South African sugar industry in talks with government to enter biofuels industry

The country’s struggling sugar industry is currently in talks with the government over a biofuel subsidy, which would allow it to convert more than a third of its annual production to renewable energy. It is according to South African Sugar Association. The association claims that currently 800,000 tonnes out of the 2.1 million tonnes produced annually by the industry are exported at a loss. “The plan aims to ease a crisis caused by a flood of cheap imports, much of it from neighboring eSwatini, and a tax on sugary drinks that has dented demand from beverage makers,” Bloomberg reports. . Companies such as Tongaat Hulett – South Africa’s largest sugar producer – could benefit from the deal. The South African Biofuels Regulatory Framework noted that a scheme to produce 460 million liters of biofuel per year could generate R1.8 billion in taxes and create up to 13,000 jobs. – Jarryd Neves

Struggling South African sugar industry pushes to subsidize biofuels

By Prinesha Naidoo

(Bloomberg) – South Africa’s sugar industry is in talks with the government over a possible subsidy that could allow it to convert more than a third of its annual production into biofuel, according to a group representing companies in the sector.

Currently, 800,000 tonnes of the industry’s annual output of 2.1 million tonnes is exported at a loss, according to the South African Sugar Association.

Discussions ensue the signing of the so-called Sugar Master Plan by government, farmers, industrial users and retailers in the industry of R16 billion ($1.06 billion). The plan aims to ease a crisis caused by a flood of cheap imports, much of it from neighboring eSwatini, and a tax on sugary drinks that has dented demand from drink makers.

While the plan includes off-take agreements with industrial users and retailers that helped boost local demand by 14% in the year ending March, diversifying the crop’s uses could improve the sustainability of the industry, said Trix Trikam, executive director of the sugar association. .

“Biofuels are one of the revenue streams the industry can venture into, provided there is a conducive policy environment and an attractive subsidy mechanism,” he said in response to questions. by e-mail.

fuel tax

Companies that could benefit from a biofuels program include the country’s largest sugar producers – Tongaat Hulett Ltd., the local unit of Associated British Foods Plc and RCL Foods Ltd.

The National Treasury did not immediately respond to emailed questions.

South Africa’s biofuels regulatory framework, which was issued by the Department of Mineral Resources and Energy in February last year, approved sugar cane as a feedstock for biofuels, it said. he declares.

The Treasury said in its 2013 budget review that the program could be subsidized by increasing the fuel tax from 3.5 to 4 South African cents per liter on all petrol and diesel products. The biofuel would be mixed with fuels.

Failure to move forward with this program has stalled previous attempts to launch a biofuel industry in the country. Potential developers were told they could not use corn due to food safety concerns. Although sorghum can be used, the lack of subsidy has led to the abandonment of projects for at least six proposed plants.

A program to produce 460 million liters (121 million gallons) of biofuels a year could create 13,000 jobs, generate 1.8 billion rand in taxes and save 1.3 billion rand in the balance of payments through a reduction in fuel imports, according to the regulatory framework, which cites an economic impact study by Industrial Development Corp.

Most of South Africa’s sugar cane is grown in the east of the country and the industry employs around 85,000 people. It has been in decline for two decades, with annual sugar production falling by almost 25%.

The sugary drink tax which came into force in 2018 as a health promotion tax resulted in industrial losses of more than R3.6 billion, the closure of two factories and almost 10,000 lost jobs. jobs, according to Trikam.

© 2021 Bloomberg L.P.

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