One of the most important discoveries of the year took place 1785km off the southern coast of South Africa where Total has made a gas condensate discovery on the Brulpadda prospects, located on Block 11B/12B in the Outeniqua Basin.
The exploration well encountered 57 metres of net gas condensate play in Lower Cretaceous reservoirs. Following the success of the main objective, the well was deepened to a final depth of 3,633 metres and has also been successful in the Brulpadda-deep prospect.
Speaking at Africa Oil Week last week (Africa-OilWeek.com), Dr Enzo Insalaco, Vice President Exploration Africa at Total explained that South Africa has become an interesting area for exploration. “When you look at the fundamentals, you can see a scenario where there are a number of significant, relatively underexplored basins and many of the play fundamentals are present in these places,” he says. “We see that there's a lot of scope for exploration and significant potential.”
That interest has been illustrated by the recent activity by the industry, which has seen a significant amount of seismic capture and blocks being taken in Namibia and South Africa. “Much of that activity is early stage, so 2D or 3D,” Insalaco added. “What we will see in the next few years is an uptick in reservoir drilling and exploration.
We have a strong position in the oil basin, so we have a couple of blocks in the Orange Basin and in South Africa the 11B/12B block where this discovery was made.”
Opening a new petroleum basin
For Total, Brulpadda was certainly a high impact well for opening up what they believe is a significant petroleum basin. “It was a very bold technical well,” Insalaco continued. “Many people may not realise that the well was actually drilled on 2D. It is a deep offshore well, so drilling on 2D was a very bold move. But given our understanding of the basin and the innovations we did on the operations, this well could be drilled safely and successfully on 2D.
“As we know, it was an operational success just as much as a technical success; we drilled the well within budget, within time and in terms of NPT we have about 3% of NPT and 3% waiting on weather. If you consider the conditions, that is fantastic operational performance. We drilled the well to the main reservoir log and then we went down to a deeper reservoir.
“We did extensive logging records, took samples of fluid, reservoir and source rock. It was a fantastic result in terms of operational performance and data acquisition. It is a gas and condensate and oil discovery, both traces were found. The reservoirs were well developed with good fluid and reservoir properties. You could not really wish for more information from an exploration well. That data acquisition has really put us in a great position going forward to be able to accelerate the next level and the evaluation.”
A fast track to production
The fact that Total drilled the prospect on basic 2D seismic data meant that they needed to hit the ground running in the discovery scenario. They planned for success and were ready to shoot the 3D campaign as soon as they were comfortable that the well was successful and there was going to be potential on the basin. “We were ready for 3D, we were already negotiating contracts on the way,” Insalaco added. “When you look at the milestones on the well you can see that we finished our P&A in the first week of February.
The rig moved offsite the middle of February, and the first 3D seismic shot was done on the 14th of March. A month between the first shot of seismic and the end of the work which is a fantastic performance.
“We also fast tracked the seismic acquisition, so we could start looking at the potential on the new data by June of this year and that allows us, together with the information that we collected, to fast track well evaluation and put us into position to commission the rig and be able to drill early next year. Doing as many processes in parallel allowed us to save 18 months to two years in the well programme and I don't think we can compress that timeline anymore, given the operational constraints and the operational windows for the seismic acquisition.”
With the initial phase of the 3D seismic acquisition programme over the basin completed, the Brulpadda well results will be integrated with the 3D seismic data ahead of the drilling programme in 2020, which will include up to three exploration wells.
Sir Richard Branson has apologised for a photo he used to mark the launch his new Branson Centre of Entrepreneurship in South Africa.
The entrepreneur tweeted a photo which was criticised for failing to reflect the diversity of South Africa.
One of the critics is South African fashion designer Thula Sindi, who says: "Where did you find so many white people in South Africa?"
Sir Richard tweeted an apology, saying it "clearly lacked diversity".
A Virgin Group spokesperson added the image in Sir Richard's tweet did not reflect "the diverse make-up of attendees" at the launch event.
In the intial tweet, Sir Richard said: "Wonderful to be in South Africa to help launch the new Branson Centre of Entrepreneurship. We aim to become the heart of entrepreneurship for Southern Africa."
Plastic milk bottles are being recycled to make roads in South Africa, with the hope of helping the country tackle its waste problem and improve the quality of its roads.
Potholes cost the country's road users an estimated $3.4 billion per year in vehicle repairs and injuries, according to the South African Road Federation, as well as damaging freight.
In August, Shisalanga Construction became the first company in South Africa to lay a section of road that's partly plastic, in KwaZulu-Natal (KZN) province on the east coast.
It has now repaved more than 400 meters of the road in Cliffdale, on the outskirts of Durban, using asphalt made with the equivalent of almost 40,000 recycled two-liter plastic milk bottles.
Road to recycling
Shisalanga uses high-density polyethylene (HDPE), a thick plastic typically used for milk bottles. A local recycling plant turns it into pellets, which are heated to 190 degrees Celsius until they dissolve and are mixed with additives. They replace six percent of the asphalt's bitumen binder, so every ton of asphalt contains roughly 118 to 128 bottles.
Shisalanga says fewer toxic emissions are produced than during traditional processes and says its compound is more durable and water resistant than conventional asphalt, withstanding temperatures as high as 70 degrees Celsius (158F) and as low as 22 below zero (-7.6F).
The cost is similar to existing methods, but Shisalanga believes there will be a financial saving as its roads are expected to last longer than the national average of 20 years.
"The results are spectacular," says general manager Deane Koekemoer. "The performance is phenomenal."
Unlike in Europe, for example, where recyclable plastic is often collected directly from homes, in South Africa, 70 percent is sourced from landfill. The plastic will only be taken from landfill if there is somewhere for it to go -- such as into roads. Shisalanga says that by turning bottles into roads it is creating a new market for waste plastic, allowing its recycling plant partner to take more out of the nation's dumps.
Kit Ducasse, control technician at the KZN Department of Transport -- which commissioned the plastic repaving -- is "impressed" with the road and has now commissioned a highway on-ramp in addition to the first road. "It's working so well," he says. "Time will tell, but what I've seen is great news."
Shisalanga has applied to the South Africa National Roads Agency (SANRAL) to lay 200 tons of plastic tarmac on the country's main N3 highway between Durban and Johannesburg and is awaiting approval for the project.
If it meets the agency's requirements, the technology could be rolled out across the nation. Since SANRAL's standards are so high, Shisalanga hopes it would then be able to meet the strictest regulations across the world.
Tackling the plastic problem
India began laying plastic roads 17 years ago, and the concept has been tested in locations across Europe, North America and Australia. But there are concerns over potential carcinogenic gases created during production and the release of microplastics (tiny particles of plastic) as the roads wear away.
"Such issues have to be ruled out, otherwise we're going to contribute to and not alleviate the national environmental waste problem," says Georges Mturi, senior scientist at CSIR.
Shisalanga has spent five years researching the technology. Its technical manager Wynand Nortje says its method of melting the plastic into the bitumen modifier minimizes the risk of microplastics. "The performance of our plastic mix is better than traditional modifiers, the fatigue seems improved and resistance to water deformation is as good or better," he adds.
Roads are one of many creative solutions to reusing plastic waste. Companies around the world are turning it into bricks, fuel and clothing.
Some other international companies have even found ways to repurpose so-called "non-recyclable" plastic into roads. But Mturi at CSIR believes this is currently too risky in terms of emissions and microplastics, because the properties of this plastic are so variable.
Still, Koekemoer hopes to expand into using non-recyclable plastic in the future, allowing the company to get even more waste plastic out of the environment.
"We're taking plastic out of our dumps (landfills) and we're reducing our pollution problem, and to top it off we've produced a product that's far superior to alternatives," says Koekemoer. "We're leading the global curves."
The Office of the United States Trade Representative (USTR) is reviewing its current dealings with South Africa based on intellectual property concerns.
In a statement on Friday (25 October), the group said that it would review South Africa’s eligibility to participate in its Generalized System of Preferences (GSP) based on a petition it had received.
The GSP is the largest and oldest US trade preference program.
It is designed to promote economic development by allowing duty-free entry into the United States for 3,500 products from the 119 designated beneficiary countries and territories.
To remain eligible for these advantages, beneficiary countries must comply with 15 statutory eligibility criteria that are important to US interests, including taking steps to afford internationally recognized labour rights, providing adequate and effective protection of intellectual property rights, and assuring equitable and reasonable access to its markets.
Why South Africa is being reviewed
The USTR said it is reviewing South Africa after accepting a petition from the International Intellectual Property Alliance.
The petition outlines concerns with South Africa’s compliance with the GSP’s intellectual property criteria in the area of copyright protection and enforcement.
While the USTR did not comment on the contents of the petition, the International Intellectual Property Alliance has previously raised concerns about the Copyright & Performers’ Protection Amendment Bill which is awaiting presidential approval before being signed into law.
The bill’s primary aim is to provide fair compensation to publishers, artists and film producers.
However, the bill has also come under intense scrutiny as some provisions allow for the ‘free use’ of certain copyrighted material.
In an August 2019 letter – signed by the Motion Picture Association (MPA) and the International Confederation of Music Publishers (ICMP) among others – a number of international bodies asked that Ramaphosa take the bill back to Parliament for a ‘proper, sector-specific impact assessment and meaningful consultation with affected stakeholders’.
“The South African Government has committed itself to modernising South African copyright law to bring it into line with the WIPO Internet and Beijing treaties, which South Africa intends to ratify,” it states.
“Our communities fully support these policy aims. Regrettably, the Copyright Amendment Bill and the Performers’ Protection Amendment Bill, as currently drafted, would not only fail to achieve these stated aims but they would instead undermine South Africa’s creative communities.
“The proposals contained in the bills would, if adopted, limit the creative sectors’ ability to protect their rights and invest in South Africa, substantially weakening the South African internal and export markets for creative content.
“This would harm South Africa’s creators, its strong creative culture and, ultimately, its citizens.”
Warning signs were there
Copyright lawyer Carlo Scollo Lavizzari has previously warned that the bill will lead to South Africa breaching its international obligations, causing unnecessary diplomatic stress and damage to the economy.
“(The bill) translated into the real world, will damage filmmakers, musicians, authors, TV productions and software businesses by diminishing access to publishing for authors locally, forcing them to publish for overseas audiences,” he said.
He said that this would decimate the local film and music industries.
“For South Africa to come ‘first’ the country needs to have a first-rate, up-to-date copyright act that benefits the creative sector.
“Today, having sound laws on copyright is simply the price of entry a nation pays to compete for talent.
“Respecting world standards of copyright protection in the digital world is no contradiction to offering world-class opportunities for creators and knowledge workers — it is actually a pre-condition.”
Following in-depth discussions with 25 of South Africa’s top financial firms, and the Royal Commission of Inquiry’s report on misconduct in the financial industry, it is encouraging to see that initial findings point to a financial services industry that comports well with standards of good conduct. However, gaps remain that need to be overcome.
As part of an assessment of the commitment to conduct standards in the sector, DB & Associates has had over 100 meetings with the executive leadership of the top 25 firms in South Africa’s financial sector over the past 18 months. This culminated in a Royal Commission of Inquiry into misconduct in the financial industry, which delivered its final report earlier this year.
The Commission’s findings were, to say the least, sobering. Initially, the assumption was made that, because South Africa is a developing country with high levels of corruption in government, as bad as things were in Australia, they would be worse in South Africa. This prediction could not have been more wrong.
Learnings from Australia’s mistakes
Forming part of the discussions with leading financial institutions were Dr Andy Schmulow, Senior Advisor at DB & Associates, who has in-depth experience in Australia’s financial industry. His extensive knowledge about the Australian landscape is relevant for two reasons: the financial system regulatory reforms currently underway in South Africa are modelled on Australia’s Twin Peaks regime; and secondly, because Australia’s financial regulation is in crisis – the product of system-wide failure to enforce anything approaching good conduct, pervasively evident for over a decade, with misconduct, and at times serious criminality, perpetrated on an industrial scale.
What was encountered is a financial services industry which, while not perfect by any means, nonetheless comports well with standards of good conduct. The reasons are many and varied. They include a far deeper awareness that the financial industry must serve the community in which it operates, not the other way around. An understanding of the need to contribute to redressing economic inequality embedded by decades of discrimination, for both social justice reasons, and to create the kind of economic prosperity that firms themselves need, in order to grow. But doubtless also the treating customers fairly (TCF) regime has played an important role in readying financial firms for the forthcoming introduction of new conduct legislation: the Conduct of Financial Institutions Act (CoFI).
From process-driven to values-driven
However, gaps remain. These relate chiefly to requirements to transform culture and governance, and the disjuncture between TCF and CoFI. With regards to the former, CoFI will require a shift in corporate governance from what, to how and why. This shifts culture ad governance from being process-driven to becoming values-driven. TCF compliance similarly requires shifts to plug gaps. For example: the six TCF pillars do not map exactly to the nine pillars of CoFI.
The three pillars that will be new under CoFI present significant challenges. In the case of product or service distribution, a regulated entity will be responsible for misconduct committed by brokers, including brokers wholly independent. This will be tricky. How should a firm enforce its obligations on an independent broker – especially a highly successful one – without the risk of that broker ending its relationship with the firm, and henceforth, selling only its competitor’s products? How will a firm impose, if need be, close scrutiny of a broker’s activities, especially one located remotely? There are answers to these questions, but they are imperfect.
Three pillars, three challenges
1. These differences relate primarily to CoFI requirements for distribution, culture and governance, and licensing.
In respect of culture and governance, CoFI will require a whole of entity regeneration of culture; an exercise that will go far deeper than anything encouraged by TCF. The consequences of failure are real: Momentum has recently been slapped with a R100 million fine by the FSCA for governance failures in one of their unit trusts. So, whereas in the past governance issues, like conflicts of interest, could be ticked off on the basis that the firm ‘has a policy’ addressing the issue, this will no longer suffice. Now the enquiry will relate to both the efficacy of the policy itself, and the strength of its implementation.
2. TCF compliance is ascertained by the firm itself. CoFI compliance will be independently judged by the newly established Financial Sector Conduct Authority (FSCA).
To date, TCF compliance has been a matter for the firm to judge, but self-assessment is a complacency trap writ large. For one thing, self-assessment will never be as searching or as critical as an independent review. Unavoidable cognitive biases, with which we are all afflicted, guarantee that. The only credible form of assessment is arms-length (which must preclude, for example, being undertaken by a firm’s auditors; such assessments merely embed leveraged conflicts of interest). Reviews must be grounded in methodologically rigorous, credible, and critical recursive reviews, conducted independently. As such, current TCF assessments present the risk of being a complacency and self-affirming trap.
3. TCF compliance is more superficial in nature and is often addressed as an afterthought, whereas CoFI requires a deeper and more profound treatment, addressed as a forethought.
TCF’s pillars lack the cascading sets of sub-principles included in CoFI’s pillars. As such, TCF is by nature more superficial, more malleable, and easier to demonstrate. As a result, it tends to default to a tick-box approach, in which TCF adherence is demonstrated through the use of leading questions, posed by the firm, to deliver the affirmations the firm seeks. As a result, even under a TCF framework, several firms have acknowledged that they are still product-focused, not client-focused.
A failure to reform such a product-flogging emphasis will serve them poorly under the new regime. CoFI, by contrast, will require compliance as a forethought to product and service design and construction, whereas under TCF, a number of firms continue to check compliance as the product rolls off the production line. Put differently; compliance must be an active participant from conception, not a theatre assistant at birth. Therefore, CoFI requires demonstrable success in promoting financial literacy and financial inclusion and affords protection to sophisticated as well as retail customers.
A journey of change towards compliance
Set against all of this is a conduct authority – the FSCA – whose remit and powers – especially as compared to its progenitor, the Australian Securities and Investments Commission – make it fully weaponised. It can punish, and can do so severely (and has already), whereas the recipients of FSCA sanctions are severely limited in their avenues for appeal. This enables the FSCA to move swiftly, and come down hard. In the process, firms that incur its wrath, even if they mount successful appeals, will be tarnished, and their reputations damaged.
A better and more prudent approach would be to leverage existing TCF adherence, not in a vein of complacency, but rather as a good start to a real and much deeper change journey. A journey in which compliance is reconceptualised, firm values are implemented (not simply articulated), and corporate culture is strengthened and enhanced towards customer centricity, at every level of the organisation.
Ex-South African President Jacob Zuma’s son Duduzane denied wrongdoing at a graft inquiry on Monday, rejecting testimony by an official who said he was offered a bribe and a ministerial post at a meeting where Duduzane was present.
Duduzane Zuma is a key witness at the so-called “state capture” inquiry set up last year to test allegations of high-level corruption during Jacob Zuma’s nine years in power.
He was a business partner of the Guptas, three Indian-born brothers accused of using their friendship with the former president to win state contracts in the years leading up to Zuma’s ousting as head of state in February 2018.
Former deputy finance minister Mcebisi Jonas told the inquiry last year that a Gupta brother offered him a 600 million rand ($40 million) bribe and the position of finance minister at a meeting arranged by Duduzane in 2015, on the condition that Jonas would assist the Guptas with their business ventures.
Duduzane Zuma said on Monday that he did arrange a meeting involving Jonas at a Gupta residence in Johannesburg in 2015 but his testimony about the meeting differed on almost every other detail. He said the meeting was between himself, Jonas and businessman Fana Hlongwane to discuss a rumour that Hlongwane was blackmailing Jonas.
Duduzane Zuma also said a different Gupta brother to the one named by Jonas poked his head into the room where Duduzane and Hlongwane were chatting with Jonas and that the meeting had not ended acrimoniously, as Jonas had said.
“After the meeting everything was cool,” Duduzane Zuma told the inquiry, answering calmly. “As I’ve mentioned in my affidavit, I’ve bumped into Mr Jonas once or twice subsequent to that meeting and my view was there was no hostility.”
He said he had held similar informal meetings at the Gupta residence “all the time”.
The state capture inquiry has shocked ordinary South Africans with revelations about the brazen way in which some people close to Jacob Zuma allegedly tried to plunder state resources and influence policymaking.
But the investigation has struggled to nail down convincing evidence of corruption involving top officials - something analysts say could be a problem for Zuma’s successor Cyril Ramaphosa, who is on a campaign to clean up politics.
Jacob Zuma appeared before the inquiry in July, but he also denied wrongdoing in several days of evasive testimony and said he was the victim of a decades-old plot.
The Guptas, who left South Africa shortly after Zuma’s removal, have not appeared before the inquiry but have submitted an affidavit in which they denied allegations against them.
Zuma still has some loyal followers in the governing African National Congress (ANC) who view him as a champion of policies that seek to address the deep racial inequality that persists more than two decades after the end of white minority rule.
But Zuma’s critics associate his leadership with deeply entrenched corruption and erratic policymaking that deterred investment and held back economic growth.
Nigerian President Muhammadu Buhari ostensibly came to South Africa to boost business ties between the two countries. But he missed a golden opportunity to drum up business by skipping a forum with business leaders because he was worried about security.
President Cyril Ramaphosa attended the forum for several hours, addressing the business people and taking questions. Some of the business people who had been expecting Buhari were disappointed by his no-show, sources said.
He was billed to appear with Ramaphosa but his security people checked out the venue of the forum – the sprawling convention centre of Gallagher Estate in Midrand – and decided on the morning of the event that it was not secure enough for him to attend, according to diplomatic sources.
One said there were no hard feelings from the SA government side – who found Buhari warm and friendly – just a feeling that he had missed a good opportunity to boost commercial ties between the two countries.
These took a knock during the recent eruption of xenophobic violence in South Africa, some of it directed against Nigerians and their businesses. Nigerian mobs retaliated in Nigeria by attacking the premises of South African companies such as Shoprite and MTN.
Agreeing on measures to prevent a recurrence of this violence and building up the commercial relations between the two countries were the major focal points of Buhari’s state visit and the Binational Commission between the two countries which he and Ramaphosa co-chaired on Thursday.
Buhari’s anxiety about security appears to be related more to tensions within the Nigerian diaspora rather than any fear of attack by South Africans.
While he was meeting Ramaphosa at the Union Buildings on Thursday, Tshwane Metro Police reportedly used tear gas and rubber bullets to disperse a handful of Nigerians – calling themselves Biafran nationals – who were demonstrating in front of the building. Some carried placards calling Buhari an imposter and demanding that Ramaphosa send him home.
They claim the “real Buhari” died in 2017, when Buhari was very ill and spent most of the year receiving treatment in London.
Self-styled Biafrans are calling for a separate state in southern Nigeria, trying to revive the movement which lead to the secession of several states to form the Republic of Biafra in 1967 in a region mostly inhabited by Igbo people.
That prompted a long civil war in which between 500,000 and two million Biafran civilians died before Biafra surrendered to Nigeria.
Another grievance of some expatriate Nigerians is the arrest in August this year of Omoyele Sowore, a Nigerian journalist and human rights activist. He ran against Buhari in the February presidential elections and was arrested after rejecting the election as rigged and calling for a protest tagged RevolutionNow.
When Buhari addressed the Nigerian community at a Pretoria hotel on Friday, some of his compatriots refused entry to the meeting were calling for Sowore’s release.
Rather ironically, even some members of Buhari’s own ruling APC party could not gain entry, because they were considered too radical, they told journalists.
A few Nigerians who were allowed into the meeting said Buhari spoke to them for about 10 minutes.
“Let me also call on Nigerians to be law-abiding and respect constituted authorities while you live here,” Buhari said, according to remarks tweeted by his office.
“May I also enjoin the few that sometimes give us a bad name, to desist from such misdemeanours and be our good ambassadors.”
This echoed his reply at a joint press conference with Ramaphosa after their meeting on Thursday to a South African journalist who asked him if he did not think the recent xenophobic violence in South Africa against Nigerians, among other foreign Africans, was partly prompted by the perception that they were involved in so much crime.
He said Nigerians understood the maxim that, “When in Rome do as the Romans do” and therefore obeyed the laws of their host country.
At the Pretoria hotel meeting, Buhari also assured his compatriots that he and the South African government had agreed on measures to tackle the xenophobic violence to ensure it did not recur.
Ramaphosa had told a press conference after meeting Buhari that these measures included establishing an early warning mechanism to pick up any signals of imminent xenophobic violence so steps could be taken to pre-empt it. He and Buhari also said that police and intelligence agencies in both countries would cooperate with each other, share information and raise levels of alertness to forestall such violence.
According to official sources, the Nigerian government is also concerned that Nigerian citizens in South African jails are not prevented from using their cellphones. Many of them continue to mastermind criminal activities in Nigeria from their South African cells, the Nigerians complained.
The South African government promised to look into this. It is not clear if the Nigerian government was referring, among others, to Nigerian oil militant Henry Okah who is serving a 24-year jail sentence in a South African prison after the High Court convicted him in 2013 on 13 terrorism-related charges over twin car bombings in Nigeria during the country’s Independence Day celebrations in 2010.
Ironically, given Buhari’s no-show at the business forum, he and Ramaphosa “welcomed the important role of the Business Forum which took place on the margins of the State Visit,” in a joint communiqué after their Union Building meeting.
They also welcomed the decision of the two governments to establish a Joint Ministerial Advisory Council on Industry, Trade and Investment which is expected to be critical in boosting private sector participation in the economies of both countries.
Ramaphosa said business and investment relations between the two countries were already strong and Nigeria accounted for 64% of SA’s trade with West Africa. The two governments had agreed to further strengthen economic ties by deepening their reforms to ensure their economies were more open to business and encouraging more Nigerian investment in SA.
He and Buhari noted the “significant footprint” of SA companies in Nigeria in sectors such as telecommunications, mining, aviation, banking and finance, retail, property, entertainment and fast foods.
By contrast, they also welcomed Nigerian business in SA but noted that it was mostly “small, micro or medium sized – with the exception of the big investment of Dangote Sephaku Cement.
At the press conference after their meeting, Ramaphosa said he would like to see a better balance in the investment relationship and would seek to achieve this by improving the environment for big Nigerian companies to invest here.
“We want to welcome more and more Nigerian businesses to operate in our space,” Ramaphosa said.
He added growing relations between the two countries were evidenced by the 32 cooperation agreements signed between them, covering a wide field including trade and industry, science and technology, defence, agriculture, energy, transport, arts and culture and tourism.
The two governments identified key sectors to boost investment for economic growth and development, including roads, railways, mining, manufacturing and agro-processing.
Credit: Daily Maverick
The Economist Intelligence Unit (EIU) analysts project Angola’s economy will return to growth only in 2021, expecting a rate of 2.5% after consecutive years of economic contraction, including in 2019, when the country is expected to see Gross Domestic Product (GDP) fall by 2.2%.
The latest EIU report on Angola states that when Angola’s economy returns to growth, 2022 and 2023 will be much more positive with expected growth rates of 4.1% and 5.0% respectively due to a gradual rise in oil prices and the non-oil economy improving its performance.
The economic studies department of South Africa’s Standard Bank projected that Angola’s economy would contract this year at a rate of -1.0%, before growing again in 2020 with a 1.4% expansion of GDP.
The EIU said in the statement that the weak economic scenario will continue to weigh heavily on the national currency, the kwanza, which this year is expected to depreciate to 345.6 kwanzas per dollar, which will worsen further towards the end of the period covered by this report to 400.1 kwanzas for every dollar.
The report recalled that oil production fell by almost 10% in 2018 to an average of 1.478 million barrels per day due to the maturity of oil fields and the lack of investment in new exploration and noted that despite the various tax benefits offered Angola has been unable to attract investors to the exploration of deep and ultra-deep wells where costs are highest.
The forthcoming concession of new blocks in two Angolan basins will only bring potential benefits in several years, so EIU analysts predict Angolan oil production will continue to decline in 2019 and 2020 as investment decisions are postponed.
The anticipated economic growth for the 2021-2023 period, with an annual average of 3.9%, is due to the improved performance of the non-oil economy, namely in agriculture, mining, construction, manufacturing and services, as access to credit increases.
The document underscored the efforts being made to attract investment and reduce nepotism and corruption but noted that the fundamental impediment to reform is the control that politicians have of the country’s economy, resisting changes to introduce greater transparency and reduce opportunities for anyone who just wants to have an income.
Declining numbers from key markets has sector concerned.
Forward bookings of trips to South Africa by international tourists are not looking good for the rest of 2019.
In fact, if foreign tourist arrival numbers continue to decline, 2019 will turn out to be even worse than last year for the industry.
That’s the word from Tourism Business Council of South Africa (TBCSA) CEO Tshifhiwa Tshivhengwa, speaking to Moneyweb this week following the latest Statistics SA data showing a decline in foreign arrivals. The council’s own Tourism Business Index (TBI), released last week, also painted a grim picture in terms of the outlook for the rest of the year.
Stats SA reported on Monday in the release of its monthly tourism and migration data that foreign arrivals were down 5% for July, compared to July 2018. The data also reveals that South Africans are travelling less overseas with arrivals by South Africans down 11.8%, while departures were down 11.6%.
The figures speak for themselves, says Tshivhengwa. “We have been saying for some time things are tough and are not looking good in terms of international tourist arrivals into South Africa. Our TBI results from last year predicted this and now it is a reality with international arrivals continuing to decline.”
Tshivhengwa says according to the latest TBI figures, international tourist arrivals for the year to date are down 1.4% compared to 2018. SA Tourism’s research, based on Stats SA data, puts the decline for the first six months of the year at 1.1%.
“The results for July have further negatively affected foreign tourist arrivals for the year, which is really concerning for us as the tourism industry,” he notes. “However, the bigger worry is that it puts our target of doubling tourist arrivals by 2030 at risk. To achieve this, we require a 6% compound growth annually in international tourist arrivals to 2030.”
TBCSA identifies itself as the umbrella body representing the “unified voice of business in the travel and tourism sector”. It also administers the tourism marketing levy, known as Tomsa, which tourists pay on specific services such as accommodation in South Africa.
Recovery unlikely this year
“Forward bookings for the rest of the year are not looking good,” says Tshivhengwa. “We were hoping for a recovery in 2019, but it is looking increasingly unlikely from an international tourism perspective. We are not seeing signs of a recovery.”
Last year foreign tourist arrivals to South Africa grew by a lacklustre 1.8% to 10.5 million. The TBCSA described 2018 as “the most challenging trading year for the tourism sector since the inception of the TBI in 2010”. The index recorded its lowest results in 2018.
Tourists from Africa, mainly the Southern African Development Community (SADC) region, make up the majority of foreign tourists to South Africa (around 7.8 million), according to auditing and professional services group BDO South Africa. Around 2.7 million tourists were from overseas (including Europe, North America, Asia, the Middle East and Australia).
The TBCSA, with support from SA Tourism, has set an ambitious target to double arrivals to the country to 21 million by 2030.
The organisations have secured the support of President Cyril Ramaphosa to grow the tourism industry and have been calling for relaxation of visa regulations and addressing the issue of unabridged birth certificates for travelling minors.
“Domestic tourism is doing better,” says Tshivhengwa. “However, on the international tourism front where tourists spend more, a continued decline in arrivals will mean that this year will be worse than last year for the tourism industry.”
Tshivhengwa concedes that recent xenophobic violence and crime incidents have not helped matters.
“These issues hurt our industry’s growth potential,” he says. “We cannot ignore them as they impact the image of our country as a whole.
“These issues, together with SA’s visa regime and continuing challenges around unabridged birth certificates, were raised by international travel companies in our recent roadshow to Europe.”
Responding to Moneyweb queries, SA Tourism acting CEO Sthembiso Dlamini points out: “South Africa views violence in a serious light and condemns it in the strongest possible terms. While we are unable to quantify the impact from an international arrivals perspective, what is concerning is the negative image the attacks have had on South Africa as a brand.”
She adds: “The recent attacks violate all the values that South Africa embodies. Our country stands firmly against all intolerance.
“We have seen queries from various international tour operators, but we have assured them that our government and safety authorities are urgently addressing the situation and that South Africa remains a warm and welcoming country, and open for business.”
On the recent roadshow and SA Tourism offensive in Europe, Dlamini says Europe is a crucial market for South Africa as it generates significant tourism numbers for the country.
“The roadshow was a great success, providing more insights into some of the barriers and concerns of tourists wanting to travel to South Africa,” she says.
“The concerns coming out of this roadshow such as unabridged birth certificates, marketing of the less popular regions as well new product offerings, will be addressed in order to make sure South Africa is more accessible to travellers from Europe and other parts of the world.”
Credit: Moneyweb South Africa
There are a host of reasons why a country’s economy must be regulated. One of the main ones is to ensure that dominant firms, whether public or private, don’t abuse their market power. When it comes to state-owned enterprises, government has a further obligation – to ensure that they perform in the public interest.
Since state-owned enterprises are owned by government, one option is to hold them directly accountable to a political and administrative head. A popular alternative in recent decades has been to establish economic regulators, mandated to operate at arms-length from the government which acts as shareholder on behalf of society.
South Africa followed this trend after 1994, creating the National Energy Regulator, which regulates electricity and other energy sources. The other regulators are the National Ports Authority and the Independent Communications Authority. Proposals to expand this approach to transport and water have now been endorsed in the draft policy document recently released by the National Treasury.
However, the model has failed dramatically to achieve its objectives in both the energy and communications sectors. In our view, it has also been a wasteful use of scarce expert capacity and institutional resources. This is our conclusion based on an analysis of independent regulation as applied in South Africa.
An important example is how the energy regulator failed to assure a stable pricing path for electricity. This is it’s most basic function. And in trying to perform its function, it is now hindering the resolution of the crisis at the state-owned power utility Eskom by awarding tariffs that offset support from the Treasury – at a time when the country faces serious fiscal and energy threats.
What’s not working
South Africa’s state-owned enterprises are supposed to provide a foundation for the country’s development. Yet many are performing badly, or not at all. In some cases they are doing actual harm by, for example, draining public resources.
Existing independent regulators are supposed to:
set fair prices to ensure that users are not ripped off;
ensure that the performance of enterprises meets minimum standards, and ideally keeps improving;
make decisions that reflect government policy goals; and,
at the same time, avoid short-term or otherwise inappropriate political pressures.
There are four main reasons why South African economic regulators are failing to achieve these objectives.
First is policy incoherence. Independent regulators are supposed to protect enterprises from the short-termism, opportunism and the fickleness of politics. But they cannot do that effectively if state owned enterprises must give effect to government policy that is still in flux.
Second is a lack of government support. Regulators can never be entirely free from political influence precisely because they need supportive decisions and actions by the state. And that support often hasn’t been forthcoming.
The National Ports Regulator is a good example. The regulator wanted the Minister of Transport to separate port services from the rest of Transnet’s operations as envisaged by the relevant legislation. But that hasn’t happened because Transnet has been lobbying government to retain the revenue from the profitable port business. And government itself is disinclined to tackle the financial challenges that would arise if the Ports Regulator was allowed to do its job and reduce bloated tariffs.
Third is the issue of performance. Most state owned enterprises are performing badly but in many sectors the primary challenge is poor performance at municipal level that results from weak governance. Whether in the local supply of electricity, water, or sanitation services, municipal failure can either compound the failure of state enterprises, or diminish any benefits they might bring.
In such instances, national-level economic regulation will have limited impact if service delivery mechanisms fail. Fiddling with pricing decisions is of little significance to citizens and firms that don’t have reliable access to water, electricity or transport services.
Part of the problem is that independent regulation was often promoted as a pathway to privatisation. But that has not happened. And in many instances the case for privatisation has not been convincing, meaning that it might just replace public dysfunction with notional accountability mechanisms for private dysfunction with little accountability. If privatisation is not the way forward, at least for now, these entities should be managed differently with a focus on public performance.
The final practical consideration is that independent regulation needs substantial technical capacity. There are various parts to this.
The regulator must have the staff who can evaluate enterprises, challenge them where appropriate but not intervene unnecessarily.
The regulated enterprise must employ people to engage with their regulator.
Government must have the capacity to set up and support the regulator. If more than one department is involved, all must have appropriate capacity.
Policy makers must provide clear policy expectations and resolve uncertainty quickly.
Ideally, other parts of society also need to be able to engage with regulatory issues. Civil society needs to have a voice as do companies that use the services of the state-owned enterprise. And courts need to be capable of dealing with these specialised issues.
The question then is whether further proliferation of regulatory capacity is possible, or even desirable.
We believe the answer is no. And argue that there is a radical, but simple, alternative.
It’s a given that political decision-making will guide the oversight of state enterprises – that’s because the government wants to use them to promote broader development policy. This means that the focus should be on building government’s capacity to guide the process. That way, political heads will be clearly accountable and failures cannot be blamed on other parties.
The water sector has been cited as one where a new regulator might be introduced. But it actually serves as a case study of how public entities can deliver well without an independent regulator. Bulk water prices are set by the national government department, using criteria legislated 20 years ago. The department calculates the tariffs and consults with major stakeholders. These include municipalities, big users such as Eskom and Sasol as well as organised agriculture. Price increases greater than inflation have to be justified.
Unlike the electricity case, this system has worked reasonably well and tariffs have increased smoothly and predictably. User participation keeps government honest in its calculations.
Some organisations still argue that a regulator would reduce mismanagement. But this ignores the lessons of experience and is based on a superficial notion of democratic accountability.
By contrast, in energy a former regulator and sector expert acknowledged that the regulatory agency’s price setting had produced huge fluctuations in the tariff which caused uncertainty. Yet, Treasury inexplicably wants to replace a relatively successful model (in water) with a failed one (in energy).
The way forward
We believe that ending dependence on failed independent regulators will ensure that there’s much more direct accountability. It will also lead to a focused effort to improve governance in both government departments as well as state-owned enterprises. And limited capacity can be integrated from disparate departments, entities and regulators.
There is no getting round the fact that tough action needs to be taken, and soon. If government doesn’t get oversight of public enterprises right, a different form of “regulation” will be imposed on the country by international financial institutions and other lenders. But their focus will be on what’s needed to ensure debt repayment, not the broader national interest.
Seán Mfundza Muller, Senior Lecturer in Economics and Research Associate at the Public and Environmental Economics Research Centre (PEERC), University of Johannesburg and Mike Muller, Visiting Adjunct Professor, University of the Witwatersrand