High oil prices have also fuelled the search for a cheaper energy source, officials behind the project said on Thursday.

Johan Hoffman, Ethanol Africa's chief executive, told Reuters the country could make ethanol mandatory to provide 10 percent of the fuel mix to achieve a 30 percent cleaner burning fuel.

"We believe it is going to be made mandatory to be used as a blend, and even if there is no regulatory blending of ethanol, we plan to export what we produce," he said.

Europe, which already has mandatory use requirements for ethanol, would be a target for the exports, he said.

Hoffman said a group of 200 South African maize growers had taken up a minor stake in Ethanol Africa, through Grain Alcohol Investments, which is made up of farmers who have pledged thousands of tonnes of maize a year to pay for their stake in the firm.

Maize farmers hope the project can reap benefits by converting their surplus output into ethanol, to avoid losses caused by overproduction.

Ethanol, or ethyl alcohol, is on its way to trading like a mainstream world commodity as soaring prices for crude oil and gasoline push consumers to use more "green" fuels produced from renewable resources like sugar, corn and soybeans.

At full capacity, Ethanol Africa's eight plants would provide about 10 percent of pump fuel requirements in Africa's biggest economy, the company said.

At current prices, ethanol will be cheaper than oil blends.

"We have a tax rebate of 40 percent from government on biofuels, so it will be cheaper than petrol," said Hoffman.

Gregor Paterson-Jones, executive director of environmental finance firm Sterling Waterford, Ethanol Africa's 50/50 partner, said: "Our long term view is that oil prices will remain high and the hunt for alternative fuels is a sound investment."

Construction of the first plant, expected to cost about 700 million rand ($111.4 million) and was due to break ground next month, with a completion date for late 2007.

The plant, in South Africa's Free State province, will require a further 200 million rand to purchase about 375,000 tonnes of maize yearly for processing into about 473,000 litres of ethanol daily.

Hoffman said his company would secure its supply of maize by giving loans to farmers to grow the crop.