Open-Ed
It was pleasing to see an upgrade to our economic growth outlook from economists at the Bureau for Economic Research last week, who now believe growth next year will be 2.2%. That’s well ahead of the Reserve Bank’s expectation of 1.5% and the IMF at 1.2%. I expect that we’re going to start seeing more upgrades as reform momentum continues. The BER cited the solid progress in dealing with our logistics challenges and the ability of Operation Vulindlela to speed up reforms.
Improved growth is the fruit of the reform efforts that we’ve seen in the last few years, ones that have largely overcome load shedding, helped ease access to visas for skilled immigrants, and now easing our port and rail backlogs. And yet there is clearly much more to do that could ultimately move us closer to the 5% per year growth level that would enable a real difference in the welfare of our people.
French energy company TotalEnergies quit its two large offshore gas fields, Brulpadda and Luiperd, last week where it had made major discoveries back in 2013. At the time there were major hopes that the discoveries would enable South Africa to develop gas independence and tap the energy source to transition from the relatively more polluting coal. But now TotalEnergies has said it is too difficult to economically develop and monetise the resources for the South African market. While the company did not say it, I am sure that ongoing regulatory uncertainty is a major contributor to that difficulty.
Since TotalEnergies’ discovery, there has been a series of dramatic flip-flops over regulating the gas sector. Government has at times announced it should get a free 20% ownership interest in all gas projects, only to then abandon amendments to the Minerals and Petroleum Resources Development Act. The department then introduced a new bill to govern gas exploration and development which was passed by parliament in April this year, that experts have said violates the constitution in several respects. It reintroduces the state’s right to a 20% interest in new projects at exploration and production phases. It allows the minister to order companies to sell a percentage of petroleum to any state-owned company designated by the minister. For any company looking to develop gas or petroleum resources, this is a new source of considerable uncertainty. The bill is sitting on the president’s desk for ascent, and would be better sent back to parliament for reworking that would enable companies to take on the huge risks of developing major new gas resources.
Uncertainty remains the theme of the minerals sector more broadly, which has faced two decades of decline. The lack of exploration activity means the industry is in a sunset phase unless there is a considerable change in how the sector is regulated. We still have among the best mineral reserves in the world, yet we are steadily falling behind many other jurisdictions in the economic contribution such reserves can make.
Author: Busisiwe Mavuso
Busi is CEO of Business Leadership South Africa (BLSA).
BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.
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