The Localisation Support Fund has commissioned a comprehensive research programme assessing the viability of establishing a domestic sorghum-based bioethanol industry in South Africa. Prepared by Blueprint Holdings (Pty) Ltd, the study draws on detailed financial modelling across six feedstock and technology configurations, value chain analysis, international benchmarking, and an integrated scenario model. The findings confirm that grain sorghum bioethanol represents one of the most compelling localisation opportunities available to South Africa's agricultural and energy sectors — strategically credible, technically proven, and closer to commercial viability than is commonly assumed.
A Country Structurally Exposed to Imported Fuel
Following the closure of its two largest coastal refineries between 2022 and 2023, South Africa has undergone a fundamental shift from domestic refiner to finished fuel importer. The retail price of 95 Unleaded Petrol has risen from approximately R10.83 per litre in January 2015 to a peak of R26.09 per litre in July 2022 and has remained at historically elevated levels since. The case for domestic bioethanol is rooted in this reality: not that it can insulate South Africa from global oil markets, but that it can introduce a domestically produced fuel component, retain value in the South African economy, and reduce the country's dependence on an internationally exposed, geopolitically vulnerable import supply chain.
A Regulatory Framework Now in Place
After nearly two decades of policy development, the August 2025 gazetting of a regulated transfer price for bioethanol under the Petroleum Products Act removed the last major regulatory barrier to a functional domestic bioethanol market. The transfer price is linked to the Basic Fuel Price, ensuring bioethanol can be blended without increasing the retail price of petrol to consumers. A window has opened. The question is whether government, industry, and the financial sector will act with sufficient urgency to translate this framework into a functioning industry.
The Economics: Where the Numbers Stand
The financial modelling assesses six feedstock and technology configurations under common assumptions of R16.50/USD, USD80/barrel Brent crude, and a 15% cost of capital. Grain sorghum, processed in a first-generation starch-to-ethanol plant, is the strongest performer. The model shows positive EBITDA of R1.94 per litre — confirming that the underlying process economics are sound — with capital servicing tipping operating cash flow to -R0.82 per litre. The breakeven ethanol price is R11.94 per litre, below the lower bound of import parity for US and Brazilian ethanol (R14 to R20 per litre). Farmer economics are workable: the plant can afford to pay R3,761 per tonne for grain sorghum against a farmer breakeven of R3,247 per tonne, leaving a farmer surplus of R514 per tonne. The gap is not between the farmer and the plant — it is a capital recovery challenge at the plant level.
A key driver of grain sorghum's strength is its by-product revenue profile. DDGS — the protein-rich animal feed produced from the non-starch components of the grain — combined with capturable CO₂, contributes R6.60 per litre to total plant revenue, worth more than half the value of the ethanol itself. When the grain sorghum operating cash flow deficit of R0.82 per litre is distributed across the entire blended fuel pool under an E2 mandate, the cross-subsidy required amounts to just 1.66 ZAc per litre of petrol at the pump — the smallest of any configuration modelled. For every litre of grain sorghum ethanol produced, the South African economy receives R5.73 in Gross Value Added.
Recommendations
The study's five priority interventions are: active enforcement of the blending mandate with transparent monitoring and consequences for non-compliance; Viability Gap Funding for first-mover grain sorghum ethanol plants; blended finance facilities combining Development Finance Institution capital with commercial lending; contract farming schemes with guaranteed offtake linked to ethanol plant investment; and a national bioethanol carbon credit protocol. Several supporting actions can begin immediately, including 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.
The gap between current conditions and commercial viability is neither vast nor unbridgeable. The window opened by the August 2025 gazette is both real and time-limited. The momentum of the current policy moment must be converted — quickly and deliberately — into a functioning industry.