Fuel import bill turns refining into a capital question

Ayanda Noah, chairperson of the Central Energy Fund Group, is calling for a national debate on the future of domestic refining, arguing that South Africa’s fuel import bill has become a capital question as much as an energy one. The economics of imports, she says, now expose the economy to strategic and financial risks that reach well beyond the energy sector.

The numbers frame the stakes. Imported petroleum products now supply about 61% of domestic fuel demand, up sharply from 22% in 2019, according to Noah. Domestic refining capacity has fallen significantly over the past decade. That dependence, she warned, leaves the country exposed to geopolitical instability, supply chain disruptions and exchange rate volatility. For importers, traders and consumers alike, it means rising exposure to currency movements and external shocks that domestic capacity would otherwise absorb.

Speaking at an industry engagement on the state and transformation of the energy industry, Noah argued that fuel imports should be viewed as more than an energy issue. “South Africa should not aspire merely to be a consumer of energy. We should aspire to remain a producer, processor, owner and developer of strategic energy infrastructure,” she said. “Energy security is economic security, and refining capacity is industrial capacity.”

Her case rests on the sector’s role as a foundation for the wider economy. Refining supports mining, electricity generation, manufacturing, transport, agriculture and logistics, and Noah said strategic refining capacity should therefore sit within a broader industrial development agenda. She pointed to Brazil, India, China and Russia, where governments, state owned enterprises, development finance institutions and private investors continue to back strategic energy infrastructure.

A central part of her argument was directed at lenders and development financiers. Noah urged institutions including the Industrial Development Corporation and the Development Bank of Southern Africa to assess energy projects on their wider contribution to industrialisation and economic growth, rather than judging them only on the commercial return of an individual refinery. “The investment discussion should not focus solely on the commercial return of an individual refinery,” she said. “We must also consider the broader economic return generated through job creation, local manufacturing, engineering capability, skills development, SMME growth and enhanced energy security.”

The most concrete opportunity she identified is the South African National Petroleum Company’s Refinery Development Programme. The proposed refinery, with a capacity of 400,000 barrels per day, is estimated to require about US$7.15 billion in investment. The project could create around 12,500 construction jobs and 2,850 permanent operational jobs, figures that underline the scale of both the capital commitment and the employment upside at stake.

Meanwhile, Noah also called for renewed investment in PetroSA’s Mossel Bay operations, saying that developing feedstock solutions and supporting infrastructure could open opportunities in petrochemicals, manufacturing, logistics and gas to power projects.

Her warning to investors and policymakers was about timing. Strategic infrastructure can take years to build but can be lost quickly, she said, and South Africa should weigh the long term consequences of choosing not to invest in domestic refining capacity. The country, in her view, should not wait for a crisis before acting.

She called for an evidence based discussion involving government, industry, labour, investors and development finance institutions to determine what energy infrastructure South Africa will need over the next three decades. The full remarks were reported by Green Building Africa at https://www.greenbuildingafrica.co.za/central-energy-fund-group-chair-calls-for-debate-on-south-africas-refining-future/

The debate she is seeking is ultimately about capital allocation: whether the country continues to pay for refined products abroad, or commits billions to rebuilding the industrial base that produces them at home.