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September 22, 2008

Maize biofuel dream turns into nightmare in South Africa

An ambitious R7 billion maize-to-fuel project was unveiled in Bothasvilles in South Africa two years ago.

The construction of the first of eight ethanol plants in SA’s major maize-producing areas of Free State, Mpumalanga and North West, was the news commercial farmers needed at one of their most trying times. A free fall in the maize price left farmers with bulging stocks. Any money making initiative to reduce the stocks was welcome.

“The bio-ethanol industry is the Free State’s largest single economic development since ( the 1950s ) inception of the gold mining industry ," Johann Hoffman, of maize-to-fuel company Ethanol Africa, said in 2006.

Hammered by erratic maize prices, biofuel production was a ray of hope for many farmers ready to throw in the towel and leave the agricultural sector. Little wonder the commercial farming community showed boundless enthusiasm. But their high hopes crashed before their eyes, because the government had other ideas. Concerned about food security, the government has excluded maize as a possible feedstock, at least in the initial stages of developing the biofuels industry.

The Bothaville plant was supposed to have been completed and in full production by the middle of last year. But the backers of maize-to-fuel plants have seen their beautiful dream turn into a horrifying nightmare, in a short time.

The global maize price increase and shortage of food in Mexico due to biofuels investments, influenced the state’s cautious stance in not including maize at the project outset. “It is envisaged that bio- ethanol production from maize will be considered only once certainty on the ability of the underutilised land to produce has been ascertained and the necessary measures are in place to guard against extreme food inflation,” the strategy says.

The decision took the Southern African Biofuels Association (Saba) by surprise, says its president, Andrew Makenete. “Maize was supposed to be the foundation of a South African biofuels project.”

Gregor Paterso n-Jones, CEO of Sterling Waterford Securities, a subsidiary of Sterling Waterford, said , “As for development of ethanol plants, we have adopted a wait and see attitude. All plans have been put on hold.”

Cape Town-based Sterling Waterford owns 50% of maize-to-ethanol company Ethanol Africa. Ecofield, a company representing a group of South African commercial farmers, owns the other 50% of Ethanol Africa.

The Accelerated and Shared Growth Initiative of SA (Asgi-SA), identifies biofuels as one of three strategic sectors requiring government support.

The state’s decision effectively curtailed the grand plans. In its biofuels industrial strategy, the minerals and energy department said biofuels plant investment could be a catalyst for transforming rural econo-mies and contribute to Asgi-SA.

Given the economy’s energy shortfall, biofuels deserve a place in the sun. Saba has assessed biofuels’ potential to contribute 10% of SA’s diesel by 2010.

Business Day

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