100 million litre a year ethanol plant in the pipeline for Hoedspruit...will the Blyde dam wall be raised?

Two years ago travel brochures and websites enticed visitors to stop at Hoedspruit, “a small quaint pioneer village where you will find the legacies of Voortrekkers, warring tribes, prosperous chiefs and fortune seekers.” Old timers told prospective visitors the Fort Coepieba was a must-stop if you wanted to know more than what the usual z-fold flyer could tell.Today the Coepieba has been levelled for a modern complex-under-construction and the town boasts several wildlife estates, a thatched tourism centre, a city-like shopping mall and more to come. General consensus is that the town is booming.

If all goes according to the expectations, plans and feasibility studies that are underway, the most recent economic boost could change the greater Hoedspruit landscape even more.Mango and citrus orchards, as well as vegetable lands will make way for sugarcane fields that could ultimately assist government’s aim to achieve 55 000 jobs through its biofuel programme in South Africa.The government, in partnership with private investors and local producers, hope to establish a multi-million rand biofuel processing plant in the area that will produce about 100 million litres of ethanol from sugarcane each year.This will translate to about 10 000 hectares under sugarcane within a 60 kilometre radius from the plant, which will probably be established within 30 kilometres of Hoedspruit.

This latest economic incentive for Hoedspruit, believed to capitalise on one of the area’s two major competitive advantages, agriculture, and specifically agro-industries, is a multi-billion rand investment announced by the Industrial Development Corporation (IDC).Project manager Noel Kamrajh, of the IDC, said R3,2 billion will be invested, in partnership with the Central Energy Fund (CEF), in projects in Hoedspruit and Cradock in the Eastern Cape.According to Pieter Scholtz, a farmer in the Hoedspruit area and member of the IDC and CEF’s steering committee on the Hoedspruit biofuel project, a feasibility study will provide the final go-ahead for the various projects and includes the option of sorghum as an alternative crop in the Hoedspruit area. It is envisaged that the Cradock plant, where sugar beet will be processed, will produce about 90 million litres of ethanol.

According to Pieter these developments are dependent on two major factors – pending legislation and protection of prospective biofuel producers.“It is well known that the government would like to change the economy from a consumer-driven to a producer economy,” says Pieter.The Accelerated and Shared Growth Initiative for South Africa (Asgisa) prioritises the biofuels sector for development in its plan to raise annual economic growth to six percent between 2010 and 2014 and to halve poverty and unemployment by 2014.Cabinet approved the draft biofuels industry strategy in December last year, which it released for stakeholder consultation until the end of March 2007.

According to the Draft Biofuels Strategy document, “The Biofuels Draft Strategy aims to achieve a biofuels average market penetration of 4,5 percent of liquid road transport fuels (petrol and diesel) by 2013 which will contribute 75 percent to the national renewable energy target.” This is based on local production.The task team indicated that South Africa has limited arable land, with only 14 percent of the total land available being fit for agriculture and 10 percent of that land being irrigated. This irrigation consumes 60 percent of the national water supply.According to the report, in most years South Africa has surplus maize and sugar production that could each produce ethanol at more than five percent of national petrol demand. “In addition there is three million hectare of currently under-utilised, high potential land, mainly lying in former homelands. Utilising one million of such land could produce about five percent of national diesel usage.”

BLENDING

Pieter believes one of the most important drivers that has to fall in place is legislation that will govern blending of all petrol and diesel used in South Africa with ethanol or biodiesel produced from crops.“The Draft Strategy is based on the national blending specifications of eight percent for ethanol (E8) and two percent for biodiesel (B2),” said Bontle Mafuna, chief director, communication, department of minerals and energy, in a press statement released in December last year. The Draft Strategy indicated that these percentages could be increased in some regions where the biofuels are produced, giving an overall biofuel usage of about 4,5 percent if the whole country’s consumption is considered.

The existing oil industry would collect biofuels for mixing with petrol and diesel at depots close to the biofuel manufacturing plants. Another key point of the Draft Strategy is that biofuel producers would be licensed and regulated, and that offtake by the oil industry would be linked to upliftment and Black Economic Empowerment (BEE). “The licensed volumes per biofuels production facility would be a percentage of what is produced based on local value addition linked to BEE participation levels, such as 100 percent offtake licensing requiring 25 percent BEE.”

HEDGE FUND

Another factor is the price of petrol and diesel, and to avoid distortions and complications in the retail market, E10 petrol should sell at the same price as petroleum. This would involve extra fuel levies and a hedge fund that subsidises biofuels when the oil price drops. According to Bontle, the Draft Strategy proposes that the existing fuel levy exemption for biodiesel be extended to bio-ethanol, and this can be based on the energy content. “If the oil price is below $45/bbl, biofuel producers would need some form of additional support. A hedge mechanism with motorists for prices below $45/bbl, could add just 1.2cpl to the petrol price if the oil price fell to an expected lowest level of $35/bbl. For world oil prices above $65/bbl, the biofuels industry could pay in and slightly reduce pump price increases.”

HOEDSPRUIT BIO-ETHANOL PLANT

Pending the feasibility study and the legislation as set out above, the Hoedspruit project hopes to be given the go-ahead early next year. Though its initial focus will be on sugar for the production of ethanol, Pieter says they will also be looking at sorghum as an alternative crop. “We have at least 10 000 hectares of land available within a 60 kilometre radius. At this stage we have about 9 000 hectares of land available in the Lower Blyde Pipeline Irrigation Network, of which at least 6 000 hectares could be available for the production of sugar,” says Pieter.There will be a strong drive to incorporate emerging farmers in the project. Producers will be sourced in the Hoedspruit area, as well as the Acornhoek, Bushbuckridge and Mametja and Willows areas.

GREEN CANE

According to Pieter the plant will process green cane, “which will reduce burning of the sugarcane used in traditional processing, and thus reduce CO2 emissions.”This will also enable the project to trade in certified emission reductions with Annex 1 countries in terms of the Kyoto protocol under the Clean Development Mechanism. The Blyde River Irrigation NetworkDuring the last month the Blyde Water Users Association (WUA) requested consulting engineers, MBB, the company also responsible for the management of the main water supply system to the Blyde River Irrigation District (Brid), to investigate how much more water can be delivered and handled by the pipeline network.

In addition, MBB was to determine how many additional hectares could be cultivated. In short, MBB found that, “given certain assumptions, the system has the potential to expand its output by providing water for 9 135 hectares.”To achieve this, producers will have to construct additional water storage facilities on their properties of at least 20m3 per listed hectare. The investigation indicated possible 3 065 hectares more can be produced than what is cultivated at present of which 2 400 hectares could be allocated to the cultivation of sugarcane, “given certain assumptions,” said Cassie du Toit of MBB.At present the Brid extends over an area of 42 366 hectares of which 8 153 have water rights from the Blyde River and about 6 000 are listed in the pipeline.

RAISING OF THE BLYDE DAM WALL

During the last five months rumours that the Blyde Dam wall could be raised reached the offices of the Hoedspruit Week. It was mentioned at an information session where the probability of the biofuel project was introduced to local stakeholders in the Hoedpsruit area.A member of the department of water affairs and forestry in Pretoria indicated that he had a meeting with farmers of the Hoedspruit area about the Blyde Dam and that the raising of the dam wall is only a concept at this stage as certain engineering and other feasibility studies will have to be undertaken.

An environmental impact assessment (EIA) will also need to be done. There are also international considerations, such as the protocol on shared watercourses, which embraces issues like the possible impact of raising the Blyde dam wall on the Massingir dam.Pieter says the biofuel project is not dependent on the raising of the dam wall as producers may replace existing crops with sugarcane.