State to piggy-back on proposed new mine laws

A SET of new amendments to mining laws, which includes giving the State a free 20% stake in all new energy ventures, have drawn both fiery criticism and keen support among the local business fraternity.

Last Tuesday the proposed changes to the 2002 Mineral and Petroleum Resources Development Act took one step closer to becoming carved in stone when parliament’s mineral resource committee voted in favour of the modifications.

Once passed, the bill will empower Mineral Resources Minister Susan Shabangu to take key decisions, allowing the State a say in all energy exploration and production rights.

It could also enable Government to force companies processing raw materials to sell some of their output to South African manufacturers and users such as Eskom, essentially keeping it local.

However, economists are concerned the bill amendment would drive away lucrative investments by foreign oil and gas giants, costing the region enormous contracts and a significant loss in job opportunities.

Last year UK corporation Impact Oil and Gas, Sasol Petroleum International and Singapore-based Silver Wave Energy Group, have shown interest in exploring the KwaZulu-Natal coastline from Margate to the Mozambican border.

In November, Sasol was granted a three-year exploration permit by Petroleum Agency South Africa (Pasa), after having already completed a two-dimensional seismic survey over a 4 000km area.

Head of the Department of the Economics at the University of Zululand, Dr Irrshad Kaseeram, believes the new law would now leave a bitter taste with these stakeholders.

‘While the minister’s resolve to ensure the local resources benefits the local population are noble in its intentions, I’m afraid that the amendments appear as a coercive and punitive tax on future oil and gas explorations,’ said Kaseeram.

‘These punitive amendments are likely to permanently chase away oil exploration companies from our shores, since drilling for oil is a highly technological feat and an extremely risky venture.

‘It costs millions just to drill a single shaft into the seabed and many shafts are sunk in a single exploration where the company suffers the loss if no oil is found.

‘Hence, with the State exacting huge ownership and control over successful ventures, will make such projects unprofitable.’

Support

On the brighter side, Zululand Chamber of Commerce and Industry (ZCCI) President Sizwe Khumalo believes the additional revenue generated by the State’s stake in energy ventures will boost infrastructure vital for the private sector to regain strength.

‘For a developmental state it is indeed expected that the state should use national resources to fund economic infrastructure to support development,’ said Khumalo.

‘For me, it is therefore not surprising that the State should have a 20% stake in new energy ventures, provided revenues from such an interest are responsibly ploughed back into economic development and related infrastructure.’