SA’s fuel industry has undergone major changes over the past five years, which demands careful and rapid adjustment to the way it operates and is regulated. Failure to do so is what has repeatedly led to news about likely shortages of jet fuel at SA’s major airport hubs, OR Tambo and King Shaka.
This risk has been caused by the changes to licensing requirements brought about by the transformation of the country’s fuels industry. Since 2019, SA has become heavily dependent on imports of refined petroleum, which started to exceed crude oil imports towards the end of 2020. The gap has widened significantly since.
The changes have been brought about by the closure of refineries. Imports of refined petroleum have increased from more than R50bn in 2019 to more than R300bn in 2023, after peaking at R350bn in 2022, according to the latest Reserve Bank quarterly bulletin.
Data published by the department of mineral resources shows that imports of refined petroleum products reached almost 19-billion litres in 2023, compared with 13.2-billion litres of crude oil.
About half of SA’s refining capacity has been closed, leaving one coastal and two inland refineries, according to the SA Petroleum Industry Association.
“As a result, imports of refined petroleum products, especially petrol and diesel, have increased from 35% in the first quarter of 2020 to 61% in the third quarter of 2023. SA has therefore shifted from a refiner and exporter of petroleum products to a net importer.”
This change has been accompanied by a 39% drop in exports of petroleum products, mainly to Southern Africa, between 2021 and 2023, with diesel and fuel oils showing the largest declines.
Diesel accounted for 67% of refined petroleum imports by volume in 2023, according to the government data, and petrol 23%. India, Oman and the United Arab Emirates (UAE) are the biggest diesel suppliers to SA, each accounting for 20% by volume.
India is SA’s largest supplier of petrol (19%), followed by the UAE (18%) and Oman (10%). The UAE (32%) is the biggest supplier of jet fuel imports, followed by Saudi Arabia (12%), with Kuwait and Qatar at 8% each.
The inland region, including Gauteng (the country’s economic hub), accounts for 52% of petrol, diesel and kerosene (jet and illuminating fuel) demand, followed by KwaZulu-Natal (19%) and other coastal provinces (29%). The inland location of the country’s economic activity adds complexity to the logistics of managing imports of refined petroleum products.
Careful management
The nature of the petroleum industry’s activity serves as a reminder that economic change, both at industrial and national economic level, needs careful management. One major problem is regulatory, especially relating to the SA Revenue Service (Sars).
Responding to media reports this month on the potential shortage of jet fuel at OR Tambo, Sars denied “dithering” in issuing licences to fuel companies. “The importation and movement of both aviation kerosene and illuminating kerosene is strictly governed by the Customs & Excise Act. It is the adherence to the provisions of the act that has proven difficult for the fuel industry.”
Sars explained that the jet fuel “shortage” had been brought about by the change in the industry — from local refining of crude oil to importing refined petroleum products. The shift from “a manufacturing-based model to an import model” meant licences that had been issued to refineries were no longer valid.
Sars later granted special kerosene import licences for a year “to allow parties to attend to the complexities involved in the process of deregistering refineries’ warehouses and registering storage facilities”.
Whether Sars is the culprit or the industry is to blame is moot. Either way, SA hasn’t managed the change from a petroleum industry that’s driven by domestic crude refining to one that relies heavily on imported petroleum products very well. Such a failure points to a weakness in the country’s ability to manage changes to economic activity. Such a weakness could be fatal, especially as the country navigates the transition from fossil to cleaner fuels.
The transition is complex because it involves far more than environmental considerations. It has social and economic implications, in particular because it will result in deep changes to the existing types of economic activity.
It will also create opportunities for new economic activity, or new ways of doing things. All this requires regulations to change or adapt to the new economic activity.
• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.
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