The R12-per-litre solution to South Africa’s fuel refinery crisis

Global fuel supply has been uncertain since the start of the current Middle East conflict, leading to higher prices and forcing countries like South Africa to find long-term alternatives, including considering biofuels.

Domestically produced bioethanol won’t only benefit motorists by securing the local fuel supply, but could also unlock significant economic value.

This is according to the Localisation Support Fund (LSF), which published new research on South Africa’s sorghum price forecasting and bioethanol market.

The study, conducted by Blueprint Holdings, determined that every litre of locally-produced bioethanol could generate up to R8 in economic value, create jobs, and reduce the country’s dependence on imported refined fuel.

It found that South Africa already has the agricultural capacity, regulatory framework, and commercial viability required to establish a domestic bioethanol industry under current market conditions.

Irshaad Kathrada, CEO of the LSF, noted that the findings come at a time when the country has shifted away from domestic fuel refining to imported finished fuel following the closure of its largest refineries.

Managing Director of Blueprint Holdings, Josie Rowe-Setz, added that the research and evidence are clear that there is a window of opportunity for South Africa to ensure national energy sovereignty and security.

With nearly 75% of all liquid fuel in South Africa imported in refined form, the country remains vulnerable to global oil price volatility, exchange rates, and geopolitical disruptions.

“South Africa now imports nearly three-quarters of its fuel from geopolitically exposed sources, and every price shock at the pump is a reminder of how little control we have over that supply chain,” said Kathrada.

“This research shows that we have a credible, near-term alternative, one grounded in South African soil, South African farmers and commercially proven technology.”

He noted that the economics are also closer to viability than many realise, with a regulatory framework already in place.

Kathrada noted that bioethanol cannot fully shield South Africa from global oil price movements, but it can introduce a locally produced fuel component into the country’s energy mix.

Meeting the regulations

Following nearly 20 years of policy, the gazetting of a regulated transfer price for bioethanol under the Petroleum Products Act in August 2025 removed one of the final obstacles to establishing a functional domestic market.

The fuel price, which is linked to the basic fuel price, now allows bioethanol to be blended into fuel without placing additional cost pressures on retail consumers.

Mabele Fuels CFO and COO, Markus Granlund, explained that the regulations exist, and that what is needed now is more confidence in consistent implementation and enforceability.

With the policy framework now largely in place, the next phase requires coordinated implementation across government, agriculture, industry and finance.

The study examined the commercial viability of several feedstock options, with a particular focus on sorghum because of the opportunity to expand production on underutilised agricultural land.

The prospect was assessed using a rand-dollar exchange rate of R16.50 and a Brent crude oil price of $80 per barrel, with sorghum emerging as the strongest commercial opportunity.

Producing bioethanol from sorghum can be done for as little as R12 per litre, with the LSF Integrated Biofuels Model indicating a breakeven price of R11.94 per litre.

Of course, there are regulated transfer prices and taxes to be adhered to, but there is still a possibility of this fuel costing less than imported refined petrol products in the long run.

The cost of supporting grain sorghum ethanol through the blended fuel pool is considered relatively low.

Considering a 2% blending mandate, bridging the current gap between production costs and the regulated transfer price would require a cross-subsidy of less than 2 cents per litre of petrol sold at the pump.

This works out to less than the rounding adjustment on an average monthly fuel price change.

Kathrada noted that several interventions could begin immediately to support the domestic production of bioethanol.

“This includes extending the VAT exemption that applies to other grains to sorghum, clarifying the use of downgraded maize as a biofuels feedstock and investing in sorghum seed research and hybrid variety development,” he said.