14 September 2004

South Africa: Country Looks to Ethanol as Alternative Fuel

Perth – Continuing high world oil prices had prompted South Africa to intensify investigations into the use of ethanol as a fuel, the deputy minerals and energy minister, Lulu Xingwana, said this week. “Our minister has already visited Brazil to see how they are using ethanol produced from sugar cane and lowering their oil bill by mixing it with fuel,” Xingwana said. “Now we would like to do thorough research on ethanol because it could be one way of achieving an energy mix that will lower our dependence on oil.”

Ethanol could potentially be used in South Africa both as an additive to transport fuel, and as an alternative to paraffin, the deputy minister said. “It is not as flammable as paraffin, which burns down informal settlements in South Africa every winter, so that would be one advantage.” Soaring world oil prices had dominated much of the discussion at the World Energy Forum in Sydney earlier this week, which Xingwana attended. South Africa was one of many countries with representatives at the forum that was focusing on the need to develop alternative fuels, she said.

In the short term, the South African government might have to again dip into its Equalisation Fund to offset fuel price rises, as it did in June, Xingwana acknowledged. “The way prices are going, wavering now around $50 (R333) per barrel, I think the government will have to do it. “We can use the Equalisation Fund to try and cushion the prices, but it is not inexhaustible. So there will come a time when the government can no longer use it. “That is why we keep on emphasising that we must practise energy efficiency so we can lower our consumption of oil while we look at alternatives,” she said.

There was no sign of any early large drop in oil prices, Xingwana stated, especially because of continuing instability in the Middle East. “The situation in the Middle East is the major cause for price volatility. There is no security for the oil wells, starting in Saudi Arabia, up to Iraq.”

In Perth, Xingwana was the keynote speaker at a conference called Africa Down Under, bringing together under one roof government leaders and mining industry executives from the two continents. Her speech highlighted investment opportunities and industry reforms in South Africa that recently culminated in a new mining charter setting black empowerment and women’s participation targets. The reaction of mining companies to the reforms had been “generally positive”, both in South Africa and in other countries, Xingwana said. “At home, there was some resistance at the beginning but I think people now realise there is a need to address the imbalances of the past, and they are coming on board.”

Australian companies with operations in South Africa had shown strong commitment to the objectives of the reforms. However, “some reluctance” had been noted among a number of companies from other countries, such as Canada. “That is a wonder because Canada has similar laws to us,” said the deputy minister. “They also say the mineral rights rest with the state, and that local communities must be involved and consulted, but some of them do not seem to understand that when it comes to South Africa.”

Xingwana said she was using her visit to Australia to stress to potential investors that there was a new emphasis on beneficiation and skills transfer in the South African mining industry. “What we are saying now is we need to add value and create jobs at home, so that we are able to sell beneficiated products which will give us more income,” she said. “Also in Australia we are looking at information technology in the mining sector, where Australia has particular expertise, and we would like some of that transferred to South Africa.”

There were numerous possible future joint venture projects for South African and Australian mining and energy companies in other parts of Africa, Xingwana added. Just one of these could be a proposed oil refinery in Angola.

Source: South African Business Report Sept. 12, 2004.

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