South Africa

Existential threat to South African manufacturing

South Africa’s manufacturing sector faces an existential threat in the next two years after Sasol announced it would stop natural gas production in June 2026, forcing the industry to scramble for alternatives. 

Executive director at the Industrial Gas Users Association of South Africa (IGUA-SA), Jaco Human, told Classic Business that this is a cliff that Sasol is pushing the industry over. 

From June 2026, Sasol will stop supplying gas from Mozambique, halting supply to downstream consumers in KwaZulu-Natal, Gauteng and Mpumalanga. 

Human said this is a unique and dangerous situation, not even comparable to power cuts from Eskom. 

“The reality is that this is a cliff. It is a hard stop, and right now, we do not have the infrastructure for any alternative and no way to reduce our reliance on this single source,” he said. 

“The consequences are real, and it essentially means production stoppages.”

“Sasol will push industry over this gas cliff. Interestingly, we have never seen any solutions coming from Sasol, saying, ‘We can provide you with more gas, and this is how much we have to spend’.”

Sasol has argued that the regulated price of natural gas was insufficient for it to maintain the pipeline from Mozambique or invest in alternatives.

According to Human, Sasol’s plan to stop production will devastate the economy and could threaten upwards of 60,000 jobs.

The best alternative currently available to industry is to push for Liquified Natural Gas (LNG) to be imported through South African ports. 

This would require massive infrastructure development to enable South African ports to receive LNG imports and connect them to the current pipeline network. This infrastructure is currently non-existent. 

“This simply has to happen. The problem is that we have now run out of time,” Human said.

He explained that the project to enable LNG imports has to break ground by July 2024 for it to be ready to replace the existing supply from Sasol. 

Industry alone cannot do this project as it needs government support to build the infrastructure and ensure sufficient demand to make the project financially viable. 

Human said the project is shovel-ready and just needs to reach financial close, which depends on sufficient levels of volume throughput to make it feasible. 

Industry alone can contribute around half of the required demand, but it needs the government to step up to cover the other half. 

Human suggested this can be done by the government simply clarifying their plans for gas-to-power projects in South Africa, or it could provide a sovereign guarantee for the infrastructure investment, estimated at around $300 million (R5.7 billion). 

“It is a plausible, surefire way to do this, but we need to move this along,” Human said. 

“The problem is that the government has not taken this on board, and we have not seen the movement or involvement of the state in a practical way regarding this matter. That is of concern.”