Corporate Accountability and Human Rights: Aligning South African Business Practices with Constitutional Values
December 11, 2023
Energy Law
Draft South Africa National Petroleum Company Bill (SANPC): 2023: Proposed Governance
This is the first, in a series of articles, in which MVR Attorneys will provide a commentary on the Draft South Africa National Petroleum Company Bill, 2023 (“the SANPC Bill”) poised to be a game changer – in the country’s upstream resources regulations. This article specifically delves on the proposed formal establishment of the new integrated state-owned petroleum company, its mandate, and role.
Following the adoption of the Upstream Petroleum Resources Development Bill [B13B-2021] (“the UPRD Bill”) by the National Assembly, the Department of Mineral Resources and Energy has released the SANPC Bill for comments from the relevant stakeholders and the general public.
The rationale behind the SANPC Bill stems from the UPRD Bill which seeks to resolve the challenges posed by the current legislative approach of regulating minerals and petroleum under a ‘one law fits both industries’ legislative approach, as provided in the Mineral and Petroleum Resources Development Act (Act No. 28 of 2002). The combination of petroleum and mineral resources under one legislation has led to regulatory ambiguity, and an undue burden of mining legislation on the petroleum industry, resulting in decline in investment capital and investor trust.
The SANPC Bill seeks to establish an integrated national petroleum company, replacing the upstream-focused PetroSA. The draft bill makes provisions for the merger of three other state-owned companies operating under the Department of Mineral Resources and Energy [ DMRE]- namely, the South African Gas Development Company (iGas), the Strategic Fuel Fund (SFF), and the Petroleum Oil and Gas Corporation of South Africa (PetroSA).
The proposed Bill outlines the company’s objective to serve as the government’s “energy champion” facilitating the development of energy infrastructure across the value chain and engaging in significant commercial projects in upstream, midstream, and downstream operations, including involvement in the production of renewable energy. The Minister of Mineral Resources and Energy is designated as the sole shareholder of the new company. The state-owned company model is an accepted industry practice. The Bill also establishes the Board of Directors and its governing regulations.
State-owned upstream companies with single state shareholder are more suited to making comprehensive strategic decisions than those with state shareholding distributed among multiple government entities. Limiting political interference in technical decisions, and clearly defining structure and roles of state shareholders are foundational to the success of managing a state-owned petroleum company.
Conversely, state-owned petroleum corporations often exhibit poor governance when there is only one shareholder. This is due to the limited pressure to maintain transparency, lack of accountability, absence of commercial oversight, and deficient management structures. Nevertheless, the Bill’s creation of the Board is viewed as a positive initial step, aligning with the government’s goal to develop a solid business climate, that mitigate political influence and promote coherent management.
While the Bill’s independent legislative framework is a positive development, it is crucial to evaluate whether its objectives ensure sustainable governance and transparency, contributing to broader national development.
In the next series of this article, we scrutinise the strengths and shortcomings of the Bill, focusing on its proposed governance.
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