South Africa spent about R76bn more than it would have importing refined petroleum products between 2021 and 2024 had it not allowed its refining capacity to wither away, exposing the economy to the vulnerability of external shocks.
The economy also paid the price in job losses, with 5,400 jobs cut as a result.
These are observations made in notes by economists published by the South African Reserve Bank last week.
South Africa’s imports of refined products remained relatively stable at about 25% in 2010-19. However, this changed in 2020 when refineries responsible for almost half of South Africa’s refining capacity closed, with imported refined products filling the gap, raising exposure to global price shocks and shipping disruptions.
“Between 2021 and 2024, the oil import bill could have been R76bn lower if the cap to the import of refined petroleum products was at 25%. The oil import bill could have been reduced by an average of 6.1%,” the notes read, highlighting the 5,400 direct and indirect jobs lost in the process.
“South Africa’s decline in refining capacity represents a structural shift in its energy and industrial sectors. Ageing plants, persistent cost disadvantages, and prolonged regulatory uncertainty have discouraged reinvestment, reducing domestic refining capacity and increasing reliance on imported refined fuels.
“At the macroeconomic level, greater dependence on imported refined products raises the oil import bill and increases exposure to global price volatility, with potential spillovers to the trade balance and exchange rate and indirectly to inflation under adverse conditions,” the notes say.
The Bank’s notes are typically for internal discussion and are meant to spark public debate. They were approved for publication by its chief economist and monetary policy committee member, Konstantin Makrelov.
The impact of import costs and exposure to external shocks was laid bare in this year’s second-quarter trade account, which in rand terms showed a R205bn deficit between April and June, largely driven by a surge in the value of crude oil and refined petroleum imports as the war in the Middle East raised supply concerns and energy prices.
A study by the Finland-based Centre for Research on Energy and Clean Air (Crea) shows global markets have paid a steep price over the sudden oil price increase after the breakout of the conflict led to shipping disruptions through the Strait of Hormuz, imposing higher energy costs on much of the world.
The study, released last month, shows South Africa’s fuel importers have incurred at least R56bn in extra costs since the outbreak of conflict in the Middle East in February sent the price of oil surging and created the largest and most sustained price shock since the 1990 Gulf War, with consumers bearing the brunt of it at the pumps.
The Crea study, which looked at prices from March until August, lists South Africa among the top 20 countries that paid the most for the Strait of Hormuz price shock.
The study compared what importing countries actually paid for seaborne fossil fuels against the prices futures markets expected before the war. Several realised cost components are excluded from the analysis, resulting in conservative estimates.
These include pipeline gas, coal, fuel oil, and naphtha costs; freight rates; and any other components of consumer prices added on top of the wholesale price.
The Bank’s notes state that as the country becomes more reliant on imports, resilient fuel logistics, storage infrastructure, and supply-security mechanisms will become increasingly important to maintain macroeconomic and energy-system stability.
“The shift towards refined-fuel imports has heightened South Africa’s vulnerability to external shocks. When global oil prices rise, the import bill increases more sharply than when crude oil was processed domestically, worsening the trade balance and the current account,” the notes read.
“The inflationary impact is indirect: larger external deficits weaken the rand and raise the domestic cost of all imports. With refined products now dominating the fuel mix, South Africa has less ability to absorb global price shocks through domestic production, reducing its terms-of-trade buffer.”
Another area hurt by the dwindled refining capacity was the domestic supply of bitumen, a key material used in the paving of roads and airfields.
The shift towards refined-fuel imports has heightened South Africa’s vulnerability to external shocks. When global oil prices rise, the import bill increases more sharply than when crude oil was processed domestically, worsening the trade balance and the current account.
— Reserve Bank
Natref was the sole bitumen producer until it halted production in September 2025, ending all domestic refinery output of the product.
South Africa now is ranked 20th globally in bitumen imports; in 2019 it was ranked 123rd.
Nearly all of the country’s surfaced roads have bituminous surfacing. The Central Energy Fund (CEF) announced plans last week to rebuild the country’s oil-refining capacity, which will see the local processing of crude at least triple.
Part of the plan is to revive the Sapref refinery, which has not been operational after the 2022 floods in KwaZulu-Natal damaged it.
The CEF is eyeing targeted throughput of about 400,000 barrels a day at Sapref.
Business Day