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Biofuels have returned to the policy agenda as government and industry stakeholders signal renewed interest in building a domestic sector amid rising fuel costs and continued pressure on agricultural producers.
Speaking at a panel discussion at NAMPO Harvest Day, agriculture minister John Steenhuisen said government is revisiting its approach after years of limited progress. “Biofuels have stuttered badly since 2007,” Steenhuisen said, adding that existing policy work is being reviewed rather than starting from scratch.
He said current conditions, including high oil prices and rising input costs, have created an opportunity to move the sector forward.
Demand creation a central constraint
A central theme of the discussion was that the viability of biofuels depends less on production capacity than on creating sustained demand. Industry participants said the lack of guaranteed offtake has historically deterred investment, despite South Africa’s ability to produce feedstocks such as maize and sugar.
“You’ve got to have the demand; you need that pull,” said agricultural economist Prof Ferdi Meyer, noting that without policy mechanisms such as blending mandates or incentives, projects struggle to remain viable over time.
Peter Starling, executive chairperson of AlcoNCP, echoed this view, saying investment follows market certainty. “If there’s a secure market opportunity and the risk is reasonable, investment will follow,” he said.
Participants pointed to international examples, including Brazil and the United States, where mandatory blending requirements and supplier incentives underpin the biofuels sector.
Policy and regulatory direction under review
Steenhuisen confirmed that a cross-departmental task team is reviewing South Africa’s biofuels framework, last substantively addressed in 2014. “We’ve done the strategy. Now it’s time to make the tough choices and interventions,” he said.
The revised approach is expected to involve several departments, including those responsible for energy and environmental policy, reflecting the cross-cutting nature of biofuels regulation. Government is also assessing the fiscal trade-off between continued fuel imports and the support mechanisms needed to establish a local industry.
Participants noted that South Africa imports a significant share of its fuel, and that reducing this dependence is a key strategic driver of biofuels development.
Opportunity linked to surplus production
From an agricultural perspective, biofuels are seen as a potential new source of demand for commodities such as maize, particularly during periods of oversupply. Steenhuisen said South Africa’s maize surplus of two to four million tonnes could theoretically yield between 800 million and 1,6 billion litres of ethanol a year.
The panel said this could provide producers with an alternative market and reduce their exposure to volatile export prices. “It gives producers options,” Steenhuisen said, adding that they are currently “trapped” by international price dynamics.
However, the discussion also highlighted that profitability must remain viable across price cycles, including periods of low oil prices or high grain prices.
Market volatility remains main risk
Speakers cautioned that the economic case for biofuels can shift rapidly with movements in oil and agricultural commodity markets. Meyer noted that high oil prices and lower grain prices create favourable conditions, but that balance can quickly reverse.
Producers raised concerns about long-term investment risk, particularly in the absence of stable policy support. “Whatever legislation we put in place must remain sustainable when the oil price is low and the grain price is high,” said Grain SA chairperson Derek Mathews.
Past projects in South Africa have struggled when demand was limited or policy support was inconsistent, despite being technically successful.
Blending mandates and incentives under discussion
The role of blending mandates, which require a minimum percentage of biofuel in conventional fuel, was identified as a key policy lever. Industry participants suggested that South Africa’s proposed blending levels may be too low to stimulate meaningful investment.
“If it’s available, make it 8 or 10%,” Starling said, arguing that scale is needed to justify infrastructure development. Beyond mandates, panellists also discussed incentives tied to carbon reduction, sustainability certification, or tax rebates as ways to support demand.
Broader economic and sector implications
While the debate focussed primarily on maize-based ethanol, panellists noted that other feedstocks, including sorghum, could also play a role depending on regional conditions and policy design.
They also highlighted the potential for biofuels to support agro-processing, rural development, and job creation, particularly if aligned with broader agricultural growth strategies.
At the same time, concerns were raised about ensuring that biofuels development does not undermine food security or distort existing markets.
Momentum depends on implementation
The discussion concluded that while interest in biofuels has resurfaced, progress will depend on whether the government can implement a consistent, coordinated policy framework.
Steenhuisen cautioned against losing momentum once fuel prices stabilise. “We’ve got to use the impetus we have now to get this over the line,” he said.
It was agreed that without clear, sustained policy support, particularly around demand creation, the sector risks repeating previous cycles of interest followed by limited implementation. – Nikilene Steenkamp, Plaas Media
