The South African government needs to take “urgent” measures to encourage exploration and enhance beneficiation in the mining and petroleum industries, said Minister of Mineral and Petroleum Resources Gwede Mantashe at the opening of Parliament in Cape Town on July 19.

He said government must challenge foreign-funded non-governmental organisations (NGOs) that oppose initiatives to explore oil and gas in the country as these legal challenges lead to delays and deter investments in the sector.

“As the government considers the medium-term development plan, it must create a framework to address the anti-development agenda of certain NGOs and adopt a balanced approach to mitigate pollution and climate degradation and promote development.”

The minister cited the case of oil giant Shell, which discontinued seismic exploration for oil and gas deposits off the Wild Coast in the Eastern Cape and relocated to Namibia where it made significant oil discoveries.

“Our country is endowed with petroleum deposits that are not yet exploited. We must accept, unreservedly, that we need responsible mining and petroleum exploration that is conscious of preserving the environment while accelerating development,” he said.

State-owned petroleum company

The formation of the South African National Petroleum Company was not a “nice to have” but an urgent intervention by government aimed at creating a state-owned national company to actively pursue oil and gas projects, Mantashe added.

Beneficiation in the mining and petroleum sectors is crucial to create employment opportunities and stimulate economic growth. To facilitate this, government should implement several interventions, he said.

“First, it must ensure reliable, efficient and affordable electricity supply as beneficiation processes are energy-intensive. Second, developing incentive schemes to encourage local beneficiation is essential. Historically, tax holidays have been used successfully to attract businesses and promote growth in targeted sectors.”

Introducing export taxes on raw materials could incentivise local processing while linking electricity tariffs to commodity prices might make energy costs more manageable, Mantashe added. “We will need an aggressive programme to engage business and consider introducing electricity tariffs that are linked to the commodity price.”