By Linda van Tilburg
- A long-anticipated draft of oil and gas legislation has been published in the Government Gazette that is aimed at increasing the development of the industry. The draft gives the state a 20% carried interest in exploration and production rights and at least a 10% participating interest by black partners. The bill includes provisions for the establishment of a Petroleum Agency and separates rules for the petroleum resources sector from laws that apply to mining exploration. Companies including Royal Dutch Shell have slowed activity in recent years, citing legislative uncertainty. Finalising the oil law has also become more urgent since Total SA announced the first significant deep-water discovery off the coast of South Africa in February. In terms of the bill, the state’s 20% carried interest “shall not be recoverable at exploration and appraisal stage.“ The holder of a production right shall recover development and production costs from the proceeds generated from production operations as prescribed.” Interested parties have until 21st of February to submit comment on the draft bill.
- Further loadshedding may occur this week as Eskom says that the systems is still “severely constrained”. There was a drop in demand during the holiday period and some of the generating units have been returned to service, but yesterday morning, 14,574MW was still missing from the country’s electricity system due to unplanned breakdowns at power stations. Eskom said it would continue to use emergency power generation if necessary, which involved using open cycle gas turbines and pumped-storage hydro-electric plants, but they could only be used for short periods before diesel and water reserves started to run out.
- South Africa’s trade surplus widened in November as the value of imports of equipment components and chemical products decreased. The R6.1bn positive balance compares with a revised R2.75bn surplus in October according to a South African Revenue Service statement. The trade account has a positive balance of R10.54bn for the first 11 months of 2019, compared with a deficit of R1.24bn for the same period last year, the revenue authority said. Bloomberg reports that the surplus may bode well for the current account, which is the broadest measure of trade in goods and services and the rand. Total export value decreased 5% from a month earlier owing to a decline in mineral products and vehicle and transport equipment. Imports fell 8% as the value of the inward shipment of equipment components and chemical products declined.
- The rand rose to a new five-month high at the end of last week as investors globally looked to take on risk, targeting emerging markets for their higher yields. The Rand gained about 5% since mid-December despite a raft of data releases showing a weak economy and nationwide blackouts by Eskom with investors willing to overlook the negatives and pocket the high yield. The Rand ended last week at R14.03 to the US dollar.
- The Davis tax committee has estimated that the annual tax gap in South Africa is at least R50bn. In an interview with the Daily Maverick, Judge Dennis Davis said this amount was lost from customs, VAT, base erosion, profit-shifting and the non-payment of tax by wealthy individuals. The term of office of the committee was extended by Finance Minister Tito Mboweni in February this year to investigate this gap. Judge Davis said if this gap could be plugged, there would be no need to raise taxes. SARS, he said was slowly being turned around under the watch of Edward Kieswetter and the net was closing in. Judge Davis advised people to take advantage of the voluntary disclosure programme before it was too late. He also highlighted that accounting, tax and law advice firms were deeply implicated in tax evasion. Judge Davis said the kind of widespread abuse of tax evasion is “equivalent to the corruption that flowed from state capture.”
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