Competition for Scarce Resources and Government Inaction Pose Challenges for South African Biofuels Markets

DUBLIN, Ireland--Research and Markets (http://www.researchandmarkets.com/reports/c74589) has announced the addition of the new Frost & Sullivan Report “South African Biofuels Markets” to their offering.

Compliance with Kyoto Protocols to Motivate Biofuels Utilisation

Currently, the South African biofuels market is mostly a theoretical one. However, it is poised for significant growth, as the government has committed to develop this growth sector. There are many available opportunities in the agricultural segment (in the production of feedstock) and the production of biofuels. South Africa will most likely follow an E8 and B2 strategy because of the available feedstock in the region. This strategy proposes the mandatory blending ratios of 8 per cent for ethanol (E8) mix with conventional petrol and a 2 per cent bio-diesel (B2) mix with diesel, which will result in biofuels replacing 4.5 per cent of South Africa’s liquid road-transport fuels. Mandatory blending is considered to be the key factor that will boost the initial uptake of products in the market. Moreover, the country has an abundance of underutilised land and labour, and hence, developments in the biofuels industry could foster significant economic activity, which will have a positive effect on economic development, poverty alleviation and fuel independence. For instance, it is estimated that 55,000 direct jobs will be created from the biofuel industry by 2013.

The national drive to decrease dependence on imported fossil fuels and, at the same time, increase compliance under the commitments made in the Kyoto Protocol is proving a major factor in boosting market potential. "The market for biofuels production in South Africa stands at the door of an exciting growth period with the country having much to gain from decreased dependence on imported fossil fuel products, while, at the same time, stimulating additional sectors – specifically the agricultural industry with a high potential to increase employment," comments the analyst of this research. "Biofuels utilisation will also form the cornerstone of the government’s strategy to reduce greenhouse gases under their Kyoto commitments."

Competition for Scarce Resources and Government Inaction Pose Challenges

While the outlook is promising, care should be taken that the biofuels industry does not compete with food production. Accordingly, the government will have to devise strategies to reduce potential conflicts for scarce resources. "Current agricultural activities in South Africa are mostly geared to meet local requirements and any additional demand for the same products will increase prices and reduce availability – which, in turn, could lower access to those who can least afford it," cautions the analyst. "While the government is dragging its feet with the development of the national strategy for biofuels, the planning and investment from the private sector has come to a halt; as long as there is no further clarity, it can be expected that very few new companies would be willing to invest in this industry."

The capital investment needed to secure industry success is considerable. However, the potential positives derived from such investments will be sizeable. High oil prices and instability in key oil producing regions are further important drivers for this dynamic market. Market participants need to carefully plan their area of involvement in the biofuels industry. There are various opportunities in the agricultural and production industries, but competition is expected to become fierce – particularly if government subsidies are favourable.

Market Sectors

The following market sectors are covered in this research:

- Ethanol

- Biodiesel

For more information, visit http://www.researchandmarkets.com/reports/c74589