The SA Revenue Service (Sars) is confident that it has identified a major player in the multibillion-rand illegal diesel blending market, having shut down two depots in Limpopo and Gauteng where it suspects paraffin is being mixed with diesel on an industrial scale.
The two facilities, in Meyerton and Louis Trichardt, are owned by an entity called Alliance Fuel, which the tax agency says is the brainchild of business person Walter Gilfillan.
The tax agency initiated an investigation into the company for violations of the Customs and Excise Act related to the illicit trading, transport and “mixing and blending of fuel products”.
Following a tip-off, Sars raided the two premises. It suspects Alliance Fuel is merely a front for Gilfillan’s solely owned entity Agrifuels.
Preliminary findings by Sars lay bare the vastness of Agrifuels’ operations. Between 2019 and 2023, the company’s income tax returns showed revenue of about R5.6bn, VAT turnover of R7bn and PAYE of R1.1bn. The company, which has several bank accounts, had inflows of more than R8.6bn during the same period.
Its Meyerton depot is a vast manufacturing site, housing 69 vertical steel storage tanks each with a capacity of about 120,000l and 23 horizontal steel tanks each with a capacity of about 80,000l.
Business Day has seen plans submitted by Gilfillan in 2017, requesting to expand the storage capacity of the Louis Trichardt depot from 69,000l with an extra 530,000l comprising five 83,000l tanks (diesel), one 23,0001 tank (diesel) and two 46,0001 tanks (petrol).
Access blocked
It is at the Meyerton site that Sars is said to have found materials that pointed to the alleged illegal activities. It is understood that when Sars officials arrived, the manager refused to grant them access to one of the facilities, claiming it was sublet to another party. The manager eventually relented after legal advice. The facility had a lab with testing machines and lateral flow device test kits, which are used to detect the first layer of the chemical marker introduced into illuminating paraffin.
The test kits indicated that no chemical marker was present, but written notes were found next to the equipment specifying the density, flashpoint and sulphur content of the diesel.
This raised concerns for Sars that the chemical marker in illuminating paraffin was being washed out to mask that blending had taken place, and the final product was being tested to conform to the density, flashpoint and sulphur content of diesel.
The non-existence of chemical markers is important because there are two types of paraffin: one used in the aviation industry and the other illuminating paraffin. The aviation paraffin attracts duties, while the illuminating paraffin does not, but must have a chemical marker to indicate that it is such.
Since illuminating paraffin is duty-free, it presents an opportunity to defraud the fiscus of the taxes on diesel by adulterating it with paraffin.
Gilfillan did not respond to requests for comment.
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