THE government’s target of ensuring that biofuels make up 2% (about 400-million litres) of the national liquid fuels mix by this year will not be met due to a lack of any funding model, the Department of Energy’s chief director for clean energy, Mokgadi Modise, told Parliament’s energy committee on Wednesday.

Ms Modise said incentives to encourage production of biofuels have not been enough to lure investment. Bioethanol was 100% tax exempt, but biodiesel fell within the tax net, although manufacturers received a 50% rebate from the general fuels levy, she said.

All renewable energy projects qualified for an accelerated depreciation allowance of 50:30:20 over three years.

Independent Democrats MPs Lance Greyling said the department had made extremely slow progress since developing its biofuels strategy in 2007. "The biggest stumbling block is encouraging the oil companies that own the refineries to invest in the blending infrastructure as there are no clear cost recovery mechanisms in place."

Mr Greyling said much would depend on the Treasury finalising the cost recovery model and regulation before the end of the financial year on March 31. "I am just wondering if there will be anything in the national budget," he said.

A major objective of the biofuels strategy is to create about 25,000 jobs by 2018.

Encouraging small farmers in the former homelands such as the Transkei to grow biofuel crops would be the main job-creation driver.

In terms of the strategy the Industrial Development Corporation would help develop two biofuels manufacturing facilities in Port Elizabeth and Cradock.

Mr Greyling said that while the Department of Energy had come up with this strategy, it was up to the Department of Rural Development and Land Reform to work out how small farmers would get their crops to the manufacturers. "Rural development have to work out how this would be achieved," he said.

Mr Greyling also said that a water-use strategy would have to be developed for these biofuels crops.

"We (the country) need to explore the use of biofuels in developing our rural economy and as an alternative fuel cost, but the slow implementation is not helping us at all," he said.