Hardly having a gas of a time
SASOL PROJECT: FAILS TO DELIVER TO POOR
Only 7% of projected government revenue has been delivered.
Sasol’s $1 billion (about R13.9 billion) gas extraction and pipeline project in Mozambique has delivered hardly any of the benefits it promised to the poor people of that country.
A report compiled in Mozambique, with the assistance of international aid organisation Oxfam, accuses Sasol of milking the country and failing to honour promises to share the wealth created by the project. Sasol has rejected the claims. A scenic drive from Mozambique’s bustling and modern capital, Maputo, to the northeastern regions near Inhambane – where the roads are either gravel or riddled with potholes and where the towns are poorly lit at night – did little to reveal that this was the home of a state of the art multibillion-rand project.
Now, two financial reports suggest that South Africa is benefiting far more from it than thousands of Mozambicans, who still walk long distances from their homes to access borehole water, some of which has allegedly been contaminated by the gas project development.
In Mangungumete, the village closest to the gas plant, residents even went as far as protesting in 2014, demanding the government or Sasol make good on their promises that the project would provide them with a better life.
Laura Mahanyele, a 46-yearold woman and community leader, said residents relied largely on subsistence farming to survive as there were few permanent jobs that resulted from the project.
But even the little the villagers are able to produce from the soil seems to be under threat.
The communities affected by the project, which included the building of a massive pipeline from rural Temane to Secunda in Mpumalanga, were largely rural, and had little access to water and electricity.
The Centro de Integridade Publica (CIP), an anticorruption organisation, said the Pande-Temane natural gas exploration project had seen the South African multinational deliver only 7% of projected government revenue for the 25-year project.
This, the CIP attributed to inflated capital costs, operating costs and abusive transfer pricing practices on the part of Sasol.
Mozambique was recovering from a civil war, with scant financial resources and infrastructure, when the Petroleum Production Agreement (PPA) was signed in 2000.
It is now believed the skewed balance of power posed by the PPA meant that the Mozambique government could not force Sasol to make good on its promise to increase revenue for the country.
Taxes to the Mozambican government were paid by granting the state 5% of the gas produced and setting up social responsibility projects. Just under 3% of the production tax was said to be allocated to the communities affected by the project – an amount which the local district authorities complained was far too little.
The national government was in talks, however, with Sasol to renegotiate the terms of the original deal to increase the revenue made by government for the benefit of places like Mangungumete.
According to the national household survey conducted in 2008-2009, 54% of Mozambicans were living in absolute poverty, but this was down from a staggering 70% in 1997. The vast majority of the rural population still lives on less than US$1.25 a day and lacks basic services such as access to potable water, health facilities and schools.
The CIP claimed the PPA was structured in such a way that the South African multinational was enriching itself while “milking” the Mozambican government.
Sasol Petroleum Temane (SPT), the entity which pays income tax to the Mozambican government, extracts and sells its gas to Sasol Petroleum International (SPI), which is registered in SA.
In 2016, Sasol said its cumulative contribution to the Mozambican government over the first 10 years was $616 million, while the contribution for the next 10 years was forecast at $3.5 billion.
According to the agreement, it was understood that after the first 10 years of exploration, the predicted increase in the production of natural gas and an agreement to liberalise the gas sales price, which was initially limited, would see a significant increase in government revenues. But the CIP said this did not materialise.
The official story, it said, was that the fall in international fuel prices thwarted the potential to allow liberal adjustment of the price of the extracted gas to significantly increase government revenue. But the CIP believed that international markets were a minor factor as an explanation for not increasing the revenue of the government.
Sasol vehemently disputed the claims in the report, saying the research was inaccurate. “We find the report published by the CIP to contain inaccuracies and creates unfounded perceptions regarding both inflation of costs and transfer prices.
“Sasol doesn’t charge the Mozambican government a handling and transportation fee and is not involved in the selling of royalty gas.”