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WP 00/036 - An Overview of the Role of Producer Services in the Petrochemicals Industry in South Africa: A Case Study of Sasol

Author: 
James Hodge

Date of Publication: 
February 2000

Abstract: 
The petrochemicals industry in South Africa has grown significantly over the past two decades, largely as a result of the expansion and diversification of the premier petrochemical producer - Sasol. This working paper examines the role that producer services have played in this growth. It finds that due to Sasol's unique processes (the use of coal instead of crude as a primary input) and continued pressure to cut costs (from the collapse of the oil price to reduced protection), it has developed significant in-house expertise in technology and engineering services. It has also actively promoted an efficient supplier network for components of these services through a shift to greater outsourcing. These services have then played a key role in enabling Sasol to both reduce costs significantly and diversify into new product streams, allowing growth in the sector. It does find that although independent suppliers have been developed, most of the spillovers from such a process have been internalised within Sasol, enabling the company to grow faster than the industry. Also, the growing liberalisation of trade in South Africa has had an effect on the organisation and performance of these producer services. There is now greater global outsourcing coupled with trade in Sasol's own services through international acquisitions and joint ventures.

Download Working Paper: DPRU WP 00/036