The ANC is a duck. On the surface, it glides upstream against a stiff current towards the SA elections with a measure of well-bred elegance. But under the water there is frantic, desperate activity. You can tell by looking at what the party is doing, not what it is saying — and what it is doing reveals that the ANC knows it is in a fight.
Every poll of voting intention reveals a reason to worry for the party. As is traditional in SA elections, it is projecting confidence and has the swagger of a winner. But poll after poll tells the same tale: the party will lose its overall majority in the May 29 national election even if, as is to be expected, the shambolic but vast yellow election machine can crank up to full power over the coming weeks, driving a polling surge in its favour as the election date nears.
The most recent poll, by Ipsos, has the ANC on just over 40% and Jacob Zuma’s political start-up, MK, at 8% of the national vote. Deputy president Paul Mashatile was moved enough only to describe Zuma’s decision to campaign for MK while not formally resigning from the ANC as “strange”.
But such sanguinity is not representative of what’s going on in the corridors of parliament, where the rapidly dawning realisation that the ANC will not have complete control of the legislative agenda after the election is manifesting in an unseemly and constitutionally questionable stampede to ram through new laws.
It is not clear that these bills are being dealt with appropriately. Last week the National Council of Provinces (NCOP) passed the Climate Change Bill and the Upstream Petroleum Resources Development Bill. And, at a pace that stretches the boundaries of parliamentary procedure and could cause trouble down the line, the Energy Regulation Amendment Bill will also come before the NCOP in the coming two weeks.
It is fascinating to watch because looking in some detail in the Upstream Petroleum Resources Development Bill one gets the sense that while there could be Machiavellian intent, it doesn’t really matter because the bill will fail to deliver anything to any of its intended stakeholders — be they investors, workers or the hyena-cadre class. It is, in some ways, an astonishing achievement.
The purpose of the bill is to create a structure that allows for the exploitation of oil and gas reserves in SA. But also, if we’re being cynical, it is also supposed to help shift rent-seeking out of coal, which has a limited future, and into oil and gas, which has a far more comfortable medium-term horizon.
The bill creates a state carry of 20% and a further BEE “carry” of 10%. That structure is common around the world, but the levels are really onerous. On top if this there are a swathe critical and unreviewable determinations that can be made on a whim by the minister on who may exploit which block and when. Finally, lest we forget, the bill is only the start of things. The National Treasury has still to determine what a royalty and tax regime might look like. Investors still can’t see the full picture.
This is obviously gigantically unattractive for the kind of companies that can bring the capital and expertise required to get into these resources: the big oil majors. Only they will have the technical nous and capital required to access resources that are technically challenging because of their location and the strong and changeable currents in the area. It’s all doable, but it adds costs and raises break-even rates in an already prohibitive regime.
The bill was first proposed in 2019 and has been left to drift in President Cyril Ramaphosa’s lackadaisical way, with the oil companies essentially giving up on SA and making large and mutually profitable ventures in Namibia and Mozambique. Having long had sight of the uncompetitive costs associated with oil and gas extraction in SA and the astonishingly slow pace of regulatory change, the investment capital has gone elsewhere.
Zero impact
Presuming the president signs it into law, the actual passage of the bill — with all its technical holes, all its many footholds and weaknesses that civil society will tie up in litigation for years — will have precisely zero impact.
Leaving aside environmental concerns for a moment, this outcome is a shocking expression of dereliction and incompetence on the part of the department of mineral resources & energy. Given a state carry of 10% (such as in Namibia), experts I have spoken to think the fiscus has lost out on tens of billions of rand a year due to this inaction, not to mention the other benefits to society of employment and development in some of the poorest parts of SA.
It is genuinely hard to fathom. Ministers seem to think capital operates in a hermetically sealed environment. It doesn’t. It doesn’t generally make moral judgments about BEE, tax regimes and so forth — it just seeks returns. Both can be achieved, but in attempting to annex 30% of somebody else’s very complex business the state chased the golden goose north of the border years ago.
The only reasonable deduction is therefore that this is performative legislation. It is the anchor around which noise can be made about the development of a “sovereign wealth fund” or some such. None of this is necessarily a bad idea, but the Upstream Petroleum Resources Development Bill will deliver none of it.
In its haste to ram law through parliament ahead of losing its majority, the government’s policy incapacity means it’s an exercise in futility. The people of Namibia can thank us at their leisure.
• Parker is Business Day editor-in-chief.
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