Biofuel in Africa - not an easy stroll in the sugar cane field for Swedish hopefuls

open | 08 December, 2007

JOHANNESBURG. The South African government has decided to downplay its biofuel strategy dramatically due to fears that crop demand will increase prices on foodstuff and threaten food security.

Biofuel also is no longer expected to make wonder for the environment. The South African government does not expect to score carbon brownie points.

Latest reports suggest that the biofuel process has much smaller, if any, effect on climate change than originally anticipated.

The South African government’s biofuel strategy is in any event more based on economics and less on climate factors.

Governments reasoning to still go ahead with a biofuel strategy is now more based part on the need to diversify fuel supply in the light of the massive rise in crude oil prices and part the need to find renewable alternatives to fossile fuel.

Biofuel has, as in just about every African country, become a new trend that just about every energy- and diversified investment company is looking into seriously. Africa’s ability to generate a number of harvests annually makes the continent interesting for biofuel investors.

A number of Nordic players, where environment technology solutions have a long tradition - though most of them are internationally small and insignificant - have set their sight on a number of markets in Africa.

Örnsköldvik based Sekab, which presently eyes Tanzania and with a representative in South Africa is one of the hopefuls

Swedish biomass technology consultants Nykomb, with a strong track record in bio mass gasification in Sweden, is working on projects in Togo and Senegal’s, where it so far unsuccessfully has tried to attract Swedish and other private equity investors.

Swedish mining exploration company International Gold Exploration’s former MD Michael Nilsson has moved on and set up a new bio energy company, Biomassive. He has entered a joint venture with two South African entrepreneurs. The company is, as a number of others, looking at setting up in Tanzania.

There are many players in the field, South African’s have also woken up to the attraction of moving its technical expertise across the border to neighbouring Mozambique as well as to Tanzania.

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Africa is an eldorado for biofuel strategists and trendy development folks ( including gold diggers and charlatans). But it is, to paraphrase a bit, by no means a stroll in the sugar cane field

Large scale supply of feedstock for biogas-, conversion- or fuel production can only be secured from either large plantations - preferably existing ones - or in contractual arrangements with well equipped and financed small scale farmers.

Many of the projects, therefore, face an uphill struggle in converting opportunities into bankable feasibility studies that then can be financed.

Projects in South Africa, with a infrastructure that can more easily absorb bio production, and that has surplus production of crops, is the safest bet for those who want to expose themselves to the biofuel market.

In many other African markets one can expect a lot of skepticism from finance- and, particularly if there is a need for soft guarantee’s from international development institutions.

One can expect continued euphoria in this field as long as oil prices are as high as they are - and technology is improving. But it is safe to bet that most projects will never see daylight.