- Refinery closures have pushed imported refined products above half of South Africa’s domestic fuel supply.
- Reserve Bank research estimates that the country could have saved R76 billion on oil imports between 2021 and 2024 with higher domestic refining capacity.
South Africa’s declining refining capacity has increased its dependence on imported fuel, exposing the economy to higher costs and international supply disruptions. Economists issued the warning after new research from the South African Reserve Bank (SARB).
The SARB study estimated that South Africa could have reduced its oil-import bill by R76 billion between 2021 and 2024. The researchers reached this estimate by assuming refined petroleum products accounted for no more than 25% of total oil imports.
Imported refined products now meet more than half of South Africa’s domestic fuel demand. Meanwhile, refinery closures have sharply reduced local processing capacity over the past decade.
Refinery Closures Increase Economic Pressure
The SARB research found that refinery closures reduced petroleum-related manufacturing output by about 20% since 2019. In addition, the closures displaced an estimated 5,400 direct and indirect jobs.
The decline has also contributed to delayed business investment. At the same time, refined petroleum products cost an average of 12% more than crude oil between 2014 and 2024.
The researchers estimated that limiting refined products to 25% of total oil imports could have reduced South Africa’s oil-import bill by an average of 6.1% between 2021 and 2024.
Economists Warn About Fuel Cost Risks
North-West University Business School economist Professor Raymond Parsons said the R76 billion estimate highlighted South Africa’s exposure to global energy shocks.
“The SARB’s cost estimate is another reminder of South Africa’s vulnerability to the ongoing global energy crisis.”
According to Parsons, South Africa needs to reduce its dependence on imported fuel. He also called for strategic fuel reserves as geopolitical tensions continue to affect international refined-product markets.
Parsons also said South Africa needs to rebuild domestic refining capacity. However, independent economist Ulrich Joubert cautioned that restoring refineries would require significant capital.
Joubert said higher fuel costs could increase transport expenses and eventually raise prices for consumers. It makes a difference per kilometre, and eventually then the price of the product that lands on these shelves makes a difference to me and your pocket.
Consequently, higher fuel costs could affect consumer spending, inflation, the trade balance and broader economic activity.
Government Plans Refinery Capacity Expansion
The South African government has acknowledged the risks linked to declining domestic refining capacity. Mineral and Petroleum Resources Minister Gwede Mantashe said about 60% of the country’s fuel supply came from imported refined products as of March.
The remaining 40% came through domestic refineries and Sasol. In response, Mantashe said the government planned to rebuild SAPREF and PetroSA and expand domestic refining capacity.
Mantashe reiterated the concern during the Department of Mineral and Petroleum Resources’ 2026/27 Budget Vote in May. It is neither sustainable nor just for a country with significant mineral and petroleum potential, such as ours, to remain exposed to external supply shocks in this manner.
Deputy Minister Phumzile Mgcina also said the Central Energy Fund was advancing the South African National Petroleum Company’s refinery strategy. The strategy aims to reduce reliance on imported refined products and strengthen long-term fuel security.
Implementation Remains A Key Challenge
Parsons said the success of the government’s refinery plans would depend on effective implementation. Although he acknowledged greater government awareness of the import challenge, he questioned whether authorities could act quickly enough as global energy conditions change.
Greater domestic refining capacity could reduce South Africa’s exposure to international supply disruptions. Furthermore, it could support employment and businesses that supply goods and services to refineries.
The Department of Mineral and Petroleum Resources had not responded to requests for comment by the time of publication.