The big problem for South Africa pushing investors to neighbouring countries instead

The South African government has dragged its feet in addressing the looming gas supply cliff, and without certainty, major companies are choosing to invest in neighbouring countries instead.

This was the warning from the Industrial Gas Users’ Association of South Africa (IGUA-SA) and the South African Oil and Gas Alliance during a recent briefing to Parliament.

The so-called “gas cliff” is a looming drop in natural gas supply as Sasol’s existing fields in Mozambique approach depletion, a problem that started emerging as early as 2019. 

With production expected to fall off as early as 2026, South Africa faces an energy shortfall that could cripple its industrial sector. 

Despite this, stakeholders have stressed that the government has made little meaningful progress in securing an alternative supply or infrastructure to import gas.

This has left the industry in a state of uncertainty, which has scared inventors away from making any commitment to South Africa. 

CEO of IGUA-SA, Jaco Human warned that the absence of confirmed gas projects or infrastructure plans has led to a freeze in industrial investment.

“Significant industrial investments have halted,” he said. “Industry is starting to look into neighbouring countries for future investment purposes where there’s access to gas energy.”

IGUA-SA, which represents major gas-reliant companies including Mondi, ArcelorMittal, and Hulamin, stressed that the lack of clarity on government policy is a significant concern. 

Human said the association still doesn’t know the government’s official policy on gas, as various strategies and plans remain unpublished. 

Craig Morkel from the South African Oil and Gas Alliance echoed these concerns, describing the situation as increasingly “embarrassing” when trying to attract investors. 

“We are running out of options very quickly. It’s urgent, and therefore we need to have all hands on deck,” he told Parliament.

Investors looking elsewhere

Meanwhile, neighbouring rivals are not waiting around. Significant gas infrastructure developments are underway in Namibia and Mozambique, offering more certainty to investors looking for energy security. 

This shift threatens to redirect long-term investment and job creation away from South Africa, exacerbating the country’s existing economic challenges.

Professor David Phaho, Director of the African Energy Leadership Centre at Wits Business School, warned of the high stakes if South Africa fails to respond in time. 

He said more than 70,000 direct and indirect jobs are at risk if the gas cliff is not addressed, and that industries dependent on natural gas contribute up to R500 billion to the economy, equivalent to up to 5% of South Africa’s GDP.

Phaho noted that the manufacturing sector, particularly the steel, petrochemicals, and transport industries, will be hardest hit. 

These sectors rely on gas as a source of energy and as a feedstock or essential fuel to run machinery. 

Many industries are difficult to decarbonise and cannot easily switch to alternatives. To mitigate the crisis, Phaho proposed importing liquefied natural gas (LNG) as a short-term solution. 

He suggested that ports such as Richards Bay, Durban, and Maputo in Mozambique could serve as entry points for LNG to feed into the existing pipeline infrastructure. 

However, this solution depends on swift and coordinated action from the government and industry players.

Sasol has committed to extending operations to mid-2027 to buy some time. The company has also agreed with the government and Eskom to help avoid the gas cliff. 

However, business leaders remain sceptical, stressing that time is running out and that a more aggressive approach is needed.

These same business leaders warned that without decisive action, the country risks losing vital industrial capacity and falling behind its neighbours in attracting energy-intensive investment.