S. African gas producers aim to consolidate fragmented market

South Africa is on the brink of a potential gas supply crisis that could have devastating effects on the manufacturing sector and jobs in the country. Industrial users of natural gas are taking proactive measures to establish a gas aggregator company to address the looming shortage. The CEO of the Industrial Gas Users Association of Southern Africa (IGUA-SA), Jaco Human, joined CNBC Africa to discuss the critical need for action. The current gas supply deficit in the country, compounded by Sasol's warning that it will no longer be able to fill the gaps by 2026, has spurred urgent efforts to secure a reliable energy source. The proposed gas aggregator company aims to bridge the gap between demand and supply in the fragmented market. Human highlighted the challenges faced by industry players in securing infrastructure and supply agreements due to the lack of a centralized entity in the market. He emphasized the need for consolidation to facilitate long-term commitments and risk-sharing among users. The absence of state support adds complexity to the situation, with the private sector stepping in to fulfill the role traditionally held by government entities. Human stressed the importance of state involvement in de-risking transactions and enhancing the bankability of projects. While discussions with the Ministry of Energy have been ongoing, clarity on the state's role in providing energy solutions is crucial for advancing the gas aggregator initiative. Despite the uncertainties, industry stakeholders are forging ahead to ensure a sustainable energy environment, albeit at a potentially higher cost. The substantial investments required for infrastructure development demand commercial certainty and financial feasibility. Sasol, a key player in the gas market, holds a critical position in the supply chain. Negotiations with Sasol are underway to extend the current supply arrangement beyond 2026, with a focus on securing alternative sources such as LNG supplies. The time-sensitive nature of these discussions underscores the urgency of finding viable solutions to avert a potential gas shortage. The collaboration between industry players and government entities will be crucial in navigating the complexities of the gas market and safeguarding South Africa's industrial landscape.