South Africa has given the green light to a new minerals law change which the country’s oil and gas sector has warned could destroy the industry.
The country’s national assembly voted through changes to the 2002 Mineral and Petroleum Resources Development Act, allowing the state to claim a free 20% stake in all new energy ventures in South Africa.
The law change will also enable South Africa’s government to buy further stakes in oil and gas projects at an “agreed price”, and enable the government to declare some minerals ‘strategic’, forcing companies to sell their output to local companies.
With elections scheduled for May 7, the ruling ANC is pushing for the state to play a bigger role in the economy to ensure the nation benefits more from its mineral endowment. South Africa is the continent’s largest coal and gold producer and the world’s biggest supplier of platinum and chrome.
“We are on the path of changing the mining and petroleum industry in South Africa, whether you like it or not,” warned mineral resources minister Susan Shabangu.
“Change is painful, change is bitter, especially when you are stuck in the past. This act is about the people of South Africa.”
But oil and gas majors have opposed the new rules, which will now be referred to the parliament’s second chamber before being signed into law by President Jacob Zuma.
The country’s Offshore Petroleum Association, which represents a number of producers including Total and ExxonMobil, said they had not been given the chance to object.
“There have been significant changes in recent days, which we have not been afforded an opportunity to comment on and which we are certain will have a chilling effect on investment in a high risk and capital intensive industry such as ours,” the group said.
Analysts believe the new law could face legal challenges.
“One of the main objectives of the bill is to streamline licensing processes to provide regulatory certainty,” said Mike Davies, a Cape Town-based political risk consultant with Kigoda Consulting.
“However, the clauses on beneficiation of minerals and state participation in the petroleum sector, combined with ministerial discretion, will have the opposite effect.”
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