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South Africa: DME biofuel won't burn food prices

South Africa could commit itself to biofuel production, confident that increased demand for maize will not burden food prices, Sandile Tyatya, chief director for clean energy at the department of minerals and energy (DME), said yesterday.
Biofuels would not be a free-for-all sector and there would be guidelines and limitations on what could be done when it was introduced, he said.

Tyatya was responding to a cautionary statement by Absa economist Ian Marsberg, who said the industry would keep food prices high. Marsberg said biofuels would be a profitable business that most people would want to be part of.

His comments echoed a warning from Reserve Bank governor Tito Mboweni,who in August questioned the wisdom of using maize and sugar as a source of ethanol, the biofuel additive, as global trends showed this pushed up prices of staple foods.

The global scramble to replace carbon-emitting gases with cleaner biofuels has propelled sugar and maize prices over the past few years.

Officials have presented a biofuels policy to revive the struggling farm sector, specifically maize farmers, who have been battered by market volatility as government support fell away in the post-apartheid era.

Tyatya said the biofuels strategy was being finalised. "I will not talk about the details of our plans, but I can say we do not believe there will be more pressure on food prices."

Marsberg said: "These are short-term worries and we need to find a balance between the security of food supply and the food we need for fuel."

It is expected that 1.2 billion litres of fuel produced in the country by 2010 will be bioethanol. Andrew Makenete, president of the Southern African Biofuels Association, said the introduction of biofuels could only be good for food production.

"[Biofuels] will expand the production of food. The only reason people are worried is because energy markets have not been defined. But we have multitudes of crops to choose from," Makenete said.

Limits proposed by the government were very low and could hinder growth in the biofuels industry, he said.

According to economist Wessel Lemmer, the country produced 6 million tons of maize a season instead of the required 8.6 million tons. That was adding to high prices.

"It has been a dry year but we can produce 12 million tons of maize a season if there is a market for it. Biofuels will be good for both our food security and economic growth because we will produce more and jobs will be created," said Lemmer.

The government should avoid setting limits because that could restrict growth to a few areas, he said.

Additional information:
News date: 03/10/2007

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