There is an alarming prediction that, in the next few years, the South African fuel landscape will likely totally depend on refined fuel imports. The recent closures of multi-national traders has created fertile ground for new BEE players to disrupt the landscape. According to key opinion leader, Eden Gagiano, this market has been locked in and locked down across the world for too long, and he believes it s high time patriotic players contribute to the much-needed growth of the SA economy. EDEN GAGIANO, fields questions on this development from TRANSFORM SA.
TSA: What specific opportunities do you see black-owned companies exploiting in the fuel business following the closure of local refineries?
EG: As our ageing fleet of refineries encounter more and more technical and functional issues combined with the looming 2024 deadline on emissions and the introduction of the next round of clean fuels, there will be opportunities for local BEE players, with the capacity, to be involved with both refined product imports as well as the import infrastructure needed (i.e.. Storage terminals etc.)
There is no reason why this would need to remain with the multinationals.
TSA: This is a capital-intensive industry, and we do know that prospective players in his cohort lack start-up capital or cannot easily access. What possible arrangements would facilitate their entry?
EG: I can speak from our point of view and we are fortunate to have good relationships with banks, both local and international. Without the banks this import flow would not be possible. These relationships are born out of performance and track record and take some time to cultivate. The trade finance teams at some of our local banks have really stepped up in terms of the assistance they can provide on high value import cargoes, and to that end do their bit to contribute to the energy charter.
TSA: We have seen in the steel industry increase in tariffs on imports. Don’t you see local refineries lobbying for the increase in tariffs on imported fuel?
EG: In short no. We have a substantial refining deficit in this country even when all six of the refineries are working (currently only one out of six is operational)… the refineries are also the biggest importers, and our main customers by volume.
TSA: What kind of support would you like to see players like yourselves getting from government, considering that fuel is critical to the economy?
EG: We pride ourselves in being competitive with the multinationals, and as our margin expectations are more modest we mostly are – while Government support is appreciated it can only assist to a point…. It is still up to the individuals and companies to be proactive, competent, innovative, and experienced… having said that a great place to start it would be to ensure the procurement and infrastructure goals set out in the energy charter are adhered to.
TSA: Is there anything you can suggest about other ways to increase the participation of black players in the industry?
EG: Allow for the development of in port infrastructure outside of Section 56. Currently most of the infrastructure is controlled by multinational majors, this needs to change, not just from an energy security point of view but from a transformation POV as well.
TSA: Are you part of any industry body that serves the interest of fuel importers?
EG: The industry body is SAPIA. It is run by the multinational oil majors and is closely aligned to their interests.
Eden Gagano is Head of trading and owner of Suzako, an independent provider of oil, gas and energy products, services, and solutions.