South Africa’s parliament is still evaluating the country’s oil and gas bill after President Jacob Zuma placed a temporary halt on it on February this year. The bill allows South Africa to freely own up to 20% ownership in new energy businesses and the right to own additional stakes.
“After careful consideration of the bill and the submissions received, the President is of the view that the bill as it stands would not pass constitutional muster,” Zuma’s office relayed in a statement.
While the bill may sound nationalistic in nature, it would pose a problem for future investors. A 20% stake can be big especially for companies that are just starting out. The Democratic Alliance Party had strongly opposed the bill since it has been passed by the parliament in March last year.
In October 2014, President Zuma outlined plans for oil and gas explorations in coastal waters and asserted that the area could have about 9 billion barrels of crude oil. However, oil firms have been extremely wary in making bids due to the uncertainty of South Africa’s oil and gas laws.
The petroleum industry remains steadfast since its products are still necessary in many industries including mining and construction. On February 2015, Oil giant Basrah Gas Company (BGC) awarded a contract for the rehabilitation of BGC’s West Qurna compressor stations to Unaoil — an engineering company that recently joined the ranks of the Iraq Britain Business Council (IBBC). The partnership happened despite declining oil prices in the global market.
South Africa is a mining giant that produces different commodities including coal, platinum, and gold. The industry has been the main driving force of the country, and is responsible for the development of its advanced and rich economy. In 2013, South Africa’s mining sector accounted for 8.3% of GDP on a nominal basis. Although it wasn’t as high as it was several decades ago, mining in the country remains important in terms of FOREX earnings and employment. The South African government has continuously assured investors that the nationalization of the mining industry will never happen, but the same cannot be said yet for the oil and gas sector. As of today, President Zuma still hasn’t announced a decision regarding the controversial oil and gas bill.
In his Durban speech early this year, President Zuma reasons that the he still hasn’t signed the bill into law because there’s need for “clarity and stability in the legislative framework governing offshore oil and gas, ensuring a ‘win-win’ outcome for government, industry, and society.” In addition, he states that the mining ministry, which is technically responsible for the extraction of hydrocarbon extraction, would have to restructure its licensing for offshore oil and gas exploration before the bill can be discussed further.