10 April 2012

South Africa: DA Calls for ANC to Divest From Firm Set to Gain From Fracking

press release

If the moratorium on fracking exploration in the Karoo is lifted, the ANC could earn a fortune.

The Democratic Alliance (DA) calls for the ANC-linked Batho Batho Trust to divest its 51% stake in Thebe Investments (Shell South Africa's local empowerment partner). Through Thebe, the Batho Batho Trust effectively has a 12% stake in Shell SA Refining, and a 14% stake in Shell SA Marketing. Shell is currently an applicant for three gas exploration licences. While these applications are not currently being processed, due to the moratorium instituted in April 2011, these applications, among others, will be considered for approval if and when the moratorium is lifted.

Deputy President Kgalema Motlanthe recently indicated that Chancellor House - the ANC's investment arm - should divest its shares in companies that gain from government tenders. In the same spirit, the Batho Batho Trust should withdraw its investment from Thebe.

The political relationship between Shell and Thebe Investments has already made a mockery of the due diligence process to be followed in ascertaining to whom the Petroleum Agency of South Africa should grant fracking exploration rights.

The Batho Batho Trust was established 20 years ago by ANC members with a view to supporting socio-economic development in South Africa. But the Trust now provides donations to the ANC.

Trust Chairman Kenny Fihla said that the trust's donations to the ANC were in line with its specific transformation agenda. This is convenient, but at odds with its initial mandate. KwaZulu-Natal Health MEC, Sibongiseni Mkhize, happens to be on the board of trustees, for instance. Prominent ANC personality in the Western Cape, Chris Nissen, emerged as the spokesperson for the Karoo Shale Gas Community Forum (strongly advocating that fracking be allowed). This effectively means that government, tasked with regulatory oversight, is compromised in performing its job effectively. It is becoming both player and referee.

Regulatory oversight is critical if the sustainable exploitation of our shale gas is to go ahead. Though a recent Econometrix report has estimated the value of the potential industry (in the best-case scenario) at R5 trillion, experts have warned that the report underplayed environmental consequences and ignored social costs. Renowned geologist Chris Hartnady has emphasised the geophysical risks of fracking, which include fresh groundwater contamination. If these risks are to be appropriately managed, all conflicts of interest must be dispensed with.

If South Africa is to benefit from the gas reserves in a manner that is economically, socially and environmentally sustainable, it is necessary that the overseer does not stand to benefit. Only then can South Africans have faith that - if the moratorium is lifted - shale gas will be exploited in a responsible manner

David Ross, Shadow Deputy Minister of Energy

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