A lawsuit in South Africa accuses petrochemicals giant Sasol of abusing its ethylene supply monopoly. The lawsuit has been brought by KAP Industrial, the parent company of Safripol, South Africa’s biggest plastics manufacturer.

Safripol and KAP launched legal proceedings against Sasol at South Africa’s Competition Commission on 2 July, asking the trade court to ‘expeditiously investigate whether Sasol’s conduct, as the monopoly ethylene supplier in South Africa, is in contravention of the Competition Act’.

Sasol’s dominance of the South African petrochemical sector began during the global trade sanctions of the Apartheid era. Without access to imported petroleum, the company developed expertise in coal-to-chemicals and Fischer-Tropsch processes to generate liquid hydrocarbons, says Roderick Crompton, a liquid-fuels pricing expert, and ex-director at South Africa’s energy ministry, where he led hydrocarbons planning.

South Africa’s plastics industry is the largest in sub-Saharan Africa, and contributed $4.5 billion (2.3%) to South Africa’s GDP in 2022, according to an assessment by the World Economic Forum’s Global Plastic Partnership.

‘[Sasol’s] single-seller monopoly over ethylene has been forcefully maintained since [it] was privatised in 1979,’ Crompton says. Safripol is therefore essentially dependent on Sasol’s ethylene supply as feedstock for its production of polyethylene, polypropylene and poly(ethylene terephthalate) (PET). In a statement, the company said it has ‘previously communicated the potential supply risk from its exposure to Sasol as a key supplier’.

Sasol’s flagship Secunda site sits in the Mpumalanga ‘coal belt’ of north-eastern South Africa. In a policy brief prepared for the economic research institution Trade and Industrial Policy Strategies in August 2024, Crompton described Secunda as the hub of Sasol’s ‘inextricably interdependent liquid fuels and petrochemicals manufacturing activities’. Sasol says that Secunda produces 150,000 barrels of liquid fuels per day. That’s a huge input into South Africa’s economy, and almost impossible to substitute, Crompton tells Chemistry World. Sasol is not only the sole supplier of feedstock material to downstream plastic makers in South Africa, but an influential manufacturer and exporter of polymer materials to offshore markets, he explains.

‘Essentially it adds immense direct and indirect value to a stranded natural asset, low-grade South African coal, via a 70-year-old coal to-liquids Fischer–Tropsch process that today is used in very few countries’, Crompton explains. However, that value comes at the expense of a significant environmental footprint, and relatively higher costs than producers that use feedstocks such as oil or ethane from shale gas.

‘For plastics converters there are benefits to having your raw material supplier nearby and in the same country,’ he says. Some South African producers clearly agree, which is why they keep on buying from Sasol, ‘even if they don’t like Sasol’s prices’, argues Crompton.

Although Sasol has maintained a monopoly in primary ethylene supply, several domestic and foreign companies have entered the South African market for finished plastic products. Import tariffs on plastic pellets, the raw material used by the plastic converting industry, were reduced in 2011. However, South African producers complained in a 2012 tribunal that they could not compete with cheap imported plastics, and could not reduce prices because of the high cost of Sasol’s materials. The International Trade Commission of South Africa, a state agency, re-imposed tariffs of 15% in 2020 following complaints that Chinese exporters had ‘flooded’ the domestic market with cheap PET.

From the perspective of technology and investment growth in South Africa’s petrochemical industry, it not ideal for Sasol’s ethylene monopoly to continue, adds Crompton, but some would say it’s better than having nothing in terms of a domestic producer. ‘Why haven’t competitors invested in [ethylene]?’ he asks. ‘There is no law or regulation prohibiting them.’

Shamiso Mupara, an environmental activist and solid-waste academic, characterises KAP’s lawsuit as an act of ‘naked self-interest’ rather than an effort to increase market competition. ‘Safripol is a significant plastics manufacturer, and the only virgin PET producer in the Southern Africa bloc of countries. The same Safripol, now complainant, has previously petitioned the International Trade Commission to protect its territories from Chinese competitors via tariffs in 2024,’ she observes.

Crompton agrees, pointing out that the dispute is about different parts of the same chemicals-to-polymers value chain. There’s a limit to the overall profit that can be extracted from that value chain, he explains. ‘This looks like a fight about who extracts what share of the [profit].’

Sasol was approached to contribute to this article but did not respond.