South Africa has a significant amount of renewable energy potential through the utilization of sugar cane, but a lack of government incentives are holding the market back according to Tongaat Hulett’s Managing Director Peter Staude. He said that the company was well positioned to take advantage and exploit this potential, noting the Makhathini project – a proposed ethanol from sugar venture, projected to cost approximately R1.8 billion.
The project, which is currently at the feasibility study stage, is not just being evaluated from a commercial return perspective, but also for its abilty generate employment opportunities and increase producitivty in the underdeveloped Makhathini region’s agricultural sector. The region boasts a surplus of water and arable land with suitable weather conditions for sugar cane farming.
However, Staude said that the greenfield project would be extremely capital intensive, and that because of the current lack of a proper fiscal regime for the energy from sugar sector, the project would be uneconomical with uncertain returns, at best.
“The lack of incentives for renewable energy projects in South Africa is criminal, considering the global need for renewable energy and the need to reduce carbon dioxide emissions,” he said.
“The Makhathini project is one of the most politically motivated capital projects in South Africa,” he added. “There are much better options for this kind of project, which would require a much lower capital base to implement. For example, South Africa could convert its export sugar into ethanol with a low capital investment.”
Currently, Tongaat Hulett is in a cash generation phase, and is not financing any major capital projects. “The earliest that we could approve an ethanol project would be around November 2010, with the cash outflow taking place in 2011,” Staude concluded.