Sasol said in a statement that the state's Central Energy Fund (CEF) signed a memorandum of understanding to conduct a feasibility study to test the venture's viability before an investment is made.
   
The study, which will also look at possible locations for the production plant, will be complete by the end of the year.

The proposed plant will require more than 500 kilotonnes of soya beans to produce 100 kilotonnes of biodiesel a year.

Biodiesel is a renewable diesel-blending component made from vegetable oil by catalytic reaction with methanol.

Annual global production is about three million tonnes, mainly in Western Europe.

Sasol supplies about 40% of South Africa's fuels.

The CEF is involved in the search for appropriate energy solutions to meet the future energy needs of South Africa, and also manages the operation and development of the oil and gas assets and operations of the country's government.