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June 19, 2008

South Africa rules out maize as biofuel feedstock

With food prices having risen dramatically in recent months, Minister of Trade and Industry Mandisi Mpahlwa on June 18 emphatically ruled out the use of maize as a crop source for biofuels.

While government will continue to proceed with its biofuels programme, other crops would be sourced to provide for biofuels, said the minister.

The minister was responding to a question in Parliament on the use of maize, or mealie meal, in biofuels programmes and the pressure this would put on maize prices as a result of increased demand.

Meanwhile, government would be taking both short- and long-term measures to deal with what he called soaring food prices in South Africa and globally, as it proceeds with the medium-term objectives of the economics cluster.

These strategies would include increasing agricultural production in the country, speeding up land and agrarian reforms, and the provision of skills for emerging farmers.

Government will also seek to "proactively improve" its ability to address anti-competitive behaviour in the context of domestic pricing structures, the minister added.

With oil prices also at an all-time high, greater attention is being paid also to the supply of energy, particularly fuel.

The production by South Africa of synthetic fuels, which entails using coal-to-liquid and gas-to-liquid technologies in which South Africa is already a world leader, will continue to be a central plank of the country's energy strategy.

"The production of synthetic fuel is crucial to cushioning the country against the supply insecurities," the minister said.

Mr Mpahlwa, as well as Nhlanhla Gumede Deputy Director General in the Department of Minerals and Energy, indicated to a Parliamentary committee earlier in the day that biofuels would continue to be an element of domestic liquid production.

Speaking at a briefing to the Members of Parliament on the energy master plan, Mr Gumede said government may have to provide incentives for coal- and gas-to-liquid production to minimise balance of payment concerns.

Moves to increase refining capacity, boost pipeline capacity, increase the handling capacity of ports and more storage facilities are also under way, with the costs of these expected to be partially carried by the private sector as well, he said.

This was reiterated in the House of Assembly by Mr Mpahlwa, who added that solar energy had also been identified as a key complementary source of energy going forward.

"It has also become clear that alternative energy sources need to be developed," Mr Mpahlwa told MPs, while the rollout of nuclear energy will continue.

In the longer-term, energy efficiency plans are being extended beyond demand management of its consumption by business and residential consumers.

"Energy efficiency does not only mean efficiency in the final consumption of energy but efficiency in production and transportation as well," he said.

Meanwhile, responding to a question on taxes on fuel, Mr Mpahlwa said Cabinet had not yet adopted a position around the reduction of the elimination of fuel taxes but said government would be consulting with stakeholders around this on an ongoing basis.

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