South Africa shale-boom outcome won’t mirror mining, ANC says
FRANZ WILD and AMOGELANG MBATHA
JOHANNESBURG, South Africa (Bloomberg) -- South Africa will make sure its population benefits when it develops its shale gas and offshore oil industries and won’t repeat the errors it made with mining, said Zweli Mkhize, treasurer of the ruling party.
A law approved by South Africa’s parliament that will give the state a free 20% stake in new oil and gas ventures and enable it to buy an unspecified additional share at an agreed price is awaiting the signature of President Jacob Zuma. Companies including Exxon Mobil Corp. and Total SA have said the law will deter investment.
South Africa is yet to develop what the U.S. Energy Information Administration estimates are the world’s eighth-biggest shale-gas reserves and produces little oil although companies such as Anadarko Petroleum Corp. are preparing to step up exploration off the nation’s west coast.
“Gas will be a serious game-changer, oil will be a serious game-changer,” Mkhize, 58, said in an April 3 interview in Bloomberg’s Johannesburg office. “I certainly hope if we were to get to that point we are able to get there under conditions that will not give us the same outcome as the previous mining operations.”
South Africa has the world’s biggest platinum, chrome, vanadium and manganese reserves. The companies that exploit the deposits have been criticized by the government for not doing enough to train workers, improve the living conditions of communities near their mines and process the minerals that they produce before exporting them.
Shale explorers are targeting South Africa, China, Russia, Australia, India and Argentina in pursuit of deposits similar to those that have revolutionized energy supply in the U.S. Argentina will drill half the shale wells in the world outside the U.S. this year, according to estimates by Wood Mackenzie Ltd., a London-based energy consultancy.
Thirty-four protesting miners were killed by police at Lonmin Plc’s Marikana platinum mine in South Africa on Aug. 16, 2012, in the worst mining violence since the end of apartheid in 1994.
Many of the mineworkers at companies including Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin, the world’s biggest platinum producers, live in shacks made of iron sheeting, share toilets, don’t always have water and power supply, and spend much of their income on debt servicing.
More than 70,000 miners at the companies have been on strike since Jan. 23, demanding a doubling of monthly pay within four years. The companies have said such a raise would be unaffordable, offering as much as 9%.
“There is a need now for a very different approach in investment by companies, maybe in partnership with government,” Mkhize said.
While there is a “mismatch between expectations and the reality of the availability of resources,” the Marikana deaths “opened our eyes to a lot of things that we could be doing differently,” Mkhize said. “No one wants to see another Marikana, but we also don’t want the social dynamics associated with Marikana,” he said.
The ruling African National Congress party wants to ensure a similar “imbalance” isn’t replicated when the companies start exploring for shale gas in South Africa’s semi-arid Karoo region, Mkhize said. Companies including Royal Dutch Shell Plc hope to tap as many as 390 Tcf of gas resources.
Interest in exploration for oil and gas off South Africa’s coast is at its highest level yet, Petroleum Agency SA, a regulator, said last year.
The ANC also plans to boost entrepreneurship by giving small-scale black-owned businesses more government contracts and by ensuring they can borrow capital from a state-owned bank, Mkhize said. The government could set up a new bank or refocus an existing lender, such as the PostBank or the Industrial Development Corp., he said.
“There’s no specific decision to have a bank,” Mkhize said. “We’ve got a number of existing facilities whose role and mandate could be altered to play this role.”
The party will on May 7 participate in elections that will probably extend its 20 years in power.
After winning more than 60% in every vote since 1994, the ANC’s support has dropped by 10 percentage points to 53% in the past year, according to an opinion poll conducted by Ipsos in October and November. Five years ago, the ruling party won 64.8% of the ballots, compared with 21.3% for its closest rival, the Democratic Alliance.