We may be approaching a moment here in SA when it becomes prudent to warn potential investors that deals struck with the present government might not necessarily be viewed with much regard by the next one. In other words, buyers beware.
I’ve been reading through the draft SA National Petroleum Company (SANPC) Bill, gazetted on Monday by mineral resources & energy minister and ANC chair Gwede Mantashe. That conjunction of party and state is almost nauseating in the writing of it, but what the SANPC bill does is make it absolutely official. They are one and the same beast.
The draft bill follows hastily in the wake of the long-debated and awaited Upstream Petroleum Resources Development Bill (UPRDP), which will separate oversight of oil and gas from minerals and mining generally. Both remain Mantashe’s bailiwick, but once you layer the SANPC over the UPRDB the morbid intent becomes frightening clear.
The UPRDB sets the country up for oil and gas exploration and for their extraction if it is viable. Oil company Total has made impressive finds off the south-western Cape, but it doesn’t mean it’s going to work them. For a start, the UPRDB takes 30% of your investment — 20% for the state and 10% for black empowerment. An oil investor would simply view them as one and the same. Then they’ll pay company tax and royalties on top of it all.
So before Total or Shell or whoever puts a cent into our super new fossil-fuelled future, they will have agreed to pay away more than 50% of their earnings. Who would be that bonkers (beyond, obviously, the ANC and its government for thinking all of this is reasonable)? Next door in Namibia the state “carry” is 10% and that’s it.
Mantashe’s new bill, the SANPC, develops this dodgy magical thinking further. The draft says a single company would be formed from the current SA Gas Development Company, the Strategic Fuel Fund and PetroSA. The new SA National Petroleum Company would, wait for it...
Be the states’s energy champion and facilitator of energy infrastructure across the energy value chain with functions including, but not limited to, management of the state’s exploration and production rights; facilitating and providing for an energy infrastructure; providing for middle and downstream petroleum, petroleum products and gas supply; providing for storage and distribution of petroleum products; undertaking commercial aspects of petroleum in the upstream, midstream and downstream operations including aggregation, marketing and trading; providing for renewable energy and providing for the acquisition, generation, manufacture, marketing or distribution of any form of energy...
This is Mantashe declaring his independence from President Cyril Ramaphosa and his complete inability to decide on a separation of powers between Mantashe and electricity minister Kgosientsho Ramokgopa. He will follow it all up soon with a new Integrated Resource Plan (IRP), a 10-year target for developing a national energy mix. Expect gas to play a big new role.
I know a lot of people will back Mantashe here. They consider themselves realists and he will ride their coattails. But in his mind he is building an entirely new energy network in SA with gas piped everywhere and old Eskom coal plants somehow handed over to him and converted to new feedstock.
This from a guy who had driven one of the world’s biggest mining industries to the brink of extinction, who has seen the Strategic Fuel Fund and PetroSA exhaust themselves. There may indeed be a role for gas in our economy, but it is vanishingly small.
But Mantashe wants to be sure the ANC controls SA oil and gas in a way it never controlled its mining. In either case though, he vastly overestimates his own capabilities and those of his comrades. He may want and provide for complete control of every aspect of the petroleum industry in his new company in his new bill, but he cannot make any of it actually happen.
Just because you have oil doesn’t mean you're going to be rich. Venezuela has the biggest oil reserves on earth and its people are beggars. Nigeria and Angola are oil producers and home to some of the poorest people in the world. Nor do you need a state oil company just because you find oil. The UK gets by very nicely without one.
An enlightened rather than a greedy state would have had an entirely different conversation with itself on oil and gas, particularly as we still don’t know what we have, and what we do know we have we don’t know can be profitably extracted. Drilling for gas in the middle of the Agulhas current is a big ask.
I would keep the state’s carry of 20% and the BEE allocation of 10% and the smaller royalty well away from Gwede Mantashe. He is yesterday’s man, a relic. It happens to all of us eventually. Rather create a sovereign wealth fund and invest what you get there. Make it a fund for future generations so when our children really need the money to escape the mess we’re making now, there’s something to help them.
Don’t invest oil and gas revenues building oil and gas infrastructure here, for crying out loud. That’s just insane when you think what the world will look like and what consumer choices it will be making in 2040. Do we really want to lock ourselves out like that? A sovereign wealth fund can invest around the world in new technologies and new prospects.
It could be an antidote to the small-mindedness of the ANC and its foolish, intellectually empty factions. Funded by fossils, it could be the making of us.
• Bruce is a former editor of Business Day and the Financial Mail.
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