South African Government Delays Imperil US$417 Million Canola Fuel Plant

Phytoenergy International Holding states it will not proceed with its plans to construct its R5 billion (S$417 million) canola biofuel plant in South Africa unless the government moves forward with the necessary steps to finalize biofuel blending rate legislation.

Regulations in South Africa requiring a blend rate of 5% biofuel in diesel and a blend rate of between 2% and 10% of biofuel in gasoline are supposed to go into effect on October 1 of this year. However, the government continues to postpone the finalization of these regulations with the publication of a position paper.

The planned mega-project, which would produce 400,000 tons of biodiesel per year, could begin production in the third quarter of 2017 if construction remains on schedule. The country’s canola production has tripled since 2003 when it produced 37,975 tons. However, to meet this production goal, the plant would need 1.1 million tons of canola per year – nine times 2014’s output of 123,500 tons, according to Wandile Sihlobo with Grain SA, the country’s biggest famer’s association. Last year, 95,000 hectares of canola was planted in South Africa. Moving forward, an additional 500,000 hectares would need to be planted in the provinces of Eastern Cape, Kwa-Zulu-Natal, and the Free State in order to meet demand.

The plant, which would be located in the province of Eastern Cape, will be 35% owned by PhytoEnergy International Holding, 25% by South Africa’s Public Investment Corp., 30% by black investors, and 10% by the African Development Bank.

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