South Africa’s oil and gas industry has long been viewed as a sleeping giant with untapped reserves, offshore potential, and an urgent need to diversify energy sources. Yet, while neighbouring countries such as Mozambique and Namibia attract billions in investment, South Africa continues to face significant hurdles.
Issues ranging from policy uncertainty to slow permit approvals and public opposition have stalled progress, leaving investors cautious about committing capital.
Policy Uncertainty in South Africa’s Energy Sector
One of the biggest deterrents for investors in South Africa’s oil and gas sector is policy inconsistency. The government has sent mixed signals about its commitment to fossil fuel exploration in the context of a just energy transition. On one hand, South Africa pledges ambitious climate targets to reduce reliance on coal; on the other, it occasionally opens the door for offshore exploration but without clear timelines or incentives.
Compare this with Namibia, where the government has created a stable regulatory environment, granting exploration rights to global players like TotalEnergies and Shell with clear guidelines. In Nigeria, despite political complexities, the Petroleum Industry Act (PIA) has given investors more certainty. South Africa, by contrast, is still ironing out regulatory frameworks such as the Upstream Petroleum Resources Development Bill, which has dragged through parliament for years.
Without a consistent policy direction, investors remain skeptical about the long-term viability of South African projects.
Why Slow Permit Approvals Are Holding Back Projects
Another stumbling block is the bureaucratic red tape around permits. Oil and gas projects require multiple environmental and exploration approvals, yet companies often wait years for decisions. This not only delays projects but also increases costs, discouraging foreign capital.
For example, Mozambique’s Rovuma Basin LNG projects progressed because authorities streamlined approval processes to attract foreign partners such as Eni, TotalEnergies, and ExxonMobil. South Africa’s drawn-out procedures contrast sharply with Mozambique’s urgency, signaling to investors that their money and time might be better spent elsewhere.
Worse still, delays often result in missed opportunities. Investors may pull out altogether or redirect funds to more efficient markets like Namibia. Without reforming its permit system, South Africa risks falling further behind its neighbors.
The Role of Public Opposition in Shaping the Future
Public protests and litigation have also shaped the oil and gas investment climate in South Africa. Environmental groups frequently oppose offshore exploration, citing risks to marine life and communities. High-profile protests against seismic surveys on the Wild Coast, for example, forced international oil majors to pause or reconsider activities.
While such opposition reflects growing global sentiment toward renewable energy, it creates uncertainty for investors, who fear reputational damage and legal battles. In Nigeria and Mozambique, governments have managed a more pragmatic balance between environmental concerns and economic necessity, ensuring projects move forward despite opposition.
For South Africa, the challenge lies in securing a “social license to operate”. This means engaging communities early, ensuring that local people benefit from jobs and revenue, and implementing strict environmental safeguards.
What South Africa Can Do to Unlock Investment
To succeed, South Africa must learn from its neighbors:
- Adopt Clear Policy Direction: Like Namibia and Nigeria, South Africa needs decisive legislation that balances its energy transition with hydrocarbon development.
- Streamline Permits: Bureaucracy must be reduced to accelerate project timelines, as Mozambique did to fast-track LNG projects.
- Address Public Concerns: Building trust with communities and enforcing transparent environmental protections will reduce protests and legal challenges.
If these issues are resolved, South Africa could finally begin to unlock its offshore potential, attract foreign direct investment, and strengthen energy security.
Also read: What South Africa Can Learn from Nigeria, Mozambique and Namibia to Win More Oil & Gas Investment
Frequently Asked Questions (FAQs)
1. Why is policy uncertainty a major concern in South Africa’s oil and gas sector?
Policy uncertainty creates confusion for investors about the government’s long-term commitment to oil and gas. Unlike Namibia and Nigeria, which have clear regulatory frameworks, South Africa is still finalizing key legislation, making investors hesitant.
2. How do slow permit approvals affect oil and gas projects in South Africa?
Delays in environmental and exploration permits increase project costs and timelines. This discourages foreign investors, who may choose countries like Mozambique that have streamlined approval systems.
3. Why are there frequent protests against oil and gas projects in South Africa?
Many protests are driven by environmental concerns, such as the impact of offshore exploration on marine life and local communities. Activists also argue that South Africa should prioritize renewable energy over fossil fuels.
4. What lessons can South Africa learn from its neighbors?
- Nigeria has passed the Petroleum Industry Act, offering investors clarity.
- Mozambique has fast-tracked LNG projects by simplifying approvals.
- Namibia has created a transparent, investor-friendly regulatory environment.
South Africa can adopt similar policies to attract capital.
5. Can South Africa balance oil and gas with its renewable energy goals?
Yes. A balanced approach means using oil and gas for energy security in the short term while ramping up investment in renewables for the long term. Clear policies can help manage this transition responsibly.
6. What must the South African government do to boost investor confidence?
- Finalize and implement clear energy policies
- Speed up permitting processes
- Engage communities early to avoid opposition
- Provide fiscal incentives for exploration and development
