In a bid to find alternative energy sources as oil prices continue to rise, a South African company revealed plans on Tuesday to invest a billion dollars in the biofuel sector, starting with construction of the continent's first factory.

Ethanol Africa will begin with an investment of R700 million ($100 million) in a plant plant in Bothaville, South Africa, according to reports. The plant is expected to be in full production next year, producing up to half-a-million liters of bio-ethanol.

The bio-ethanol industry is the largest single economic development in the Free State since the inception of the gold mining industry [50 years ago], said Ethanol Africa's chief executive Johan Hoffman told the Mail & Guardian online.

Declining oil reserves in the world have left open a market gap for biofuels, he added.

Bio-ethanol, an alcohol produced from agricultural feedstock, is used as a blend component in the fuel used in the U.S. and Europe. When mixed with gasoline, it increases octane production while producing cleaner emissions.

The ethanol industry has grown significantly over the last few years, expanding production capacity at a compounded annual growth rate of approximately 20 percent from 2000 to 2005 in the U.S.

Hoffman said the Bothaville plant in South Africa, was the prototype of eight more that would be erected in the next six years, brining the total cost of the projects to about $1 billion. Ethanol Africa said it was also exploring opportunities in Zambia, Mozambique and Angola

Construction of the plant will begin today and is set to provide 10,000 jobs when production begins by the end of next year.

By 2015, the company expects to supply 12,5 percent of the country's fuel needs - in addition to the 40 percent already produced synthetically from coal and gas.

Hoffman said that contrary to popular belief, he was convinced bio-ethanol could be produced at less than $50 per barrel, proving to be beneficial on a global scale.

Major fuel markets such as the United States have been urged to turn alternative fuel supplies to lessen dependence on oil.

US President George Bush, in his State of the Union address earlier this year, said the country is addicted to oil, which is often imported from unstable parts of the world.

He encouraged US firms to invest in alternative fuel technologies to mitigate the dependence.

Mozambique Zambia South Africa Angola