South Africa’s big ‘fake fuel’ problem

Government measures to prevent diesel adulteration have created a regulatory gap that hampers legitimate stakeholders’ ability to store fuel required in the aviation industry, leading to constraints at major South African airports.

This gap is also exposing industry operators to avoidable compliance risks, including administrative penalties and potential forfeiture threats, disincentivising further investment.

This is according to the Fuels Industry Association of South Africa, whose comments come after media reports of Jet A-1 supply constraints at Cape Town International Airport (CTIA).

In a press release on Friday, 21 November, the association explained that these constraints are not due to a fuel shortage problem, but are instead an administrative matter.

The association explained that aviation kerosene is chemically similar to unmarked illuminating kerosene. This means aviation kerosene can theoretically be used as a diesel blender. 

“Because of this similarity, government policy has long recognised the need to prevent diesel adulteration,” the association explained.

Diesel adulteration refers to a practice that defrauds the fiscus, undermines compliant operators, damages engines, and distorts the fuel market.

South Africa’s government has launched a war on illicit trade in South Africa, with Finance Minister Enoch Godongwana recently highlighting the illegal alcohol, cigarette and fuel trade as priority areas.

“To prevent such misuse and curb diesel adulteration, unmarked illuminating kerosene is taxed at the same rate as diesel, ensuring duty harmonisation between the two products,” the association explained.

In contrast, illuminating kerosene that South Africans can buy for household use is marked with an invisible tracer, Authentix A-1, to prevent its diversion into the diesel pool.

“This chemical marker ensures that, if the product is mixed with diesel, its presence can be detected during testing,” the association said.

“Marked illuminating kerosene, therefore, does not attract any duties or levies. Similarly, aviation kerosene used as aircraft fuel does not attract duties or levies.”

However, the association explained that Jet A-1 fuel used on domestic flights is subject to value-added tax (VAT), while aviation kerosene for international flights is zero-rated.

It said these duty structures exist to protect the diesel tax base and maintain environmental and fiscal integrity. “They do not imply any non-compliance by the industry or any duties owed,” it said.

“Moreover, members of the Association collectively collect and pay over R140 billion annually to SARS in customs and excise duties, fuel levies, the Road Accident Fund levy and VAT.”

Regulatory gap

The association emphasised that the Jet A-1 supply constraints currently faced at CTIA are not related to any duties or levies owed to the fiscus, sabotage of security of supply, or any attempt to defraud SARS. 

“The challenge arises instead from unrealistic registration requirements that are misaligned with long-standing industry practices – an issue that has been known to the authorities for some time,” it said.

“This is an administrative matter, not a fuel shortage problem. At the heart of the present vulnerability is a long-standing regulatory gap within the Customs and Excise Act.”

The association explained that there are rules in place regarding the registration and movement of aviation kerosene to and from warehouses.

However, these rules do not provide clear guidelines or a registration process for independent storage operators that want to store duty-free aviation kerosene.

This means that independent storage providers have struggled to obtain the necessary registration to store aviation kerosene, “despite their critical role in the supply chain”, the association said.

The association explained that this lack of regulatory clarity has two key consequences –

• It threatens existing Jet A-1 infrastructure in Cape Town, Durban, and East London, and may constrain new investment in additional aviation kerosene storage at key strategic hubs such as CTIA.
• It exposes industry operators to avoidable compliance risks, including administrative penalties and potential forfeiture threats, creating uncertainty for companies that provide essential storage capacity for aviation kerosene.

“In the association’s view, this situation creates undue risk to the importation and availability of aviation kerosene, as companies may become reluctant to engage in storage or import activities while the registration pathway remains unclear and potentially punitive,” it said.

“We reiterate that this is a solvable administrative issue. With urgent, coordinated action by SARS, normal operations can be restored swiftly, protecting South Africa’s aviation connectivity, tourism sector, and broader economic activity.”

“The association remains fully committed to working with all stakeholders to maintain continuous and secure aviation kerosene supply to all the airports in the country and will continue to provide updates as information becomes available.”