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In a recent interview, Lindiwe Mekwe, acting CEO of Petroleum Agency South Africa (PASA), says that the oil and gas industry has the potential to become one of the top contributors to South Africa’s GDP within the next two decades or so.

This, however, requires that the country attracts sufficient exploration leading to good discoveries, and is based on the assumption that regulatory issues will have been resolved.

‘Oil and gas development is, however, still in the exploration phase if you compare it with the established state of the minerals industry,’ says Mekwe.

Interpretation of geological and geophysical data suggests that South Africa has potential for major oil and gas discoveries both on- and offshore. Current proven reserves offshore include the gas and condensate fields off Mossel Bay (F-A and E-M fields), which have been in production for decades, and new proven reserves in the F-O gas field. Off the west coast, there are proven gas reserves in the Ibhubesi gas field, where Sunbird Energy, together with partner PetroSA, is planning a development that will include a small-scale LNG plant.

Onshore, there are proven reserves in gas fields operated by Tetra4 in Virginia (Free State province), currently being used to fuel a local bus network. Coal-bed methane has also been discovered in the Waterberg region of Limpopo by Anglo as well as by Badimo Gas and partners Kinetiko Energy, near Amersfoort, Mpumalanga.

PASA’s role is to regulate these and other such operations on behalf of government, and to perform the major functions of promotion of investment in exploration; regulation of exploration and production activities; and archiving and distribution of geological and geophysical data to would-be explorers. ‘It’s only through this data that we’re able to determine and process how much onshore and off-shore resources may exist, advise on investment and help mitigate risks,’ says Mekwe.

There is an excellent case to be made for investment in South Africa’s burgeoning oil and gas exploration and production sector, with shale gas representing a major opportunity. The US’ Energy Information Administration (EIA) has reported that South Africa has some of the largest potential shale resources in the world in the Karoo geological basin. The EIA has reported a potential shale gas resource of 380 trillion cubic feet (Tcf), while PASA’s own estimates are 205 Tcf.

The recent discoveries of major gas deposits off both Mozambique and Tanzania also send a very positive message for the east coast. The deepwater areas of the west and south coasts are completely unexplored and may hold vast potential.

However, there are challenges that PASA faces in attracting qualified explorers to South Africa. One of these is the delay in the finalisation and enactment of the new Mineral and Petroleum Resources Development (MPRD) Amendment Bill. PASA expects that a recent announcement by Minister of Mineral Resources Gwede Mantashe will speed up the enactment of the bill, which is with Parliament before being presented to President Cyril Ramaphosa for sign-off.

Regulatory uncertainty has resulted in a slowing down of exploration activity over the past few years, which has been exacerbated by the dramatic fall in the oil price. Exploration companies that have made discoveries have also been loath to proceed to production or struggled to fund development operations while the impact of the regulatory environment on their operations has been uncertain. Finalisation of the bill should revitalise the industry, just as the oil price is recovering.

Another major challenge for the industry in South Africa is the lack of infrastructure such as subsea and overland oil and gas pipelines. In countries with a mature oil and gas sector, established infrastructure makes development costs far lower and monetisation of discoveries far less of a hurdle. However, the South African government is committed to developing oil and gas infrastructure over the next 10 to 15 years.

South Africa is not known as an oil and gas-producing country, such as the likes of Angola or Nigeria. There is risk associated with exploring for oil and gas in an area such as South Africa where the geology is not as conducive to oil and gas formation and trapping, and this presents a further challenge to explorers.

The current fiscal regime applicable to oil and gas exploration as well as production recognises this risk and comprises fees related to exploration, corporate income tax, royalties, fiscal stability agreements, and payments to the Upstream Training Trust.

The trust is an NPO that contributes towards the development of scientific and engineering capacity in South Africa for the upstream petroleum industry through investment in the development of young people, with a specific focus on historically disadvantaged individuals. The agency was instrumental in creating the trust, as well as in its inclusion in oil and gas exploration agreements, and sees its activities as an imperative for transforming the industry. Transformation of the industry is high on PASA’s agenda and it is working closely with both the industry and government to achieve a more balanced approach to participation and ownership.

Traditionally, the oil and gas business and the energy business in general, has been and remains a very male-dominated domain. The agency would like to see this change and supports initiatives such as Women in Oil and Energy South Africa, and the American Association of Petroleum Geologists’ Professional Women in Earth Sciences.

While there are now more women involved in the industry locally, it is by no means representative, and so Mekwe calls on her male counterparts to recognise the potential of women, particularly in the executive realm.

In today’s world, oil and gas are arguably the most critical energy resources, and PASA is in total support of those entering the South African oil and gas exploration and production industries. The agency is fully committed to ensuring that the government and policy-makers sustain the sector for the benefit of all involved and will do everything in its power to advance the industry.

Tel: +27 (0)21 938 3500
Fax: +27 (0)21 938 3520
[email protected]
www.petroleumagencysa.com

CAPTIONS:

Lindiwe Mekwe, acting CEO of Petroleum Agency South Africa

South Africa’s oil and gas sector has the potential to emerge as a top contributor to the country’s GDP

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Business in Africa is synonymous with mining, which forms the backbone of the economy of many countries on the continent. Not only is it considered one of the biggest catalysts for development in many African nations, but is also a source of employment and global trade exchange.

In 2017, South Africa’s Chamber of Mines estimated that the country’s mining sector constituted 6.8% of its economy. The mines in South Africa employed a total of 464 667 people by the third quarter of 2017, up from 457 290 at the end of 2016 – largely thanks to industrial minerals such as iron ore, chrome, coal and manganese.

So despite a challenging period – the release of the reviewed Mining Charter, industry unrest, monopoly and unethical business practices – South Africa’s mining industry is persevering, ‘helped by a gradual, improvement in the world economy’.

Mining-related companies and suppliers have also had to adapt to these conditions. One company that is flourishing and making a difference in the mining industry is Invincible Valves, which supplies locally manufactured and imported valves and accessories for a range of sectors, including the mining, petrochemical, power generation, water, sewerage and general industries.

Under the leadership of MD Pam du Plessis, the firm is seeking to grow through diversification – enhancing its existing products and introducing its own range of valves, Inval, which she describes as ‘a quality product with a price acceptable to the market in this day and age’.

Du Plessis, as a female entrepreneur in a predominantly male industry, is proud of the strides the company has made. Her contribution to the industry has helped her earn numerous recognitions, including the prestigious 2017 Enterprising Women of the Year and Moving Mountains 2017 awards. She was also recently named as one of the 30 most daring CEOs in business by Insight Success magazine.

AN INNOVATIVE VALVE COMPANY
Established in 1982 and located in Germiston, on the East Rand, Invincible Valves has almost four decades of experience in distributing, manufacturing, reconditioning and rubber-lining valves. Its own registered brand, Inval, features a comprehensive range of valves, including a broad spectrum of low pressure valves. 

Invincible Valves distributes its own range of valves as well as products on behalf of some of the biggest manufacturers in South Africa.

Built on the foundations of commitment, honesty and loyalty, the company is known for its exceptional customer service. It provides a ‘one stop shop’ to customers, supplying any additional requirements necessary for the valves’ application. The company offers many ancillary services such as rubber-lining of pipes, fittings and valves as well as reconditioning of valves.

As an approved BBBEE Level 4 supplier to all major industries within South Africa, Invicible Valves boasts expertise and experience across a broad spectrum of industries and applications, with a wide range of valve products at its disposal.

THE DRIVING FORCE
Du Plessis credits her success to her father, whom she regards as her role model. ‘He is the person who introduced me to the world of business at a very young age and has supported me in every moment of my life,’ she says. 

Having benefited from the support of family, Du Plessis in turn has been motivated to uplift her employees by upskilling them, and attributes the company’s success to the fact that it provides staff with the required training for their respective areas.

Her goal is to empower as many people as she can and has played an active role in establishing a fully equipped education and training centre on the company’s premises in Gauteng, South Africa, which was built in response to the absence of an efficient training facility of this nature in South Africa.

The recently opened centre offers courses delivered through the South African Valve and Actuator Manufacturers Association. In addition, ABET and basic business and life skills training courses are offered to staff, interns and the local community within which the company operates. Du Plessis says: ‘A number of these are offered to young students from local technical high schools, along with all staff members within our organisation.’

33 Shaft Road, Knights, Germiston, 1406
Tel: +27 (0)11 822 1777 / +27 (0)11 026 7413
Fax: +27 (0)11 822 3666
[email protected]
www.invalve.co.za

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Barak Fund Management (Barak) is an African-focused fund manager operating in the credit space, with funds diversified along the yield curve. Barak has become synonymous with trade finance, given the flagship Structured Trade Finance Fund has close to a decade-long track record with a 100% hit rate. With in excess of US$1 billion assets under management – the majority of which are concentrated in trade and working capital – the team of more than 60 spans across Africa and extends to Europe.

Other funds in the short end of the curve (deals maturing within one year) include the Barak Impact Finance Fund and the Barak Sharia Trade Finance Fund. For deals requiring trade finance and expansion capital, the Mikopo Structured Credit Fund, employing leverage, targets borrowers who need funding for less liquid assets maturing within four years. The Barak Asha Impact Fund is a closed-end vehicle, targeted purely at agricultural assets with measurable socio-economic development aspects.

With transactions in more than 25 countries, predominantly in sub-Saharan and East Africa, and collateralised by no less than 30 commodities (approximately 15 commodity sectors), the fund manager has deployed in excess of US$2.5 billion since inception for both inter-regional and cross-continental trade. With demand from African SMEs for growth and expansion capital, Barak is extending longer-dated funding, enabling growth and develop-ment within segments of economies that were previously excluded.

The Cayman-domiciled funds are managed outside of Mauritius, with the advisory and main operations in Johannesburg, South Africa. Other locales – primarily for deal origination and/or representation – include Cape Town, Nairobi, Abidjan, Accra, London and Switzerland.

The team has the advantage of agility, superior market penetration, expansive networks and the ability to manage exposures in order to transact successfully. Barak’s strategies focus on fully funded or syndicated debt in the African growth and expansion capital finance space, using asset-backed loans with various forms of collateral verified by independent collateral managers.

Africa presents nuances, which – with the team’s considerable insight – are addressed. Barak mobilises decades of combined expertise, proprietary relationships, market presence and stealth in order to monetise opportunities. The senior management team is a hand-picked group of specialists with significant expertise in agricultural commo-dities, structured trade finance, logistics and loan management.

The Barak investment approach is based on the principles of discipline, diversification, collateralisation and downside-case scenario valuation. The company acknowledges that Africa presents numerous risks including but not limited to macroeconomic, political, liquidity (currency) risks, over and above traditional business risk. Each investment is approached with a stringent on-boarding process – using desktop and on-the-ground due-diligence processes – in order to determine the viability of a potential project’s funding.

Deal originators have the advantage of accessing capital along the yield curve, enabling multiple business requirements to be addressed. Thus, as a business owner in Africa, Barak presents an opportunity to obtain finance in line with business require-ments, and to ensure it creates a strong partnership for the long term.

Extensive networks are key to enabling growth of deal pipelines, with more than 70% of clients being repeat borrowers. Barak has the benefit of extensive technical expertise on a per-sector basis, specialising in agricultural commodities, resources and renewable energy. Deal originators are also active in metals trading, accessing markets across the continent open to a select few. By creating additional trading opportunities for borrowers within its network, Barak strengthens relationships, adding further value.

Barak aspires to be the partner of choice given its reliability, flexibility and understanding of generally uncharted terrain.

With a growing lack of funding due to increasingly difficult regulatory constraints in banking, Barak is a key partner for traders and businesses, enabling seamless business continuity in the face of broad regulatory stringency.

14 Marbella Road, Pellegrin, Trianon,
Quatre-Bornes, Mauritius
Tel: +230 698 0397
[email protected]
www.barakfund.com

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