South Africa's refinery footprint has shrunk sharply, and the Reserve Bank says that has real costs. The bank, in a note on the economy released last week, said refining capacity has fallen by about half over the past decade. With imported refined products now supplying more than half of local fuel demand, the country is more exposed to global price shocks and shipping snags, and it's more vulnerable to swings in the rand. Business Day reported on the bank's analysis earlier.
Running the numbers, the bank figures South Africa's oil-import bill would have been 76 billion rand lower had a larger share of fuel been refined domestically. It also modeled a scenario where imports of refined petroleum were limited to 25%, which would have cut spending by an average of 6.1% over the four years through 2024. The shutdowns have bite: petroleum-related manufacturing output is down roughly one fifth since 2019, and around 5,400 direct and indirect jobs have been displaced. Earlier this year, gasoline and diesel prices in South Africa hit record highs as oil costs jumped due to the war in Iran.
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Right now, only two crude refineries are running: Sasol's Natref and Astron Energy's Cape Town plant, together able to process about 208,000 barrels per day. Last week, the Central Energy Fund announced plans to reconstruct the Sapref refinery south of Durban, which was idled after floods in 2022 damaged the facility in KwaZulu-Natal, aiming for throughput of 400,000 barrels daily. If those plans move forward, South Africa's reliance on imported refined fuel could ease, which the Reserve Bank notes is a key source of exposure to global disruptions and currency volatility. For your wallet, the takeaway is simple: when a country leans on imports for essentials like fuel, global shocks show up faster in everyday prices at home.
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