SA’s diesel market faces a glut as Eskom’s much improved operational performance has seen the power producer cut expenditure on the fuel for backup power.
Eskom has spent more than R60bn on diesel in the past five years as it struggled to keep the its coal-fired plants running, forcing it to use open-cycle gas turbines to generate energy, However the state-owned utility said in update last week that it had reduced diesel expenditure by more than R10bn, compared to the same period last year.
Sasol on Tuesday said total sales of liquid fuels in its financial year ended June fell 4% from a year earlier due to a combination of “continued challenges in the SA market and the planned optimisation of inventory after the low closing inventory in 2023”.
The group said it expected sales to climb 4% in 2025, supported by improved production at Secunda and Natref.
Outgoing CFO Hanre Rossouw said SA’s diesel market was experiencing turbulence at the moment.
“The ‘problem’ is that Eskom is actually doing really well. People were questioning whether Eskom was burning diesel to keep the lights on, but our market intelligence certainly says they are not. They are doing well,” Rossouw said.
“What happened previously was that because Eskom was buying a lot of diesel, there were a lot of traders who imported diesel in the hope of selling that to Eskom. So we have seen an oversupply of diesel in the SA market,” he said.
“We do believe it’s a short-term phenomenon. We have also seen a rise in paraffin imports where people spike diesel with paraffin. That has also put pressure on the supply and demand balance in the market.”
Reports emerged earlier this year that some fuel stations in SA were selling diesel adulterated with paraffin, which affects the lubricity of diesel and does not contain the necessary additives required by modern engines. Repeated use of the tainted fuel can lead to engine failure.
Vehicle warranties do not cover damage caused by contaminated diesel, and motorists need to make insurance claims for fuel-related engine damage.
Sasol’s fuels segment comprises the sales and marketing of liquid fuels produced in SA. The company, headed by Simon Baloyi, supplies about 40% of SA’s domestic fuel needs through retail and wholesale channels.
“I am delighted that our Sasol rewards loyalty programme has reached an impressive 1.8-million subscribers, since launching two years ago. This programme contributed to our increase in retail fuel sales performance, despite an overall decrease in sales volumes,” Baloyi said.
Business Day reported in June that SA’s more than 4,600 garage forecourts were having to contend with dwindling fuel sales. Partnerships with retail outfits have been critical in diversifying revenue, according to a report by Trade Intelligence, which does research on the consumer goods sector.
The report found that nearly 600 new forecourts had opened in SA since 2019, even as overall sales had declined over the same period, forcing competitors compete for dwindling spending.
The data shows the number of fuel stations in the country grew 14.5% in the past five years as fuel sales declined more 7% than to 21.9-billion litres in the period.
The study reviewed major competitors in the sector — Astron Energy, Shell, TotalEnergies, Sasol, Puma, BP and Engen.
Fuel companies are increasing their focus on forecourt retail to supplement their revenue. Shell, meanwhile, recently announced its intention to disinvest from its SA downstream business, which houses more than 600 of the group’s forecourts.
Sasol would not be drawn on whether it is interested in buying that business.
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