A working paper by the School of Oriental and African Studies, a public research university in London, says decarbonisation is an existential challenge for Sasol, but argues the group is well positioned to drive SA’s green hydrogen economy.
The paper, published in December, looked into the green transition and employment in Southern Africa. It flagged Sasol as having a key role to play in the region’s just transition efforts.
It said green hydrogen was central to Sasol’s transition, with the question not being “if” but when and how.
“Sasol’s interests are to transform their operations, with maximum government support, in a way that ensures the best returns. The best returns depend on maintaining their dominant position in basic chemicals, including ammonia.
“This position has been entrenched by previous state support, rights to feedstock including coal and natural gas, and infrastructure provision such as pipelines,” the working paper reads.
Pole position
The paper comes amid a discourse about the groundwork Sasol CEO Simon Baloyi is laying for the reinvention of a strategic company woven into SA’s fabric as an economic powerhouse and an environmental enigma.
Sasol has been in the hydrogen game for more than 70 years, but the hydrogen of the future — clean, green hydrogen — is still not mainstream and far from cheap to produce. It sits atop 3.5-million tonnes of grey hydrogen, used primarily in making ammonia, fertiliser and refining oil.
“While Sasol paints a picture of being too big to fail to lobby government for favourable treatment, its inherent advantages in the production and technology base mean it is in pole position already to invest in renewable energy and green hydrogen production.
“The risks from carbon taxes mean it has to do so ... for competitive regional pricing and linkages to agriculture it is essential that green industrial and energy policies support rival producers as well as Sasol.”
The study calls for a renewed emphasis on the role of the state in dealing with the complex challenges presented by the green transition, and in the process avoiding development traps.
“The transformation of the energy-mineral complex, particularly central for SA, also requires integrating electricity regulation and industrial policy to plan, direct and co-ordinate investments in critical infrastructure in grids, pipelines and storage,” the paper reads.
“Market-shaping competition and regulatory rules are critical to creating a viable and predictable business environment in the context of technological change and to avoid capture of the trajectory by the largest firms,” it adds.
SA’s energy transition, particularly that of Sasol, the biggest emitter listed on the JSE, has been subject to much research in the past year.
A policy brief by think-tank Trade & Industrial Policy Strategies (Tips) urged Sasol to reinvent its Secunda plant, saying the plant’s sunset phase would be largely influenced by the government and how it manages SA’s just transition.
The giant Secunda plant, which makes fuel from coal, is Sasol’s biggest moneymaker and biggest environmental headache, accounting for nearly 84% of its scope 1 and 2 carbon emissions.
Sasol has over the years had several run-ins with environmentalists and authorities over its emissions, second only to Eskom.
In July 2023, Secunda Operations was informed that the national air quality office had declined its application of the minimum emission standards under the National Environmental Management Act to be regulated on an alternative emission load basis for the sulphur dioxide emissions from the boilers at Secunda Operations steam plants from April 1 2025.
However, Sasol in April last year successfully appealed against the decision.
Steel industry
The School of Oriental and African Studies working paper also zoomed in on SA’s steel industry, dominated by ArcelorMittal SA (Amsa).
It said realising the potential for relatively low-cost green steel in SA required a set of linked policies, and that the global move to renewable energy and green hydrogen for steelmaking was an opportunity for the country as green hydrogen replaced coking coal as a reductant, with the advantages of abundant high-quality iron ore and existing infrastructure.
“The danger of the dominant steel firm dictating the policy agenda, coupled with the international incentives and border taxes, means that green steel is exported in primary form. This will have fundamental consequences for employment,” the paper reads.
“The plans developed by Amsa in SA over 2021 and 2022 are for exports of primary sponge steel to Europe and other markets — not to ensure that SA manufacturing has competitive green inputs. This lacuna is also evident in the approach to renewable energy — competitive green electricity is essential for diversified manufacturing, and not only in energy-intensive heavy industries.
“Provision of renewable energy to diverse customers requires the transmission infrastructure to match investments in generation.
“The SA government has delayed making the changes required,” it said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.