Re­fin­ers trum­pet value

Re­searchers cite in­di­rect and in­duced eco­nomic ben­e­fits ren­dered by SA oil re­finer­ies to sup­port a fuel up­grade sub­sidy

CityPress - - Business - DEWALD VAN RENSBRUG dewald.vrens­burg@city­

South Africa’s oil re­finer­ies re­leased com­mis­sioned re­search this week show­ing how im­por­tant their op­er­a­tions are to the broader econ­omy. Al­though the coun­try’s six oil re­finer­ies em­ploy just 4 809 peo­ple di­rectly, re­searchers con­tend that th­ese work­ers “sup­port” 100 times as many jobs in sup­plier in­dus­tries through the con­sump­tion spend­ing of their, and their sup­pli­ers’, em­ploy­ees.

In re­search com­mis­sioned from KPMG by the SA Petroleum In­dus­try As­so­ci­a­tion, the au­dit firm at­tempted to quan­tify the eco­nomic ac­tiv­ity stem­ming from the var­i­ous parts of the fuel value chain.

The im­por­tant es­ti­mate is that the re­finer­ies them­selves have eco­nomic sig­nif­i­cance far out­weigh­ing their op­er­a­tions.

As with jobs, the KPMG study found that the re­finer­ies “in­duce” far more eco­nomic pro­duc­tion than their own ex­pen­di­ture in the econ­omy – hav­ing a di­rect ef­fect on GDP of R46.6 bil­lon, which is what they spend do­mes­ti­cally on pro­duc­ing fuel from oil.

Then they had an “in­di­rect” ef­fect of R96 bil­lion, said Jeaunes Viljoen, a se­nior econ­o­mist at KPMG who pre­sented the find­ings at a brief­ing in Jo­han­nes­burg.

“If the re­fin­ery spent R100 mil­lion on elec­tric­ity, this in­di­rect ef­fect would be the ex­pen­di­ture Eskom made to gen­er­ate the elec­tric­ity,” she ex­plained via email.

To that KMPG also adds the in­duced im­pact, which is the es­ti­mated con­sumer spend­ing by em­ploy­ees at the re­finer­ies and at their sup­pli­ers.

This adds an­other R79 bil­lion to the es­ti­mate, lead­ing to the con­clu­sion that the oil re­fin­ing sec­tor con­trib­utes R212 bil­lion to GDP.

Eco­nomic im­pact as­sess­ments in­cor­po­rat­ing th­ese es­ti­mates of in­di­rect and in­duced eco­nomic ef­fects are pro­lif­er­at­ing. South Africa’s su­gar-sweet­ened bev­er­age in­dus­try is a prime ex­am­ple: it had a con­sul­tancy do a sim­i­lar ex­er­cise as part of its fight against the pro­posed su­gar tax, to be im­ple­mented on April 1.

Bri­tish Amer­i­can To­bacco SA this week also re­leased a study fol­low­ing the same pro­ce­dure as that con­ducted on the oil re­finer­ies. This, ap­par­ently, in prepa­ra­tion for the con­flict the to­bacco in­dus­try ex­pects will en­sue when Health Min­is­ter Aaron Mot­soaledi re­veals new anti-smok­ing mea­sures next year.

Chief among th­ese is the health depart­ment’s pro­pos­als for plain pack­ag­ing for cig­a­rettes, which would de­stroy Bri­tish Amer­i­can To­bacco’s con­sid­er­able brand power in South Africa.

The oil re­finer­ies have their own con­flict with gov­ern­ment for which the new re­search could be use­ful. Avhap­fani Tshi­fu­laro, ex­ec­u­tive di­rec­tor of the petroleum as­so­ci­a­tion, de­nied that the study was a pre­lude to lob­by­ing.

“This study was not com­mis­sioned for a par­tic­u­lar pur­pose. It is about pro­vid­ing in­for­ma­tion on the in­dus­try. It is not about clean fu­els; it has noth­ing to do with that.

“How­ever, if you for­mu­late pol­icy, you have to take into ac­count what it does,” he added.

The as­so­ci­a­tion has been at log­ger­heads with gov­ern­ment for years about who will pay for the up­grad­ing of the coun­try’s six lead­ing oil re­finer­ies, which will en­able them to pro­duce diesel that meets so-called Euro 5 emis­sion stan­dards. South Africa cur­rently op­er­ates un­der Euro 2 guide­lines.

The petroleum as­so­ci­a­tion has pro­posed that the cost be passed on di­rectly to the con­sumer, as a levy on the fuel price. Gov­ern­ment has in­di­cated it will only par­tially sub­sidise the up­grade.

The 2017 dead­line for South Africa switch­ing to a new, cleaner fuel stan­dard was al­ready off the ta­ble, Tshi­fu­laro said.

In this year’s Bud­get Re­view, the oil com­pa­nies were of­fered a spe­cial ac­cel­er­ated de­pre­ci­a­tion al­lowance as a sub­sidy for their re­fin­ery up­grades.

Prac­ti­cally, it would have amounted to a tax hol­i­day of three years.

The as­so­ci­a­tion was unim­pressed, ar­gu­ing that the costs of the up­grade would have out­stripped this tax break.

It has re­peat­edly said the up­grades will be “in­vest­ments with no re­turn” – done purely to meet reg­u­la­tory stan­dards, rather than in­crease prof­its.

The new re­search breaks up the in­dus­try to il­lus­trate the over­whelm­ing eco­nomic im­por­tance of the re­finer­ies, as op­posed to the re­tail in­dus­tries, such as fuel sta­tions.

Tseliso Maqubela, the depart­ment of en­ergy’s deputy di­rec­tor-gen­eral for petroleum, at­tended the brief­ing and wel­comed the re­search. “It is im­por­tant to see what hap­pens if re­fin­ing dis­ap­pears. Some peo­ple say we should im­port fuel, but a study like this shows the im­por­tance of the re­finer­ies,” he said.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.