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October 07, 2009

Bright future forecast for Kenyan, South African biofuel sectors

Kenya and South Africa will see strong growth of their biofuel industries over the next five years, and an increase in the generation of electricity from renewable sources, a global research company says in its latest report.

SA and Kenya are reported to have favourable emerging green energy policies, the study by Frost & Sullivan says.

“Growing government support in the form of production subsidies and the increasing liberalisation of electricity sectors is boosting the renewable energy industry in Africa.”

High targets set by the European Union and the US for the inclusion of biofuels in their fuel supply will be key drivers in the growth of biofuel projects in Africa. It estimates that the sub- Saharan African biofuels market will earn 26,9m this year, and ris e to 229,9m in 2017.

The EU has set targets of a biofuel blend of at least 10% by 2020 and the US aims at 136- billion litres of biofuel by 2022.

“Globally, growing awareness of environmental issues and finite energy sources has led to heightened investment into alternative and renewable energy,” says Frost & Sullivan analyst Kholofelo Maele. “Biofuels have received increased support in an effort to reduce greenhouse gas emissions and for their role in helping countries to achieve energy independence.”

Biofuels have the potential to reduce countries’ fuel import bills significantly and to free up the funds for development. Growing “energy crops” could provide an income for subsistence and small-scale farmers and support rural initiatives.

But delays in formulating and implementing regulatory framework s have been a major restraint and limited infrastructure in many countries remains a challenge .

“Legislating mandatory blending into a country’s fuel supply will create a secure market for biofuels,” says Maele. “However, the present uncertainty around policy has made investors hesitant about investing in this industry, which is still in its infancy.”

In Kenya the Strategy for the Development of the Biodiesel Industry, completed last year, is yet to be officially launched .

The country is also engaged in a debate on the best crops to use . Some experts favour the jatropha plant because it does well in dry areas, while others argue it still requires too much water, and lobby for croton and a mix of other seeds.

Lorna Omuodo, head of Vanilla Jatropha Development Foundation says Africa needs to put more money into research to decide which crops are best .

“Some people have been talking about the effects of biofuel crops on food security. In Kenya for instance, we already have food security problems even without growing biofuel crops,” says Omuodo.

Isaac Kalua, head of Green Africa Foundation, which works with farmers growing jatropha seeds, says a cost- benefit analysis done by the foundation shows farmers can easily make about R6600/ha a year from selling its seeds.

With spreads of the crop dovetailing with arid and semi- arid areas, the returns compare favourably to the R4000 to R2700/ha a maize farmer earns in a rainfall-fed area in Kenya .

If processed into crude fuel using simple technology available at farm level, earnings jump to R10300 a year, exceeding earnings from tea, which stand at R5000 for the same size of land a year.

“We are growing jatropha in some of the driest areas like Kitui where we have not had any major rainfall in the last six years,” says Kalua.

But David Newman of Edelevu Energy, which promotes production of biofuel from croton nuts says jathropha is uneconomical. Research done by his company to be released soon will provide a true cost- benefit analysis of jathropa, he says.

A study conducted by the Nairobi-based African Centre for Technology Studies in October last year recommends more research and development, which also involved rural communities, on the viability of jatropha production.

Despite such uncertainties, the Frost & Sullivan report says many foreign organisations and local commercial farmers have invested in land or have entered into agreements with out- growers for growing energy crops and setting up pilot production facilities.

This is to ensure that production can begin as soon as the regulations are in place.

High targets set by the EU and the US for the inclusion of biofuels in their fuel supply will be key drivers.

Business Day

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