SA is pressing ahead with a $1bn oil investment in South Sudan in a bid to ensure domestic energy security.
“It is happening. We are active there, we are doing exploration, we are working on certain blocks and that’s it,” Mantashe said on the sidelines of the Africa Oil & Power conference. The R15.6bn equivalent investment is funded from state coffers, he said.
The deal between South Sudan and SA’s Strategic Fuel Fund (SFF) received negative attention when, in May, then-energy minister Jeff Radebe signed an agreement to invest in oil exploration in the war-torn African nation in what the Sunday Times newspaper dubbed a “dodgy deal”.
The newspaper reported that Radebe’s cabinet colleagues said the minister may have flouted government processes as the deal had not come before the cabinet and did not have approval from the Treasury.
A Treasury official told the publication that it made no sense for SA to make an investment of that size when the country was trying to boost its economy by attracting foreign investment. The publication reported that the minister’s team had already spent about R20m pursuing the mystery deal, including hiring a private jet to travel to the underdeveloped country.
Radebe, however, denied there was anything untoward, while the South Sudanese government said SA had been awarded a block with immense potential.
In its first phase, SA has partnered with the South Sudanese national oil company, Nilepet, on an exploration block in which SA holds 90%, according to Kholly Zono, acting CEO of the Central Energy Fund (CEF), of which the SSF is a subsidiary.
In the next phase, which has just been approved at board level, SA will seek out various partners to “spread the risk”, he said.
The CEF, which has assets of R33bn, is able to carry the $1bn development project on its balance sheet, but the load will in any case be lightened when partners are brought on board, Zono said.
The investment is strategic and aligned with the group’s mandate to ensure security of supply, he said.
“If you want an affordable source of energy, you invest at the early stages,” Zono said. For those who invest at exploration phase, indications are that the cost of production could be between $20 and $25 a barrel, as compared with the oil market price of $70 a barrel.
South Sudan is perceived as a risky investment destination. Despite a peace agreement between the two sides in the civil war, tension remains and it looks unlikely that a unity government will be formed by the encroaching November 12 deadline.
Zono, however, said one needed to balance the opportunity with the risk. “But one must still be able to say: how do I ensure my investment and opportunity is not exposed? Obviously it is something we are watching.”
On Wednesday, South Sudan announced it would auction licences to develop eight oilfields across the country.
Civil society has, meanwhile, called potential investors to ensure adequate transparency and accountability measures are in place before putting any money into the East African nation.
This follows on a report by The Sentry, a non-governmental organisation cofounded by actor George Clooney, which found deficiencies in transparency and accountability frameworks that facilitated exploitation by predatory foreign investors and South Sudanese leaders.
Director-general for planning in the energy department of South Sudan, Arkangelo Okwang Oler, said transparency is one of the main provisions in the nation’s Petroleum Act and constitution, which both include transparency initiatives.
Asked what measures SA will take to ensure transparency in its business dealings with South Sudan, Mantashe said: “What is transparency in investment? You invest in a project. You work on that project, not underground, above board. What more?” /With Linda Ensor
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