South African biofuels budget underspent by 15 percent; government project constraints too tight, say critics

In South Africa, the Department of Minerals and Energy has underspent its biofuels budget by 15 percent, although the department has helped finance four projects to date. Critics of the program say that limiting government support to 20 percent of the capital cost of a project has affected the project development rate.

The program also limits projects to maximum cost of $13.7 million with a minimum of 1 MW of electricity, 240,000 gallons of biodiesel, or 400,000 gallons of ethanol, too small for many projects to be commercially viable.

Last month, the South African government has flip-flopped on the use of surplus corn for ethanol production, following a meeting between industry leaders and the Agriculture minister, Lulu Xingwana. Average corn demand in South Africa is 9 million tons and forecasters have projected a bumper crop, with ethanol demand expected to act as a price support.

In December, the national government unveiled its biofuels policy, which set a target of 2 percent of fuel supply coming from biofuels by 2013. The policy excluded corn as a feedstock, restricting the 2 percent target to biodiesel made from soybeans, canola or sunflower oils, or ethanol from sugar cane or sugar beet.

The policy also will implement a 50 percent fuel tax exemption for biodiesel and a 100 percent exemption for ethanol. The final plan backed away from a 4.5 percent biofuels target that was the centerpiece of a draft plan circulated in the summer.

Also in recebnt sweeks, the South African energy shortage became acute after South African energy supplier Eskom withdrew supply from Zimbabwe, Botswana and Namibia, and reduced supply to Swaziland because of shortages in South Africa. Eskom had exported 5 percent of its energy regionally. Swaziland and other Southern African nations are turning to the emergency development of power from biofuels to avoid being plunged into darkness. Swaziland Electricity Company  asked consumers to switch off all unused appliances from 6 a.m to 10 p.m daily. The Swaziland National Energy Policy Project (SNEPP) initiated in August 1999, had failed to address the development of sufficient alternative resources.

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