Life could well be a gas - if SA plays its policy cards properly
Imperative that the government crafts a policy to steer the SA economy the way of Norway, and not Venezuela
A significant gas find in SA waters highlights the urgent need for the government to push ahead with a new policy for the oil and gas sector. The legislation must, however, strike a balance that attracts investment but also ensures South Africans benefit from the newly discovered mineral wealth.
The drafting of such policy is already under way and the mineral resources minister signaled the urgency of the matter – even before multinational corporation Total, last week, announced a significant gas find off the coast of Mossel Bay. Further drilling will determine the true extent of the resource.
It is now imperative that the government crafts a policy to steer the SA economy the way of certain resource rich nations such as Norway – and not others, such as Venezuela.
In 1969, a major oil find in the North Sea was the catalyst that totally transformed Norway’s small, struggling economy. Oil revenue, combined with sound policy and discipline, now sees the country enjoy a sovereign wealth fund worth more than $1-trillion, and rising.
Venezuela, which holds the largest proven oil reserves in the world, offers a sharp contrast. The Venezuelan economy’s complete dependence on one commodity, together with erratic policy and rampant corruption, sees oil production at multi-decade lows. The country’s economy is in ruins and its people are starving. Independent estimates are that Total’s gas find could bring at least R1-trillion into the SA economy, but history dictates that policy is key. It’s now up to the government to get it right.