Godongwana flags regulatory hurdles to SA gas exploration

Finance minister Enoch Godongwana has cited South Africa’s gas exploration experience as an example of how the country’s constitutional architecture and regulatory framework can frustrate investment, as he weighed in on the institutional obstacles holding back economic growth.

Godongwana was speaking to RMB chief economist Isaah Mhlanga at a post-medium-term budget policy statement breakfast in Johannesburg on Thursday.

He pointed to South Africa’s gas exploration experience as an example of how legal challenges can deter investment.

Companies that found gas in Namibia started their exploration efforts here but faced repeated legal challenges over environmental issues and eventually gave up. They went to Namibia, where they made discoveries.

Even the constitutional architecture is a problem.

His remarks come amid longstanding concerns about delays and regulatory uncertainty facing South Africa’s oil and gas exploration industry. In July, the Offshore Petroleum Association of South Africa (Opasa) said lengthy approval processes and legal proceedings had contributed to a halt in offshore exploration, despite discoveries in the past decade.

Opasa spokesperson Niall Kramer told Business Day offshore exploration approvals can take up to five years in South Africa, compared to three to nine months in some other African jurisdictions. The association has called for specialised courts to expedite dispute resolution.

The industry is also facing a potential supply cliff, with the expected end of pipeline gas supplies from Mozambique’s Pande and Temane fields by mid-2028. Industry representatives warned at a parliamentary committee meeting in June 2023 that fragmented policy and regulatory uncertainty were delaying decisions on addressing the anticipated supply shortfall.