If South Africa is going to stake out its place in the budding ethanol industry, we do not have the luxury of time, writes Andrew Russell.
South Africa finds itself facing a multitude of challenges which require urgent action.
These fundamental issues, like load shedding, the dysfunction at our ports, failing service provision at the local government level, as well as the need to fix our ageing public infrastructure must be addressed if the economy is to generate the growth needed to create jobs, reduce inequality, and lift millions of South Africans out of poverty.
But the global economy will not wait for us to fix our problems. The competition to dominate the industries of the future is afoot, and South Africa risks falling further behind unless we act now to get into the race.
A notable area of competition is for dominance in the green economy. From renewable energy generation to battery storage, there are innumerable examples of green economy industries that are growing quickly as the just energy transition gains momentum.
One such field is the production of sustainable aviation fuels (SAFs). SAFs are an alternative to traditional fossil fuels which produce far less carbon emissions, helping to slow the progression of climate change.
Considering how much transportation contributes to global emissions, a shift from fossil fuels to SAFs is a critical ingredient in the effort to combat climate change, and it has great promise for South Africa.
In May 2021, SA Canegrowers published the findings of a joint study conducted with the Roundtable on Sustainable Biomaterials (RSB). The findings suggested that, by diverting 50% of the 19 million tons of sugarcane produced by growers each year towards ethanol production, the industry could produce approximately 700 million litres of ethanol annually for local or international biofuel markets.
This ethanol could then be converted into 433 million litres of sustainable aviation fuel for the aviation industry.
The study further shows that if both aviation and road transportation are considered, the local South African demand for fuel ethanol alone could be approximately 2.4 billion litres annually. Globally, SAFs currently account for less than 1% of global jet fuel use and are likely to hit 2% by 2025 with the right policy support.
Based on these figures, South Africa would need to double its sugarcane production just to meet local demand for fuel ethanol for road and aviation transportation. Given that the sugar industry currently supports one million livelihoods across the value chain, there are tremendous prospects for employment creation were sugar production to double and a new value chain established to produce SAFs.
To take advantage of this opportunity, South Africa requires two key ingredients: an enabling regulatory framework and funding.
The first of these should be prioritised since it can directly influence the latter. A legal framework for local SAF production should not only ensure that local players produce SAFs that meet international standards, but also include incentives to encourage investment in the industry.
The United States is currently the world’s largest producer of SAFs. The US government and airlines have agreed to produce at least 11 billion litres of SAFs per year by 2030 and to meet 100% of aviation fuel demand by 2050. In September 2022, the Energy Department published a plan that aims to help US companies corner the SAF market. To this end, US President Joe Biden signed legislation implementing tax credits and allocating $290 million for a SAF grant programme.
In the developing world, South Africa’s BRICS partner India is leading the way. In May 2023, India announced plans to use 1% of SAFs by all domestic airlines from 2025. This blending approach is a model South Africa can follow to introduce SAFs at a realistic pace, increasing the percentage of SAFs as production increases and becomes more efficient and cost effective.
Notably, India also does not yet have the necessary regulatory framework, but this has not stopped them from laying the groundwork to grow the industry.
Another BRICS partner, Brazil, is already the world’s second largest producer of ethanol, producing more than seven billion gallons a year.
According to its agriculture ministry, Brazil has 349 plants producing ethanol from sugarcane. They are also converting grain into biofuel.
The Brazilian example is notable since the country is one of the world’s largest sugar exporters. Their pivot to the production of SAFs from sugarcane therefore provides a model as South Africa works to create a path to building a sustainable industry.
Indeed, critics of the local sugar industry have decried its failure to diversify the sugarcane value chain, but the fact is that growers too are eager to see this come to fruition.
If South Africa is going to stake out its place in this budding industry, we do not have the luxury of time. We need to take the legislative steps necessary to regulate the SAF market as well as make provision for the investment needed to pivot the sugar industry.
The argument for prioritising these steps is clear from the benefits: short-term work for multigenerational economic growth and job creation. All that remains to be seen is whether we will demonstrate the foresight required to position South Africa for the future.
Andrew Russell is the chairperson at SA Canegrowers.
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