The South African Revenue Service (SARS) is clamping down on the illegal diesel blending market, as it raided a suspected multibillion-rand player.

SARS has identified what it believes to be a major player in this illicit trade and has recently shut down two depots, one in Limpopo and another in Gauteng, reported Business Day.

These facilities, located in Meyerton and Louis Trichardt, are reportedly owned by a group with operations of a staggering scale.

According to SARS’ preliminary findings, the company reported revenue of R5.6 billion between 2019 and 2023, with VAT turnover reaching R7 billion and PAYE payments amounting to R1.1 billion during the same period.

Additionally, the company’s various bank accounts recorded inflows of more than R8.6 billion, further underscoring the magnitude of its operations.

SARS has focused much of its investigation on the Meyerton site, where suspicious materials indicating illegal activities were found.

In South Africa, illuminating paraffin does not attract the same duties as diesel or aviation paraffin, but it must have a chemical marker to signal its proper classification.

The absence of this marker suggests that the paraffin was being deliberately altered to remove the marker for the purpose of making dirty diesel.

Samples taken from the Meyerton facility confirmed the adulteration of diesel, raising significant concerns about the scale and sophistication of the operation.

In early 2024, South Africa’s Minister of Petroleum and Mineral Resources, Gwede Mantashe, issued a warning to petrol stations nationwide, highlighting the growing issue of contaminated diesel.

This followed an investigation by the Department of Mineral Resources and Energy (DMRE), which revealed that at least 70 petrol stations were selling diesel diluted with illuminating paraffin.

The contaminated fuel fails to meet regulatory standards and poses a risk to vehicles by degrading engine performance and causing long-term damage.

The illegal blending of diesel with paraffin is driven by the tax advantages paraffin enjoys in South Africa.

Unlike diesel and petrol, Paraffin is not subjected to the heavy taxes that fuel products typically face.

Unscrupulous businesses exploit this tax disparity to boost profits, blending paraffin with diesel and selling it at a lower price to attract customers.

This practice not only undercuts legitimate businesses but also undermines tax collection efforts, contributing to substantial revenue losses for the government.

In a parliamentary address, Mantashe voiced his concerns about the increasing number of cases linked to contaminated diesel.

He pointed out that the lack of regulation on diesel prices in South Africa creates an environment ripe for exploitation.

While petrol prices are strictly regulated, diesel prices are not, allowing stations to set their prices freely.

This flexibility has enabled some businesses to sell contaminated diesel at marginally lower prices, gaining an unfair competitive advantage.

Unfortunately, consumers who unwittingly purchase this tainted fuel may face costly vehicle repairs due to engine damage.

In response to the growing problem, the DMRE has launched an aggressive campaign of random fuel quality testing at petrol stations nationwide.

This initiative aims to detect contaminated diesel and deter businesses from engaging in illegal fuel blending practices.

While the crackdown is gaining momentum, the economic and environmental damage caused by this illicit trade underscores the importance of robust enforcement measures to protect consumers and the country’s fuel market.