South Africa in deep trouble – with over 60,000 jobs at stake

 ·3 Mar 2024

South Africa is set to run out of natural gas in two years after Sasol announced that it will cut natural gas production in June 2026. This poses a big threat to South Africa’s manufacturing sector.

This is the warning from Jaco Human, executive officer of the Industrial Gas Users Association of South Africa (IGUA-SA).

Starting June 2026, Sasol will stop supplying gas from Mozambique, halting supply to downstream consumers in KwaZulu-Natal, Gauteng and Mpumalanga. This will lead to a ‘day zero’ for gas users.

Human said Sasol’s decision to cease the gas supply is driven by the dwindling supply and their decarbonisation needs. Gas has a finite supply as a natural resource, making shortage inevitable.

“It’s not a new problem to the government or industry players. However, it is now real,” said Human.

The sudden decision by Sasol means the threat of day zero to South African households and the manufacturing sector is more urgent.

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

The looming gas crisis is particularly concerning as electricity supply, the primary substitute for natural gas, is threatened by load-shedding.

Many households rely on gas for cooking, lighting, and heating. In the manufacturing sector, gas is the cheapest source of energy.

There is currently no alternative to gas for most manufacturing industries which use it, especially given the unstable electricity supply.

Other energy sources, such as diesel, fuel, and oil, are prohibitively expensive. It means many large-scale manufacturers depend on gas.

Sasol’s proposed cuts will cause an immediate halt in production in these industries. According to Human, there is no plan to transition away from natural gas.

Last year, the government promised a major gas plan, laying out the next steps for a transition, to be released by the end of 2023. No such plan has yet been finalised.

South Africa is unlikely to find new domestic sources of natural gas within ten years, said Human.

In all likelihood, the country will rely on imported gas from mid-2026. The high cost of importing gas will put a squeeze on manufacturing firms in the years to come if the government fails to intervene.

This article was first published by Daily Investor and reproduced with permission. Read the original here.

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