Experts warn that South Africa's growing reliance on imported refined fuel makes the economy more vulnerable to international supply disruptions, pressure on the trade balance, and rising costs.
These remarks came after a study by economists at the South African Reserve Bank (SARB). According to this study, if refined petroleum products constituted no more than 25% of total oil imports, the country's oil import bill between 2021 and 2024 could have been R76 billion lower.
The study, published this month in the Economic Bulletin titled 'Running on empty? South Africa's refinery closures and their macroeconomic impact,' showed that over half of domestic fuel demand is now met by imported products due to reduced local refining capacity.
Professor Raymond Parsons, an economist at the Northwestern University School of Business, noted that the R76 billion estimate highlights the economic risks arising from South Africa's dependence on imported fuel. He stated that the SARB calculation serves as another reminder of South Africa's vulnerability to the current global energy crisis, and reducing import dependency remains a top priority.
Parsons also emphasized that geopolitical events have strengthened the arguments for developing strategic fuel reserve policies, as refined petroleum products face international pressure. He added that restoring domestic refining capacity is necessary to compensate for losses caused by the sharp decline in refineries over the last decade.
According to the SARB study, the closure of refineries has led to an approximate 20% decrease in oil-related industrial production since 2019, displaced about 5,400 direct and indirect jobs, and contributed to delayed corporate investments. Furthermore, it was found that refined petroleum products averaged 12% more expensive than crude oil between 2014 and 2024.
Researchers also calculated that limiting the share of refined products to 25% of total oil imports between 2021 and 2024 could reduce the country's oil import bill by an average of 6.1%.
Independent economist Ulrich Jobert believes that the R76 billion estimate is relatively small compared to the size of the economy, but rising fuel prices could significantly affect both households and businesses. He explained that increased transport costs could ripple through the entire economy and ultimately be reflected in consumer prices.
Jobert warned that higher fuel costs could also negatively impact consumer spending, inflation, the trade balance, and the broader economic situation. Nevertheless, he noted that restoring domestic capacity is not a simple process, as refineries require significant capital investment, and reconstruction costs must be weighed against expected benefits.
However, greater domestic capacity could make South Africa less susceptible to international supply disruptions while supporting employment and the business that supplies refineries with goods and services.
The government has acknowledged the risks associated with declining domestic refining capacity and increased reliance on imported finished fuels. On March 25, answering questions in the National Assembly, Minister of Mineral Resources and Petroleum Gweed Mantsashe stated that about 60% of South Africa's fuel needs are covered by imported refined products, while about 40% is processed at domestic refineries and by Sasol.
Mantsashe announced the government's intention to restore SAPREF and PetroSA, as well as gradually increase domestic refining capacity as part of efforts to strengthen energy security. During discussions in May within the Department of Mineral Resources and Energy Budget vote, he reiterated that South Africa remains overly dependent on imported refined petroleum products and is exposed to external supply shocks.
He stressed: 'It is unsustainable and unfair for a country with our significant mineral and petroleum potential to remain exposed to such external supply shocks.'
Deputy Minister Fumzile Mgcina reported that the Central Energy Fund is promoting the strategy of the South African National Petroleum Company's refineries to reduce dependence on imported refined products and strengthen long-term supply security.
Parsons concluded that the effectiveness of the government's plans will depend on their implementation. He noted that the government has shown awareness of the fuel import problem but questioned whether it can act quickly enough amid changing international energy conditions. As of the publication, the Department of Mineral Resources and Energy has not responded to a request for comment.