Report highlights challenges, risks facing Sasol amid the just energy transition

With this in mind, Sasol’s ‘Sasol South Africa – The Just Transition: Jobs, Justice and Prospects’ report, examines the growing operational, financial, environmental and social pressures facing Sasol and the implications for workers, communities, municipalities and South Africa’s industrial future.

During a dialogue on May 29, chemical engineer Dr Bruce Young discussed some of the report’s findings, highlighting that about 27 000 direct and 425 000 indirect jobs depend on Sasol’s operations in the country.

He said a big restructuring was likely in the cities of Secunda and Sasolburg, arguing that planning needed to start now.

“Cutbacks are unlikely to happen all at once. Half of Sasolburg, for example, is based on gas feedstock. The other half processes feedstock from Secunda. As the gas runs out in Sasolburg, there is an inevitable restructuring coming there.”

Young explained that Sasol was heavily linked into the South African economy, noting that plastic production alone, for example, multiplied into 25 000 direct jobs downstream.

Hence, he reiterated the importance of proper planning, noting that skills in coal-based industries did not easily transfer to solar, wind or new industries.

“Without a plan, thousands of jobs and entire communities are at risk.”

Young pointed out that Sasol was facing challenges on several fronts.

He described Sasol South Africa’s financial position as fragile, noting that the company had high debt and a weak balance sheet. He also noted that the company’s profits were too low to fund full-scale technological transformation.

Young highlighted feedstock challenges, which included volume decline, quality costs and transport costs for coal. He also noted that, as gas ran out, liquefied natural gas (LNG) was not affordable.

Additionally, he explained that the ageing plant would require significant investment to replace.

Another challenge includes the target to reduce emissions by 30% by 2030 and to reach net zero by 2050.

He also noted that the chemicals being produced by Sasol were facing declining volumes, describing the global chemical environment as “incredibly competitive and oversupplied”.

SECUNDA

Young highlighted that coal mining productivity at its operations in Secunda had been in a long-term decline and that the cost per ton had been steadily increasing.

He noted that the Isibonelo Colliery, which supplies about 10% of Secunda’s coal, was depleted, with long-term replacement coal supply uncertain.

He said there was an overall trend of rising feedstock costs, worsening coal quality and growing supply security risks.

In terms of production, Young said Secunda’s economics were highly volume-sensitive, with lower output weakening profitability and cash flow.

He noted that Sasol had reversed its earlier greenhouse-gas-driven coal reduction strategy, with the company now targeting 7.4-million tonnes a year by 2028.

“Secunda production has been facing a long-term decline, essentially since 2019.

“So that’s a persistent trend and, understandably, that trend cannot continue and [for] Secunda to continue to operate, they have to address that,” said Young.

He added that Sasol’s 2025 financial statements still projected long-term decline, with output falling to seven-million tonnes a year by 2030 and to 6.4-million tonnes a year from 2034.

He attributed the decline in production to worsening coal quality, feedstock constraints and ageing infrastructure, noting that the decline after 2028 would largely be driven by natural gas decline.

Hence, the company’s coal destoning project aims to improve feedstock quality and stabilise production.

“All indications are that that project is going well,” he said.

Young warned that the risk of doing nothing amid the just transition could result in a loss of technical expertise and could have negative impacts on jobs, families, towns and the economy.

“Planning needs to start now – to reduce job losses, broken towns and to develop safety nets.”

Following Young’s presentation, Crompton Consulting CEO Dr Rod Crompton said all equipment and machinery had a finite life, adding that a point would be reached where it was too expensive to repair or replace machines, or where new technologies would become more competitive than existing technology.

“Secunda is the only source of petrochemicals in this economy, and for 50 years there’s been no plan on what to do after Secunda for petrochemicals.

“So when will Sasol Secunda run into problems? Well, we know what the gas supply is doing, we’ve got a forecast from Sasol, but for the rest it’s difficult to say. It also depends a lot on the oil prices . . . but it could be sooner than we think,” he said.

Crompton described Sasol as being vulnerable, recommending that the company start preparing for the just transition by putting measures in place sooner rather than later.

MOVING FORWARD

In order to mitigate these issues, Crompton suggested some actionable steps.

He pointed out that the report recommended action on all aspects immediately.

Additionally, he said workers and unions should be part of coordinated negotiation and planning on the technical and operational changes on economic sustainability; that government, business and labour should help create retraining programmes and support new industries; and that communities needed to be involved in the local plans.

“Funding and commitments are key. International partners are offering help, but it’s not enough.”

He expressed that every path forward involved complex trade-offs between industrial competitiveness, social protection, environmental concerns, and government appetite and capacity for interventions.

He reiterated the need for early planning and coordinated action to avoid unplanned consequences.