The use of biofuels has received considerable attention of late in particular regarding the Draft Position Paper on the South African Biofuels Regulatory Framework (the “Position Paper”) and the mandatory deadline on 1 October 2015 for the introduction of mandatory blending of biofuels with conventional fossil fuels.1
Food shortages in South Africa remains a critical issue, and has been tempered by suggestion by Government to manufacture biofuel from plants, such as sugar cane, soya beans and sunflowers, to name but a few, thus steering away from maize as a raw material for the manufacture of bioethanol.
The question that then begs is what types of additional raw materials are in abundance which do not affect food security? A possible answer could reside in waste polymeric material. The depolymerisation of polymeric material into an alternative fuel could be a possible substitute for conventional fossil fuels.
Could this type of fuel, referred to hereafter as “Polydiesel”, be considered a green fuel? The green technology component could possibly be derived from one of the principles of green technology namely Source Reduction, which is defined as the reduction of waste and pollution. At present, only about 20 percent of South African polymeric material produced annually is recycled by conventional recycling methods.
The next relevant question would then be, is this kind of technology legal in South Africa? The answer would be in the affirmative as supported by the provisions of the South African waste management act 59 of 2008 pertaining to the recovery of municipal waste, including plastics.
One may ask why technology of this nature has not been commercialized previously in South Africa. The author is of the opinion that the provisions of Act 59 of 2008 coupled with the South African Revenue Services (SARS) taxation on any fuel manufactured for the use in a combustible engine makes the margins for commercial viability of such fuel very slim, particularly on a small scale production set-up. Relevant legislation relating to SARS is the Excise and Customs Act 91 of 1964.
Act 59 of 2008 defines “recovery” as “the controlled extraction of a material or the retrieval of energy from waste to produce a product”. Schedule 1 of Act 59 of 2008 specifies, in Category A thereof, the requirement of obtaining a licence should more than 1000L a day of polydiesel be recovered and further, in Category B of the same Schedule, the requirement of an Environmental Impact Assessment (EIA) should more than 10000L of polydiesel be so recovered in one day. Whilst it is envisaged that the requirement of a licence would not be too costly, should one wish to attempt to upscale a plant to above 10000L a day to increase profitability, an EIA is quite costly in South Africa, data suggests that within the South African context a large number of EIAs are being conducted for relatively small scale projects and that the main cost burden is placed on small and medium economic enterprise. 2
Regarding excise and the amount of money payable to SARS for every litre of polydiesel produced, we first look at the definition of distillate fuel and whether excise is applicable to polydiesel. Act 91 defines a distillate fuel in Chapter 27 of Schedule 1, very broadly as "Distillate fuel, being products intended for use, advertised for use, put up for use or otherwise marketed or disposed of for use as fuel in compression-ignition internal combustion piston engines.” It is further clear from subsection 2 of section 37B of Act 91, with all its requirements, regarding licensing and levies, would be applicable also to the manufacturer of polydiesel. A promising section of Act 91, is the provision for the application of a non-commercial licence, if the fuel is manufactured for own use in terms of section 37B subsection 2(c). This section applies to all biofuel types and exempts the user from the requirements of a license and payment of levies.
Having due regard to the above mentioned legislation. What to do then when you are a small company such as a trucking company using about 25000L of Diesel a month and would like to save some money on your fuel bill by manufacturing your own fuel?
The first possible avenue to be pursued should be research and development regarding the commercialization of the depolymerisation of polymeric material, however, before commencement of the research, pre-register your research with the Department of Trade and Industry for a Research and Development Tax incentive in terms of section 11D of the Income Tax Act, No 58 of 1962 having due regard to the requirement of a qualifying activity such as the possible filing of a patent or design application for the Intellectual Property developed.
Apply for a non-commercial licence from SARS in terms of section 37B subsection 2(c) of Act 91 of 1964 to produce less than 25000L of Polydiesel a month.
Approach an Intellectual Property Attorney for future avenues such as filing Patents or Registered Designs as a qualifying activity in terms of section 11D of the Income Tax Act.
Publication Name: Chemical, Legal and Business
Date: February 2015
Allan John Rabie
Attorney
Patent Department
Email ajr@kisch-ip.com
Tel +27 11 324 3000
