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The agricultural sector as a biofuels producer in South Africa

Understanding the Food Energy Water Nexus

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REPORTZA

2014

FUNDED BY

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AUTHORAlan Brent

ABOUT THIS STUDYFood, water and energy security form the basis of a self-sufficient economy, but as a water-scarce country with little arable land and a dependence on oil imports, South Africa’s economy is testing the limits of its resource constraints. WWF believes that a possible crisis in any of the three systems will directly affect the other two and that such a crisis may be imminent as the era of inexpensive food draws to a close.

WWF received funding from the British High Commission to establish a research programme exploring the complex relationship between food, water and energy systems from the perspective of a sustainable and secure future for the country. This paper is one of nine papers in the Food Energy Water Nexus Study.

PAPERS IN THIS STUDY1. Climate change, the Food Energy Water Nexus and food security in South Africa: Suzanne Carter and Manisha Gulati2. Developing an understanding of the energy implications of wasted food and waste disposal: Philippa Notten,

Tjasa Bole-Rentel and Natasha Rambaran3. Energy as an input in the food value chain: Kyle Mason-Jones, Philippa Notten and Natasha Rambaran4. Foodinflationandfinancialflows:David Hampton and Kate Weinberg5. The importance of water quality to the food industry in South Africa: Paul Oberholster and Anna-Maria Botha 6. The agricultural sector as a biofuels producer in South Africa: Alan Brent7. Virtual water: James Dabrowski8. Water as an input into the food value chain: Hannah Baleta and Guy Pegram9. Water, energy and food: A Review of integrated planning in South Africa: Sumayya Goga and Guy Pegram

ABOUT WWFThe World Wide Fund for Nature is one of the World’s largest and most respected independent conservation organisations, with almost five million supporters and a global network active in over 100 countries. WWF’s mission is to stop the degradation of the Earth’s natural environment and to build a future in which humans live in harmony with nature, by conserving the world’s biological diversity, ensuring that the use of renewable natural resources is sustainable, and promoting the reduction of pollution and wasteful consumption.

DISCLAIMERThe views expressed in this paper do not necessarily reflect those of WWF. You are welcome to quote the information in this paper provided that you acknowledge WWF, the authors and the source. If you would like to share copies of this paper, please do so in this printed or PDF format.

In conducting the analysis in this paper, the authors have endeavoured to use the best information available at the time of publication. The authors accept no responsibility for any loss occasioned by any person acting or refraining from acting as a result of reliance on this paper

CITATIONShould you wish to reference this paper, please do so as follows:Brent, A. 2014. The agricultural sector as a biofuels producer in South Africa. Understanding the Food Energy Water Nexus.WWF-SA, South Africa.

For further information please contact:

Manisha Gulati at mgulati@wwf.org.za orTatjana von Bormann at tvbormann@wwf.org.za

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ABSTRACTAnalysts suggest that biomass resources are available to varying degrees to establish a local bioenergy industry in South Africa. To refine the available data, the potential biomass resource of South Africa is being investigated further–through a programme of the national Department of Science and Technology (DST)–to develop a bioenergy atlas for the country as a whole. This paper focuses on the agricultural sector of South Africa only, with the aim to address some of the main issues that have emerged in terms of expanding biofuel production in a sustainable manner. It is concluded that biofuels, in themselves, pose few sustainability risks for related food production in terms of land and water resources. Rather, the current practices of the agricultural sector overshadow the risks of biofuel production. The conservative policy approach to biofuels should thus be extended to the agricultural sector to minimise these risks as a whole. Also, the tendency to focus on integrated cropping and thereby extending the productivity of the agricultural system–with biofuels–should be enhanced. This would then buffer food production against volatile global prices–the major influence on local food prices. Such agrarian transformation of the agricultural sector–with related benefits to rural communities–would increase the availability of biomass in general. “Next-generation” technologies would then be near to commercialisation in South Africa and elsewhere to exploit the non-food components of the available biomass, with integrated processing as a means to produce not only biofuels but also high-value chemicals through a biorefinery approach.

KEY WORDSBioenergy, agriculture, sustainability, investment, green economy

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CONTENTSABSTRACT

1. Introduction 5

1.1 The Food Energy Water Nexus in Africa 5

1.2 The implications for bioenergy in Africa 6

1.3 Bioenergy in the South African context 7

1.4 Objectives of the paper 9

2. The policy regime to promote and create a biofuels market in South Africa 9

2.1 National Biofuels Industrial Strategy 9

2.2 Mandatory blending of fuels 10

2.3 Participation: Farmers and crops 10

2.4 Arable land to be used 10

2.5 Implications of other national policies and strategies 11

3. The impacts of biofuels on food prices and availability in a global context 12

4. The possible impacts of the production of biofuels on water resources 14

5. The benefits of investment in biofuels on upstream agricultural development 16

6. New technologies to overcome food security and resource issues 19

6.1 Next-generation technologies for total biomass conversion 19

6.2 Integrated production of biofuels and high-value chemicals in a biorefinery 20

7. Conclusion 21

REFERENCES 22

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1. INTRODUCTIONBiomass is the main source of energy for most of southern Africa (Johnson & Matsika 2006) but the rationale for bioenergy development differs from that in Western Europe, where the focus is on greenhouse gas reductions; or from that in the Americas, where energy security is the key issue. In Africa, the real potential of bioenergy is in social development. It is therefore important that Africa’s vast resources are used to develop a bioenergy sector that is inclusive, innovative, socially acceptable and financially viable, and balanced with adequate and sustainable food production (Stafford & Brent 2011). However, to date bioenergy in southern Africa has been limited by, among other factors (Amigun & Von Blottnitz 2008), poor conversion efficiency and technology transfer, poor feedstock availability and poor access and affordability. Additionally, the lack of supportive policy guidelines and an effective implementation strategy is exacerbated by the food-fuel debate (Sapp 2013), which leaves policy makers uncertain as to how to proceed in the light of food insecurity coupled with water scarcity–especially in South Africa.

1.1 THE FOOD ENERGY WATER NEXUS IN AFRICAThe chronic nature of food insecurity in Africa is a result of many complex factors. One is that of low crop yields (see Figure 1), which may be attributed to low energy inputs in agriculture compared to capital-intensive and highly subsidised agricultural systems in developed countries (Folberth et al. 2012). Furthermore, food insecurity may not be due only to an absolute lack of food but also to problems associated with post-harvest losses–a lack of storage facilities and inefficient processing and distribution mechanisms for consumption–either a result of high energy costs or the unavailability of energy, termed “energy for food” (Liska & Heier 2013).

Another factor affecting food insecurity is that of water scarcity, given that 70% of global freshwater is used for agri-cultural purposes. “Water for food” has become an important slogan in the current debates on poverty reduction and climate change in sub-Saharan Africa (Allouche 2011). However, emerging research suggests that the current evidence, based on water availability for agricultural production in the region, is inadequate for making decisions. Knowledge of basin-scale natural water storage–soil moisture, groundwater and surface water–is typically based on inconsistent and incomplete datasets. There is also a lack of integrated, evidence-based frameworks for evaluating the impacts of developmental policies, climate, and land-use changes on the environmental water flows essential to the functioning of catchment ecosystems. This then constitutes the water-food nexus (Allouche 2011).

Figure 1: The Africa lag–the Green Revolution largely bypassed Africa, where cereal crop yields have barely improved in 50 years

Source: Lynd & Woods (2011)

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All of this is compounded by a limited capacity to purchase food. At the international level, food insecurity in Africa could be related to unfavourable trade regimes, which suggests the importance of local food self-sufficiency(Ackello-Ogutu 2011).

1.2 THE IMPLICATIONS FOR BIOENERGY IN AFRICAAfrica thus needs to develop a bioenergy capacity (including biofuels) that complements food to ensure a sustainable future; landscapes should be optimised to deliver a range of ecosystem services such as food, fuel, water, biodiversity and carbon sequestration, among other things (Stafford & Brent 2011). This development needs to have multifunctional benefits for the African population (Amigun et al. 2011). The interlinkages between bioenergy production, food security and environmental sustainability in an African context should be harnessed to realise the potential for sustainablebioenergy implementation–to unlock cycles of energy and food poverty by developing energy security, food security, job creation, income diversification and rural development in southern African economies.

The current implementation of bioenergy systems is constrained by a lack of proper analysis of interlinkages between bioenergy production, food security and environmental sustainability–coupled with poor quality data for existing energy and water consumption and food security. Most bioenergy systems are being evaluated from the perspective of being in competition with food production and environmental systems, rather than for their complementary role (Lynd & Woods 2011). This kind of competition is believed to be most prevalent with the production of bioenergy from so-called “first-generation” feedstocks, which are food crops by nature (FAO 2010). Furthermore, bioenergy is mostlyevaluated in terms of its role as fuel for transportation or for utility-scale electricity generation. This disregards its important role in a range of energy services at rural level. Bioenergy has multiple functionalities in rural economies that include energy security, food security, job creation, diversification of income and a broader rural development that includes health and education (GBEP 2011). Therefore, bioenergy systems should be developed to benefit rural communities, in particular, through the stimulation of local economies and the provision of employment (Amigun et al. 2011).

The question that remains is whether African populations are worse off with the implementation of bioenergy systems than without them (Lynd et al. 2011). The opportunities for the integration of bioenergy directly into food systems include being an enabler of both energy and food security for the poor. This is in direct contrast to considering bioenergy and food systems as separate and competing systems. This new dimension creates a better understanding ofmultiple benefits that can be gained if bioenergy systems and food systems are handled as integrated systems thatdepend on and complement each other. A study based on a market system approach by the joint initiative of the Food and Agriculture Organization of the United Nations and the Policy Innovation Systems for Clean Energy Security consortium (FAO and PISCES 2009) on the impact of small-scale bioenergy initiatives on rural livelihoods revealed that bioenergy has the potential to improve rural livelihoods by offering new economic choices to rural communities. The study also highlighted that advances in bioenergy would add value to rural livelihoods. However, these scale-up activities have the potential to upset local economies and to create negative resource balances through commodity price increases and the inefficient use of resources. Therefore, sustainability criteria should be developed and more detailed techno-economic analyses need to be performed (GBEP 2011). The benefits of small-scale and large-scale bioenergy systems to rural livelihoods should also be evaluated. The point of departure should be a food- and energy-securityperspective that considers an increase in food productivity, access to modern energy, and broader rural development as the major sustainability indicators. A key aspect of this approach is the use of advanced technologies to make a significant contribution to socio-economic development and sustainable environmental practices. Bioenergy has the potential for such a contribution, provided that the right mixture of feedstock, processing technologies, end-uses and community-ownership is found to enable sustainable development. In terms of global supply chains, innovative business models have been called for to maximise the small-scale opportunities that bioenergy offers (see Figure 2).

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Figure 2: Business model innovations that provide small-scale opportunities in bioenergy supply chains

Source: Vermeulen et al. (2009)

1.3 BIOENERGY IN THE SOUTH AFRICAN CONTEXT

The potential of first-generation energy crops in the South African agriculture sector has been compared to the rest of Africa (see Figure 3(i)). The potential of the non-food component of biomass has also been assessed to ascertain the potential of next-generation bioenergy production (see Figure 3(ii)), as well as the available woody biomass in the region to supply South Africa’s energy needs (see Figure 4).

Figure 3: (i) Yields of different energy crops across Africa; and (ii) biomass availability in South Africa (Mt/yr (energy equivalent in PJ/yr)

(i)Crop Litres of oil/ha Countries where grownPalm oil 5 950 Angola, DRC, Nigeria, Ghana, and Tanzania

Soya bean 446 DRC, Malawi, South Africa, Tanzania, and Ghana

Coconut 2 689 Nigeria, Ghana, Senegal, Mozambique, and Tanzania

Jatropha 1 892 All countries

Sunflower 952 Angola, Malawi, Nigeria, Ghana, Botswana, DRC, Mozambique, South Africa, Namibia, Zimbabwe, Zambia, and Tanzania

Cotton seed 325 Angola, Malawi, Nigeria, Ghana, Mozambique, Tanzania, Zimbabwe, Zambia, and South Africa

Avocado 2 638 DRC, South Africa, Tanzania, Nigeria, Ghana, and Senegal

Groundnuts 1 059 Malawi, Angola, Ghana, Nigeria, DRC, Gambia, Senegal, Mozambique, Tanzania, Zimbabwe, and Zambia

Cashew nut 176 Angola, Mozambique, Tanzania, Ghana, Nigeria, and Senegal

Castor beans 1 413 Angola, DRC, Tanzania, South Africa, and Mozambique

Business arrangements

to include small-scale

owners and enterprises

Opptions for government

policy support

• Subsidised �nance and insurance schemes • Fiscal incentives (e.g. tax breaks, reduced concession fees)Local supply quotas (e.g. Brazil’s Social Fuel Seal) • Active support: information, guidance, research

FARMING MILLING REFINING DISTRIBUTION END USES

Outgrower schemesPurchase contracts

Land leasesSharecroppingManagement

contractsJoint ventures

(e.g. community land inputs = shares in the

business)

Cooperative millsShare ownership

Small-scale facilitiesaimed at local

end-usesSupply contracts with larger re�neries and

distributors

Intermediary tradersTransport contractors

Utilising existingdistribution systems

(e.g. networks of rural retail outlets aimed at

farmers)

Sliding-scale energy pricing

Subsidised multi-function platforms

Subsidised improved appliances

Use of unre�ned oil rather than re�ned

biodiesel

Support to o�-grid energy schemes

subsidies as above

Local contentrequirements

Employment lawsHolding developers accountable to job

projections in approved investment

contracts

Active promotion of small-scale milling operations, e.g. via

supply of prototypes

Range of support to promising joint equity

models

Support to positive models through

regulation, information, model

contracts and brokerage

Underwriting community business

involvement

Limited options given high capital costs of

biore�neries

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(ii)1

1. ResiduesAgriculturala

Maize Stover 6.7 (118)

Sugarcane bagasse 3.3 (58)

Wheat straw 1.6 (28)

Sunflower stalks 0.6 (11)

Subtotal 12.3 (214)

Forestry industryb

Left in forest 4.0 (69)

Sawmill residue 0.9 (16)

Paper & board mill sludge 0.1 (2)

Subtotal 5.0 (87)

2. Energy cropsc

From 5% of available land 34.0 (584)

From 10% of available land 67.0 (1 170)

From 20% of available land 134.0 (2 330)

Total, annual basis(assuming 10% available land) 84.0 1 470

3. Invasive plant speciesd 8.7 (151)

Sources: (i) Ambali et al. (2011) (ii) Lynd et al. (2003)

Figure 4: The available woody biomass in the region to address the energy needs of South Africa

Source: CRSES (2012)

1 a Maize, wheat, and sunflower based on 5-year averages as reported in the 2003 National Department of Agriculture (NDA) crop production estimates, assuming that residue production is equal to crop production and that grains are harvested at 25% moisture content. Bagasse based on NDA production data using yield factors.

b Forest product residues data based on total roundwood sales from plantations, assuming 50% moisture content, 50% of harvested logs left in the forest, and 50% loss in milling. Paper sludge based on 5% of total annual South African paper and paper board production of 2.3 Mt.

c Based on the value for 10% of available land area calculated with available land being land in excess of cropland required for food production (estimated for 2025), and land currently in use as forest or wilderness.

d Theron (2003).

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These analyses all suggest that biomass resources are available to varying degrees to establish a local bioenergy industry (DME 2007). To refine the available data, the potential biomass resources of South Africa are being investigated further–through a programme of the national Department of Science and Technology–to develop a bioenergy atlas for the country as a whole (SAEON 2012).

1.4 OBJECTIVES OF THE PAPERThis paper focuses on the agriculture sector of South Africa only, with the aim to address some of the main issues that have emerged in terms of expanding biofuel production in a sustainable manner (Stafford & Brent 2011), namely:

• establish the status quo of the policy regime to promote and create a biofuels market in South Africa

• examine the possible impacts of biofuels on food prices and availability in the global context

• examine and quantify the extent of the possible or anticipated impacts of the production of biofuels on water resources

• examine whether the current investments and planned investments in biofuels and the biofuel production chain can benefit upstream agricultural development

• examine if new technologies can overcome food security and resource issues.

2. THE POLICY REGIME TO PROMOTE AND CREATE A BIOFUELS MARKET IN SOUTH AFRICA

2.1 NATIONAL BIOFUELS INDUSTRIAL STRATEGYThe National Biofuels Industrial Strategy initially focused on a short-term five-year pilot programme to achieve a 2% penetration of biofuels in the national liquid fuel supply, or 400 million litres per year–to be based on local agricultural and manufacturing production capacity (DME 2007). This target represents about 30% of the national renewable energy target for 2013–of 10 000 GWh of energy consumption–set out in the White Paper on Renewable Energy (DME 2003). Before the release of the strategy, commercial sugar producers and maize farmers represented the majority of the parties looking to drive the South African biofuels industry. Two years later, however, progress in the development of the country’s biofuels industry had been very modest, especially in terms of investment (Van Zyl & Prior 2009). The only real activities by then had been the approval of R3.2 billion (US$437 million)–by South Africa’s Industrial Development Corporation (IDC) and the Energy Development Corporation (EDC)–for two bioethanol plants that should collectively produce about 190 million litres per annum of bioethanol from sugarcane and sugarbeet; and for the planned erection by Rainbow Nation Renewable Fuels Ltd of a 1.1 million tonnes per annum soybean crushing facility that will produce and distribute about 228 million litres of biodiesel.

Indeed, Letete and Von Blottnitz (2012) highlight that no commercial biofuel plants have been established in the country. Only biodiesel is currently being produced for the transport market, by the more than 200 small-scale initiatives that use recycled vegetable oil, most of which were established long before the strategy was released in 2007. Thus, until recently, there has been no assurance that commercial biofuel production will actually occur. Van Zyl and Prior (2009) attribute this to the absence, until then, of obligatory nationwide blending of biofuels into conventional liquid fuels.

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2.2 MANDATORY BLENDING OF FUELSIn 2011, the national Department of Energy (DoE) published draft regulations for public comment on the mandatoryblending of biofuels with petrol or diesel. The regulations strive to promote the blending of locally manufactured biofuels into the existing petrol or diesel pool. It also seeks to ensure that biofuel manufacturers receive a fair price for biofuels supplied to blending facilities, while also sending out a clear signal to investors with regard to securing the off-take of biofuel use by oil companies. The finalised regulations were released a year later (RSA 2012) and stipulated the standards to be followed–blending a minimum of 5% (by volume) of biodiesel into diesel, and between 2 and 10% (by volume) of bioethanol into petrol. The national Department of Energy (DoE 2013) recently gave notice that the regulations would come into effect in October 2015.

2.3 PARTICIPATION: FARMERS AND CROPSCanola, sunflower and soya are promoted as feedstocks for biodiesel, while sugarcane and sugarbeet are the choice of feedstocks for bioethanol. The government has stated that maize, South Africa’s staple food, could not be used in the production of biofuels, in order to ensure food security and to reduce the risk of high prices.

The government also promotes the use of farmers in the former “homelands”–previously disadvantaged black areas–to produce the feedstock. However, Letete (2009:168) and Amigun et al. (2011) have highlighted that these small-scale farmers are sceptical of these new ventures and generally are not willing to engage in farming crops that they are not familiar with.

Overall, the combination of the preference given to previously disadvantaged farmers and the exclusion of maize as feedstock has, undoubtedly, slowed down the establishment of an agriculture-based biofuels industry in South Africa (Letete & Von Blottnitz 2012).

2.4 ARABLE LAND TO BE USEDThe government documentation talks about new and additional and currently underutilised land to be found in the former homelands, but these definitions are not transparent. Letete (2009) investigated the agricultural area of QwaQwa in the eastern part of the Free State Province and discovered that there are three types of land in this area that could be classified as currently underutilised:

• Land owned by emerging black farmers: Since the late 1990s, the South African government has been awarding agricultural land to emerging black farmers, through various schemes, as a means of land reform. Because of the lack of financial, management and, in some cases, technical skills, most of these farmers have been struggling to operate the farms effectively, sometimes even leading to the total abandonment of the farms.

• Communal land: This is generally composed of a number of large pieces of land in the rural areas that are used for agricultural purposes by the whole community. All farming carried out on this land is purely subsistence in nature.

• State land: In the former homelands, there are usually areas of state-owned land that are of agricultural quality and which were meant to be demarcated for agricultural purposes, but which were never demarcated under the apartheid regime. This type of land is usually left unused, illegally used by the local community for grazing

purposes, or used for cultural activities.

The use of the first two types of land above for biofuel production is bound to conflict with food supply. While the little that the emerging farmers are able to produce at the moment is currently being sent to regional silos that feed into the national food industry, the land used for communal subsistence farming is vital for the survival of these communities. In many cases, the community cannot afford to use it for anything else. The formal demarcation of state-owned land, on the other hand, is usually a lengthy process where decisions rest with the highest authorities in the national department.

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Thus, it remains unclear to many stakeholders as to what land is referred to as new, additional or currently underutilised, a fact that can potentially hamper the involvement of many interested parties in the biofuels industry (Letete & Von Blottnitz 2012).

2.5 IMPLICATIONS OF OTHER NATIONAL POLICIES AND STRATEGIESAt a national level, a number of other policies and strategies now exist in South Africa to support the production of biofuels and more continue to be developed. However, it is also important to note that new policies do not in themselves create an enabling environment for biofuels programme development and implementation. This requires a balanced mix of professional, technical, financial and legal service providers, innovative funding, interdepartmental leadership and championing projects for success. Nevertheless, the key overarching policies and strategies that underpin the development of the biofuels industry, regardless of the abovementioned uncertainties, are as follows:

• New Growth Path: The New Growth Path framework sets an ambitious goal of creating five million jobs by 2020. The framework (RSA 2010) does not describe the model or mechanism that will be used to achieve this target, but it does assume that this will be achieved mainly in the private sector. One of the sectors expected to

contribute to job creation is the “green” industry sector, of which renewable energy forms part. The targets in the renewable sector that can stimulate job creation include a 33% target for power generation from renewable energy sources by 2020.

• Industrial Policy Action Plan (IPAP) and the South African Renewables Initiative (SARi): South Africa has developed and implemented a number of IPAP versions. In the 2011 version–termed IPAP2–a number of renewable energy sector plans are highlighted. These plans are aimed mainly at developing competitive local

manufacturing for renewable energy technologies, including biofuels (DTI 2011). To this end, IPAP2 supports the recently launched (at COP17) South African Renewables Initiative (SARi), which is primarily driven by the Department of Trade and Industry and the Department of Public Enterprises, but with the support of other national departments. Through SARi, the government is seeking to achieve the following objectives as part of a broader accelerated, collaborative, cohesive and structured approach:

- to design, establish and secure appropriate funding to catalyse the generation of power from renewables, and associated industrial development

- to effectively implement industrial and renewable energy policy, planning and procurement programmes to mitigate climate change consequences in achieving economic development goals domestically

- to demonstrate and share learning from innovative large-scale collaboration to mobilise investment in climate change-compatible infrastructure and green growth

- to enable public partnerships to leverage funding, including private sector investment, in a manner that supports South Africa’s efforts to move towards a greener economy that offers sustainable social development

and economic upliftment.

• National Development Plan (NDP): A fundamental aspect of the National Development Plan, which was released by the National Planning Commission with a vision for 2030 (NPC 2011), is the need for South Africa to move away from the unsustainable use of natural resources and to transition to a resilient, low-carbon economy.

To this end, the NDP includes proposals to:

- support a carbon-budgeting approach, linking social and economic considerations to carbon emission reduction targets

- introduce an economy-wide price for carbon, complemented by a range of programmes and incentives to raise energy efficiency and to manage waste better

- simplify the regulatory regime to encourage renewable energy use.

The plan then suggests, as shown in Figure 5, that with a realistic strategy and global partnerships, South Africa can manage the transition to a low-carbon, resilient economy at a pace consistent with the government’s public pledges–without harming employment opportunities and competitiveness.

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Figure 5: The quandary of growth and job creation as perceived by the National Development Plan

Source: NPC (2011)

3. THE IMPACTS OF BIOFUELS ON FOOD PRICES AND AVAILABILITY IN A GLOBAL CONTEXT

Analysts have suggested that the production of biofuels may be one of the key reasons for the agriculture commodity price surge of 2008, with the subsequent spikes in global food prices (Timilsina et al. 2012). However, there is no established consensus on the causes of the recent food crisis and its potential determinants, which include the surge in biofuels, cost-push factors such as the increase in energy and fertiliser prices, high food consumption growth in large emerging economies, the role of market restrictions, hoarding of investment funds, and the devaluation of the US dollar on dollar-denominated commodity prices–to name but a few. The report of the High Level Panel of Experts (HLPE) on Food Security and Nutrition of the Committee on World Food Security, entitled ‘Biofuels and food security’ (HLPE 2013) suggests that the introduction of biofuels might have had not merely an additional, but an amplifying effect in combination with other factors. This has had implications for policies that consequently need to also carefully consider the common context of the various factors. Nevertheless, global analyses suggest that the expansion of biofuels would cause a moderate decrease in world food supply, with more significant decreases in developing countries such as those in sub-Saharan Africa. Feedstock commodities–sugar, corn and oil seeds–may then experience significant price increases (Timilsina et al. 2012), but in all likelihood these would be due to increased volatility coupled with, for example, crude-oil price increases (see Figure 6), and not necessarily an increase in biofuel production (Ajanovic 2011).

Good for growth, not

great for jobs

Good for jobs, not great for growth

Mining, exporting management

services, high-skill service exports

Labour-intensive manufacturing min-skill service exports, process

outsourcing

Public employment

schemes, home based care, retail

sector growth

Rising public sector wage bill,

low levels of investment,

falling education standards

Good for growth, good for

jobs

Bad for both jobs

and growth

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Figure 6: Development of the crude-oil price and feedstock prices for the period 1996 to 2009

Source: Ajanovic (2011)

It is in this global context that South Africa has also experienced significant food price increases–see Figure 7, for example–without the intervention of a local biofuels industry. Local prices have increased along with global prices but have not decreased correspondingly when global prices have recovered. These increases should be viewed in context–available arable land has been used to produce energy crops in the order of 34 to 134 million tonnes per year since 2004 (see Figure 3(ii)), and practices to maximise agricultural residue used in biofuel production have improved (see Figure 8).

Figure 7: Consumer price index for bread and cereals in South Africa since 2002 (black, left axis) and global maize prices (blue, right axis)

Source: Bar-Yam et al. (2013)

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Figure 8: Distribution of crop residues by district in South Africa–improved case

Source: Batidzirai (2013)

The available agricultural (land) resources coupled with the conservative approach of government in formulating the associated policies to protect food production (in section 2 of this paper) means that a biofuels industry in South Africa is not likely to have an impact on food prices and availability if placed in the context of large, global movements in the biofuels (and other agricultural) space. However, other sustainability criteria should be seriously considered (Ajanovic 2011).

4. THE POSSIBLE IMPACTS OF THE PRODUCTION OF BIOFUELS ON WATER RESOURCES

Many analyses of the potential production of biofuels feedstock are undertaken at the macrolevel, based on average conditions. The reality in many developing countries and particularly those in Africa, however, is that the analysis of biofuels production and its sustainability requires specific consideration of the high variability of climatic and other natural factors governing its production and impact (Jewitt & Kunz 2011). This is particularly the case with water resources.

When considering the overall life-cycle of biofuels production, almost all the water consumption occurs during the agricultural activities necessary to produce the feedstock (Ackom et al. 2010)–these can range from 500 to 2 000 litres of water per litre of biofuel produced (Powers et al. 2010). The wide range of water requirements for biofuels depends on how the water demand is defined, the type of feedstock used and soil and climatic variables; differentiation is also required between agricultural water withdrawals and agricultural water consumption (Ackom et al. 2010).

For South Africa, the optimal distribution of biofuel crops was established by utilising the climatic thresholds of the intended production targets for each crop from the National Biofuels Industrial Strategy (see Table 1). Figure 9 provides an example of the potential for sugarbeet production as feedstock for bioethanol. Figure 10 provides an indication of water use for feedstock production in different areas compared to the requirements of indigenous vegetation.

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Crops MAP (mm)

MMR (mm)

MAT (°C) Tave (°C) Tmin (°C) Tmax (°C) Planting date

Growth cycle

Canola 500-1000 - - - > 5 (June to October)

< 25 (June to October)

01 /Jun 140

Cassava > 1000 - 20-29 - - - - -

Jatropha 500-1500 - 11-28 - Frost free areas> 0

- -

Sorghum - 450-650 - 20-25 (Jan T >21)

- > 21 in Jan 01 Nov 115

Soya bean - 550-700 - 20-30 - - 01 Nov 150

Sugarbeet 550-750 - 15-25 - >-1 (August to February)

- 01 Aug 200

Sunflower - 400-600 - 18-25 - > 19 in Jan 01 Dec 125

Table 1: Climatic thresholds for potential biofuel crops in South Africa

Note. MAP - mean annual precipitation: MMRain - mean monthly rainfall totals over growing season; MAT - mean annual temperature; Dmean T - daily mean air temperatures over growing season; Dmin T - daily minimum air temperature over growing season; Dmax T - daily maximum air temperature over growing season.

Source: Jewitt et al. (2009)

Figure 9: Climatic optimum growth areas for sugarbeet (Beta vulgaris var. saccharifera)

Source: Jewitt et al. (2009)

Mean annual rainfall: 550-750mmMean annual temperature: 15-25 degCAug-Feb temperature > -1 degCPlant date: 01 AugustGrowth cycle: 200 days

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Figure 10: Median annual streamflow reduction acocks–sugarbeet (%)

Source: Jewitt et al. (2009)

The study conducted by Jewitt et al. (2009) concluded, with the information available at that stage and based on climatological drivers only (not soil, pests and other factors), that only sweet sorghum and sugarcane would have the potential to use more water than the dominant, indigenous vegetation types–although sugarbeet needed further investigation. It has then been deemed that biofuel production, under rainfed conditions overall, is unlikely to change the current burden on national water resources. However, the impact on a smaller spatial scale could be significant at the local level, especially in times of drought.

While the study of Jewitt et al. (2009) only considered rainfed production, it is inevitable that biofuel crops would be irrigated. This introduces an additional source of uncertainty into analyses of the likely impact of biofuels on water resources (Jewitt et al. 2009). Under irrigated conditions, the impact of biofuel production on water resources could be significant if there is competition with irrigated food crop production. Again, however, if it is assumed that the government will follow through with a conservative policy approach to protect food production, then this would mean that a biofuels industry is likely to have a minimal impact on water resources–at a national level, anyway.

5. THE BENEFITS OF INVESTMENT IN BIOFUELS ON UPSTREAM AGRICULTURAL DEVELOPMENT

Many low-income countries see biofuels as an opportunity to promote development (Ewing & Msangi 2009). Tanzania, for example, is considering establishing a domestic biofuels industry in order to stimulate agricultural growth, create jobs and reduce rural poverty (Arndt et al. 2012). The perceptions in the rural areas of Tanzania are that the specific benefits will come from employment, income-generating opportunities, improved social services and, importantly, access to markets for crops (Mwakaje 2012). Arndt et al. (2012) conclude that as a result, food production actually increases–slightly under most biofuel investment scenarios, but especially if biofuel crop interventions address the main reasons for food shortages in these rural areas, namely the low productive capacities in these areas (see Figure 11).

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Figure 11: Causes of food shortage in rural areas of Tanzania

Source: Mwakaje (2012)

Similarly, in the areas targeted by the National Biofuels Industrial Strategy of South Africa, the agricultural economy is characterised by extensive and pronounced features of the “second economy”, which relates to (typically) gross underdevelopment of previously disadvantaged individuals and of specific geographic areas. These are the focal areas of the development strategies and initiatives of government–at all levels–within the broader objective of sustainable economic growth and equitable socio-economic wealth creation. The strategic objectives for, specifically, agrarian transformation within the provinces embody the common strategic intent and desired outcomes of the various policy and planning programmes from national level through to local implementation. Figure 12 illustrates the conceptualisation of an agrarian transformation model for biodiesel production in the Eastern Cape province (Amigun et al. 2011).

Figure 12: Agrarian transformation model proposed for a biodiesel plant in the Eastern Cape province of South Africa

Source: Amigun et al. (2011)

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These agrarian transformation models suggest that effective development of these areas through economically and environmentally sustainable (integrated) cropping provides the key to accelerated socio-economic development of these areas. In addition to the substantial quantities of agricultural commodities (crops and by-products) produced, together with the associated backward and forward linkages (see Figure 13), this forms the basis of an “economic revolution” against the underdevelopment that is the norm.

Figure 13: Integrated cropping and processing model to transform the agricultural sector in the rural areas of the Eastern Cape province of South Africa

Source: KPMG (not released)

Such a transformation of the agricultural sector would require between six and 10 years to facilitate the transition of ownership and management structures (see Figure 14)–with subsequent benefits to rural communities (see Figure 15)–through a community-based approach of inclusive large-scale cropping.

Thus, if managed correctly through sound policy and institutional interventions as part of the investment in biofuel value chains that form part of a larger agricultural system, the overall (economic) productivity in the rural communities of South Africa could be enhanced.

Figure 14: Interim and final management and ownership structures for agrarian transformation

Source: KPMG (not released)

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Figure 15: Benefits for communities of agrarian transformation of the agricultural sector in rural areas of South Africa

Source: KPMG (not released)

6. NEW TECHNOLOGIES TO OVERCOME FOOD SECURITY AND RESOURCE ISSUES

Alternative approaches to agricultural practices are one solution to overcoming food security and resource problems. New bioenergy technologies are another. To this end, Ambali et al. (2011) provide a comprehensive overview of what new technologies have to offer to improve the sustainability of biofuels.

6.1 NEXT-GENERATION TECHNOLOGIES FOR TOTAL BIOMASS CONVERSIONFood and next-generation biofuels are already produced from sugar, starch and oil-rich food crops. When “second-generation” technologies come to fruition, the appropriate entry point could be the use of agricultural and forestry residues. This lignocellulose component is globally recognised as the preferred biomass for the production of a variety of fuels and chemicals with significant benefits in agricultural development. Besides the lignocellulose produced as agricultural waste in the grain-based industries, South Africa also has strong biomass-based industries in sugar production and the paper-and-pulp industry, thereby providing widespread availability of this renewable resource (Lynd et al. 2003).

Lignocellulose can be converted to fuels and chemicals by a combination of biological and thermochemical processing. Biological processing involves the hydrolysis of cellulose and hemicellulose into fermentable sugars for use in fermentation processes, while typical thermochemical treatment involves gasification, combustion or pyrolysis to convert lignocellulose into high-value energy or chemical products (Lynd et al. 2003). The preference for lignocellulose as a future resource for biofuel production stems from its widespread availability, lower cost per energy unit, and an overwhelmingly positive energy balance that is superior to, for example, starch (Van Zyl et al. 2011). Figure 16 compares the potential biofuel production from agricultural and forestry residues, invasive plants and energy crops in South Africa, in relation to the current fossil fuel and the National Biofuels Industrial Strategy’s target of 400 Mℓ/yr.

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Figure 16: Potential biofuel production from lignocellulose biomass (assuming only 50 to 70% was utilised) when advanced second-generation biochemical and thermochemical technologies are available in South Africa

Source: Ambali et al. (2011)

6.2 INTEGRATED PRODUCTION OF BIOFUELS AND HIGH-VALUE CHEMICALS IN A BIOREFINERYThe economics of the conversion of starch, sugar, lignocellulose and vegetable oil raw materials into biofuels can be improved by the integration of various processing technologies in a single production plant, or “biorefinery”, based on the conditions in a particular local industry and region (Hatti-Kaul 2010). Such a biorefinery is based on the model of an oil refinery, where a range of fuel and high-value chemical products is produced from crude oil to achieve optimal profitability. In the case of biofuel production, such an integration of processing is of particular importance because commercial undertakings currently depend on government incentives. Biorefineries represent a technological solution that can substantially improve economic feasibility, especially considering the highly volatile nature of agricultural raw material costs and market prices for transportation fuels due to exposure to international economic and political pressures. It is likely that the future global market for biofuels will be exposed to similar volatility as the current crude-oil markets, with substantial economic impacts for the industry internally and externally.

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7. CONCLUSIONThe biofuels industry in South Africa, although supported in essence through a formal national strategy since 2007, has struggled to become a flourishing industry compared to other parts of the world. However, the recent policy intervention, in the form of mandatory blending with conventional fuels, provides a positive signal to the sector. Indeed, a number of biofuel-related projects are in various stages of commissioning (see Table 2).

Table 2: Biofuel - related projects in various stages of commissioning.

No Company name Plant type(bioethanol/biodiesel)

Capacity(million litres per annum)

Location Licence status

1 Arengo 316 (Pty) Ltd Sorghum-based bioethanol 90 Cradock, Eastern Cape Granted

2 Mabele Fuels Sorghum-based bioethanol 158 Bothaville, Free State Issued

3 Ubuhle Renewable Energy Sugarcane-based bioethanol 50 Jozini, KwaZulu-Natal Granted

4 Rainbow Nation Renewables Fuels Ltd Soybean-based biodiesel 288 Port Elizabeth, Eastern

CapeIssued

5 Exol Oil Refinery Waste vegetable oil-based biodiesel 12 Krugersdorp, Gauteng Granted

6 Phyto Energy Canola-based biodiesel > 500 Port Elizabeth, Eastern Cape

Initial stages of licence application

7 Basfour 3528 (Pty) Ltd Waste vegetable oil-based biodiesel 50 Berlin, Eastern Cape Granted

8 E10 Petroleum Africa CC Bioethanol 4.2 Germiston, Gauteng Granted

Total > 1000

Nevertheless, the biofuels sector (still) faces a number of sustainability challenges in the South African context, specifically pertaining to the competition for land–with potential implications for food security (and prices)–and the availability of water resources. Thus, much of the debate has revolved around how biofuels would be integrated within conventional agricultural production systems, and how new technologies may benefit the evolution of the biofuels sector in the South African context. This paper set out to:

• establish the status quo of the policy regime to promote and create a biofuels market in South Africa

• examine the possible impacts of biofuels on food prices and availability in the global context

• examine and quantify the extent of the possible or anticipated impacts of the production of biofuels on water resources

• examine whether the current investments and planned investments in biofuels and the biofuels production chain can benefit upstream agricultural development

• examine if new technologies can overcome food security and resource issues.

The Bottom Line: Biofuels, in themselves, pose few sustainability risks for related food production in terms of land and water resources. Rather, the current practices of the agricultural sector overshadow the risks of biofuels. The conservative policy approach to biofuels should thus be extended to the agricultural sector as a whole to minimise these risks. Also, the tendency to focus on integrated cropping, thereby extending the productivity of the agricultural system–through biofuels–should be enhanced. This would then buffer food production against volatile global prices, which is the major influence on local food prices. Such agrarian transformation of the agricultural sector–with related benefits to rural communities–would increase the availability of biomass in general. Next-generation technologies would then be near to commercialisation to exploit the non-food components of the available biomass, with integrated processing as a means to not only produce biofuels but also high-value chemicals, through a biorefinery approach. Such a systemic, holistic view is necessary if the complexities of the Food Energy Water Nexus are to be understood adequately to inform the transition to a low-carbon, resilient economy–or the green economy (DEA & UNEP 2013; Musango et al. forthcoming).

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