LETTER: Sapref has strategic role in SA economy

Jabulani Sikhakhane says in his column that “it is not clear what studies led the KwaZulu-Natal provincial government to conclude that the refinery is key to provincial economic growth” (“Shades of King Shaka Airport fiasco in premier’s call for buying Sapref”, March 15).

While we have not had sight of these studies, those commissioned by the SA Petroleum Industry Association (Sapia) show that the oil industry plays a strategic role in enabling and stimulating the SA economy and is pivotal to growth, investment and employment in the whole economy.

Refining is a critical part of the oil industry in the country and during 2019 six refineries were operating with a total installed capacity of 718,000 barrels per day (bpd), processing and transforming crude oil, natural gas and coal into petroleum products. This is as per the most recent economic impact assessment commissioned by Sapia and conducted by FTI Consulting.

The study also showed that the direct contribution to the SA economy in 2019 was:

• R139bn to GDP (2.7% of GDP in 2019);
• 171,358 jobs (1.1% of employment in 2019);
• R55bn in capital expenditure;
• R152bn in operating expenditure;
• R121.3bn in tax generated and collected; and
• R1bn of social investments.

The oil industry has the second-highest multiplier effect on GDP compared with other industries in the SA economy. For every R1 contributed directly to GDP a further R1.59 is supported elsewhere in the economy. The industry supports 1.5% of the country’s total employment — for every job created in the industry a further 1.52 jobs are supported elsewhere in the economy. The industry contributed R94bn in capital expenditure and R197bn in operating expenditure. For every R1m of capital investment the industry adds another R1.2m to GDP.

SA has a well-developed downstream industry involved in importing, producing and distributing petroleum products for its domestic and regional markets. The industry was directly responsible for the supply of about 35-billion litres of petroleum products to these markets. The industry transports crude oil and petroleum products around the country through pipelines measuring 3,800km and  operated by Transnet Pipelines, and supplies jet fuel to SA’s main airports. It operates more than 5,000 retail service stations supplying customers across the country with petrol and diesel.

The termination of refining operations at Enref and the pausing of operations at Sapref suggest that domestic supply is reshaping strongly in favour of imports. The gazetting by the department of mineral resources & energy of the new regulations regarding petroleum product specifications and standards at the end of August 2021 means important decisions need to be made on whether domestic refineries will be upgraded to meet these new regulations.

Failure to upgrade will mean that tens of thousands of jobs will be placed at serious risk, as these refineries will be forced to close. This includes not only jobs in the refineries themselves but also in the industries associated with the refineries — those that supply services to the plants and those that rely on the production of specialty products from these plants. Keeping refineries operational means securing these livelihoods.

The new regulations require their implementation from September 1 2023. Sapia is of the view that the very short time frame provided for implementation is impossible to meet and is likely to render the refinery fleet obsolete within two years, making SA largely dependent on imports for its petroleum product requirements. This is going to raise considerable questions about the security of supply of products and worsen the trade balance.

Sapia is presently in the process of consulting with the department for them to amend these regulations so that a mutually acceptable and possible implementation plan and date are obtained. Every aspect of the industry is changing — demand, supply, emerging technologies and environmental regulation and policy. Sapia and our membership are committed to playing our part in society now and into the future as we adapt to this evolving environment.

Avhapfani Tshifularo, Executive director, Sapia

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