in ethanol production.
South African officials have released draft biofuels policy documents with proposals on issues like ethanol and biodiesel blends, but an apparent wrangle over the more contentious matter of state subsidies has stalled a final policy.
The Southern African Biofuels Association says it needs between 2 billion and five billion rand ($300 million and $740 million) a year from the government to get the capital intensive industry off the ground.
"I think the problem is that we're in a policy vacuum at the moment. What we need first for ethanol (production) to work is a clear policy and at the moment the policy environment is not clear," Stewart said.
South Africa is expected to unveil its own biofuels policy this year and officials hope it will open up new markets for producers in the struggling farming sector. The government wants biofuels to provide up to 75 percent of its renewable energy needs by 2013, joining the global push for cleaner energy alternatives to harmful fossil fuels.
Ethanol and biodiesel are eco-friendly by-products of crops like sugar and maize and are already being widely used in cars in countries like Brazil, the world's largest sugar producer.
"There are things like mandated ethanol content in fuel mixes, among other issues, that we would need in the policy in order for this to be a success in South Africa," Stewart said.
Science and Technology Minister Mosibudi Mangena said in July the government was unlikely to meet demands for subsidies to help a nascent biofuels sector, but industry players say without such support they would battle to make profits. Mangena said subsidies would not go down well with many parts of the farming community, which have seen their livelihood shrink since post-apartheid South Africa cut agricultural subsidies.
However, without some assurance of assistance from the government to ensure profitability, local sugar industry players would remain reluctant to invest in ethanol production, Stewart said.
"I would say there would definitely need to be an economic incentive for farmers to move into ethanol," he said.
Reuters
