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.<\/p>\n
The economy also paid the price in job losses, with 5,400 jobs cut as a result.<\/p>\n
These are observations made in notes by economists published by the South African Reserve Bank last week.<\/p>\n
South Africa\u2019s 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\u2019s refining capacity closed<\/a>, with imported refined products filling the gap, raising exposure to global price shocks and shipping disruptions.<\/p>\n \u201cBetween 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%,\u201d the notes read, highlighting the 5,400 direct and indirect jobs lost in the process.<\/p>\n \u201cSouth Africa\u2019s 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.<\/p>\n \u201cAt 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,\u201d the notes say.<\/p>\n The Bank\u2019s 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.<\/p>\n The impact of import costs <\/a>and exposure to external shocks was laid bare in this year\u2019s second-quarter trade account, which in rand terms showed a R205bn deficit<\/a> 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.<\/p>\n 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.<\/p>\n The study, released last month, shows South Africa\u2019s fuel importers have incurred at least R56bn in extra costs<\/a> 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.<\/p>\n