Minister has a warning for South Africans who use diesel

Minister of Mineral and Petroleum Resources Gwede Mantashe has warned about the rise in adulteration of fuel products in South Africa. 

In particular, Mantashe warned about the impact that the illegal blending of diesel with illuminating paraffin could have on diesel users and the fiscus. 

Speaking at the Fuels Industry Imbizo, Mantashe said South Africa has maintained fuel supply stability despite the ongoing conflict in the Middle East. 

The conflict has significantly disrupted global energy supply chains and resulted in soaring fuel prices in South Africa, with petrol hitting a record high in June. 

While Mantashe praised the industry’s efforts to work with the government to maintain fuel supply stability, he warned that there are still areas of concern for the state. 

The disruption to global oil supply put South Africa’s fuel price formula under unique pressure, with retailers feeling immense pain while waiting for the official petrol and diesel prices to adjust. 

These retailers had been effectively selling fuel at a loss for a couple of weeks before the adjustment, putting them under severe financial pressure. 

This also pushed some to increase fuel prices ahead of official price adjustments, Mantashe said. 

While this tactic involved only a small number of participants, Mantashe said it undermines public confidence in the industry and tarnishes the reputations of fuel retailers. 

A more pressing issue for Mantashe is the illegal blending of diesel with illuminating paraffin, which has risen sharply in recent months as criminals benefit from higher prices. 

“This criminal activity undermines the rule of law, distorts markets, damages equipment, compromises consumer confidence, and poses significant risks to our economy and national security,” Mantashe said. 

“Government continues to work closely with law enforcement agencies to combat this illicit trade. However, we cannot succeed alone. Industry cooperation remains essential.” 

The problem only appears to be getting worse, with Bidvest Protea Coin saying that it has identified more than 100 illicit fuel depots across the country. 

“Mixing and blending have been around for years, but on a very small scale. But these days, it’s just getting out of hand,” Protea Coin COO Waal De Waal said. 

Dirty diesel

Criminals selling so-called ‘dirty diesel’ stand to make significant profits from illegally blending paraffin with diesel. 

The practice benefits them by increasing the volume of fuel they can sell and by greatly increasing the margins on sales. 

This is because of the significant price difference between paraffin and diesel, which persists in South Africa due to how prices are regulated. 

The gap first opened up when the government changed how paraffin prices were regulated to make them less tied to diesel and petrol prices. 

This led to significant variances in paraffin pricing and relatively wild swings, which severely impacted poorer households who used the fuel for cooking, heating, and lighting. 

As a result, the formula to calculate the price of paraffin was changed, making the fuel extremely cheap as it is not subject to the same taxes that are levied on the sale of petrol and diesel. 

The surge in diesel prices is due to the conflict in the Middle East, which has widened the gap in recent months, making it more attractive to blend paraffin with diesel. 

Paraffin is also widely available in South Africa due to its use as a relatively cheap way to heat and light homes. 

This creates a near-perfect storm in which the ingredients to make dirty diesel are abundant and the economic incentives are substantial. 

While this has immense benefits for criminals, it creates significant problems for diesel users down the line. 

Dirty diesel can cause high-pressure pumps in diesel engines to wear out and seize, it can clog injectors, and lead to entire engine failures. 

The fuel also does not burn cleanly, leading to increased emissions and toxic smoke from vehicles. 

Paraffin sales in South Africa are regulated tightly to try to prevent illegal blending from occurring and to ensure that the correct amount of tax is collected. 

The fuel is marked with an A1 market for SARS and the Department of Mineral and Petroleum Resources to monitor. 

However, De Waal said the market is relatively easy to bypass, with simple methods to remove the identifying marker. There is also a lack of equipment available to pick up the marker.