In August 2023 Sasol’s announcement of the impending cessation of its natural gas supply sent shock waves through SA’s industrial sector. The news underscored the urgent need for decisive action to secure the country’s future energy supply. Yet, while the initial announcement triggered some high-level meetings, the SA government has since lapsed into a telling silence.
This lack of engagement, particularly in addressing short-term solutions, stands in stark contrast to its verbose advocacy for less challenging, long-term policies. In any other country facing such a crisis the government would be working hand in glove with the private sector to avert disaster. Here, industry finds itself alone.
The urgency is clear: Sasol’s ability to maintain gas supply ends in June 2028 — a mere 42 months away. Given the 30-month minimum lead time to build the necessary infrastructure, SA has only a few months to conclude agreements and break ground. Failure to act will result in a catastrophic economic shock.
SA’s industrial gas users contribute about R700bn annually to GDP and directly support 100,000 jobs. Sectors such as mining, automotive, chemicals, ceramics, glass, consumer goods and steel depend on a stable gas supply.
Disruption risks widespread job losses and could destabilise the economy. The stakes could not be higher, yet government silence persists on the specifics of any plan or solution.
Vague initiatives
Despite the lack of meaningful engagement with industry, the government continues to announce purported solutions. From the Eskom and Sasol memorandum of understanding to vague initiatives of government-to-government liquefied natural gas (LNG) supply deals, and uncertain developments regarding Richards Bay and Transnet pipeline upgrades, these proposals lack critical details such as commercial terms, pricing and timelines. Without such specifics these announcements seem little more than political theatre. Words alone cannot sustain an industrial economy; actionable and bankable plans are imperative.
Governments in other nations facing similar crises would align closely with private sector stakeholders to craft pragmatic, urgent solutions. For instance, during the Russia-Ukraine conflict the German government took decisive steps to safeguard its energy security by forging public-private partnerships, ensuring adequate financial support and sharing risks with the private sector.
Such measures demonstrate that governments typically have skin in the game, recognising their pivotal role in stabilising markets and securing the future of their nations. By contrast, the SA government’s disengagement places the burden of gas energy security entirely on the private sector, an untenable expectation for a developing economy.
That said, the private sector has stepped up in the absence of any discernible government plans. The industry-led Gasco initiative represents a practical and least-cost, sustainable path forward. This nonprofit demand aggregator is already well advanced, with shareholder agreements expected to be put in place in the first quarter of this year.
Negotiations with suppliers are under way, and financial institutions have indicated they are prepared to back the project. Gasco’s approach is not onerous or overly complex; it simply requires government alignment and limited risk assumption by the government to succeed — risk that is in the national interest.
While a critical player, Sasol has made it clear that it cannot fulfil the country’s LNG needs alone. Its role as a trader for commercial gain, coupled with its limited balance sheet, underscores the importance of broader and more progressive market solutions such as Gasco — solutions that are truly designed to serve the broader economic interest of the country rather than narrow monopolistic, business and government-serving interests.
Risk sharing
Time is running out. The next six months will determine whether SA’s industrial sector survives or succumbs to the gas cliff. The government must not only focus on politically convenient long-term policies, it must engage immediately with the private sector to develop actionable short-term solutions. High-level, focused discussions between government departments and industry stakeholders are essential. These talks must result in a framework that enables infrastructure development and risk sharing with the private sector to secure gas supply within the critical time frames.
The solutions are not complex or onerous. The private sector is taking on the challenge head-on in the interest of the economy. It is crafting practical and cost-efficient solutions. It has the technical expertise, commercial strength and commitment to secure SA’s gas energy future. What is lacking is a proper public-private partnership framework.
Suppose there is a solution as advocated by the government. In that case the right announcements need to be made now — announcements that speak to government and market alignment, definitive infrastructure developments, project timelines and carefully considered public-private finance and risk frameworks.
SA stands at a pivotal juncture. The recent disruptions to the supply of gas from Mozambique due to political unrest underpinned the urgent need to establish a secure and sustainable gas supply for SA industrial and other users, an objective that should be front of mind for all stakeholders.
The departments of electricity & energy and trade, industry & competition and the National Treasury have the tools and capacity to drive real change. With the right focus and alignment within these departments, working together with industry, there is no reason this challenge cannot be met with confidence and purpose.
By channelling its energy into actionable, collaborative frameworks the government can secure the country’s industrial future and restore faith in SA’s ability to navigate this critical moment. But time has run out and swift action is now imperative.
• Human is CEO of the Industrial Gas Users’ Association of Southern Africa.
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