The South African Civil Society Information Service

The National Development Plan: A Low Carbon Vision Steeped in Contradiction

By Saliem Fakir · 15 Nov 2011

The much-vaunted National Development Plan (NDP) emanating from Minister in the Presidency, Trevor Manuel’s planning commission is an interesting and wide-ranging document that hopes to set the tone for government thinking over the next two decades. Not everybody will agree or is already agreeable to everything it contains.

How the NDP is received is dependent on whether the National Planning Commission is just viewed as a high-level policy think tank embedded in government or if it has the ability to finesse government’s implementation where trade-offs are well understood and upon which sound decisions can be made. This is yet to be seen.

However, deep within the weighty 400 or so pages of the NPC’s plan lie certain self-contradictions.

Environmental groups have already highlighted the most controversial aspect of the NDP’s proposals – the issue of fracking.

In this regard, the NDP’s stance is problematic.

The NDP calls for allowing shale-gas exploration in order to determine the reserve size in the Karoo. Its basic premise is that fracking is a low carbon solution.

However, this is a hotly debated issue. Industry has its own spin on these claims, but substantially more research is needed to demonstrate whether unconventional natural gas is a low carbon solution or not.

In truth, the NDP’s fracking stance speaks low carbon, but at the same time, undermines its long-term low carbon vision. Perhaps the NDP is seeking a debate, as it appears to hold great hope that shale-gas will displace nuclear.

It just so happens that government has set up a cabinet level sub-committee reporting to Deputy President Motlanthe to oversee the procurement of nuclear power. It looks like nuclear will get there first before fracking opens up as a new economy.

However, if vast shale-gas reserves are proven, injudicious management will only extend resource intensification and the dreaded ‘Dutch disease’ problem that the NDP so decries in its opening remarks. Already there’s a big scramble by multinationals and local tenderpreneurs to get their hands on shale-gas, largely enabled by a policy vacuum for the natural resource.

The problem of lack of national policy, which plagues coal will now play itself out for shale-gas -- an issue that the NDP picks up on, but still repeats as a mistake, as it rushes to favour shale-gas.

If large reserves are opened up for rapid exploitation and shale gas is traded as a commodity it will likely strengthen the South African rand and limit the potential of the export sector, which is also identified in the NDP as a key way to drive up jobs and reach the 11 million jobs target by 2030.

Shale-gas is going to prove to be South Africa’s nemesis because it will open up a Pandora’s box of resource and political conflict, the likes of which South Africa has perhaps never seen before, if the resource is proven to be significant, as geologist predict.

It will be our own “devil’s excrement,” as a Venezuelan representative on OPEC once remarked about the problems that vast oil and gas reserves bring to his country. 

For a document that engages in long-term thinking, its position on fracking is an easy slip into short-termism for the NDP.

The NDP is so embroiled in its own internal weigh-ups between fossil fuel addicts and the new visionaries for a low carbon future that it rather pronounced on two separate visions without showing how the one can be reconciled with the other -- hence this self-contradiction.

The shale-gas solution as a cheap option is yet to be ascertained for South Africa, especially if the evidence on liquid petroleum gas (LPG) is anything to go by, where we see LPG producers trying to squeeze more cash out of the regulatory authorities and creating an artificial shortage for LPG.

Because government is not obliging, as it sees LPG as a cheap option for poor consumers, the refineries have gone on strike. Have the shale-gas policy proponents learnt anything from the LPG debacle that is still ongoing?

Fracking costs in the US are highly distorted by subsidies, lax environmental laws in which externality costs have not been properly accounted for and in which over-production of shale gas has allowed gas prices in the US to drop below the floor price for unconventional gas.

The NDP would have been a far better bastion of independent thinking and leadership had it not got too tempted to pronounce on shale-gas. This is a strategic mistake and quite tragic because a role of neutrality is needed now more than ever from this important government agency as citizens look toward it for vision and leadership, while all else in the energy sector seems to be somewhat in disarray.

If the resource is vast it will most definitely be captured by rentiers. This is precisely what the NDP in its diagnoses recognises: to build a less resource intensive economy it needs to have a better way to manage the privatization of resource rents in the minerals sector.

South Africa needs a better extractive industries policy to enable the public to socialise windfall profits for the public good just like the free market economy Australia is doing with a minerals tax, and leading by example.

This urge to pronounce without clear thinking of how to do things differently only legitimates the urgency by which shale-gas - if it is found to be in large numbers - will simply go the way our other minerals and commodities have gone. Whether its traditional extractive industries or the new BEE brigade smacking their lips in anticipation, it will be filled with the greed and partisan interests of those wanting huge surpluses from a new extractive industry.

Fracking is not just about energy or the environment. It’s about the whole economy, just as large oil reserves have become about the whole economy for Nigeria and Angola.

It’s the resource curse problem and that’s why the NDP approach is so self-defeating.

There are also other downsides associated with vast resources, namely, the trap of complacency in other areas of the economy that become overlooked. It contributes to the culture of a ‘do-nothing’ scenario. A very thing admitted in Chapter 3 of the NDP when it notes: “High commodity prices buffer the economy and create the appearance of growth, leading governments and companies to become complacent and under-invest in people and productivity growth.”

Shale-gas, like other resource commodities will go through boom and bust cycles that lead to uneven development unless one has good policies for the socialisation of resource rents and for supporting other sectors that will be dented by the surge in commodity trade.

This is probably not the intention of the NPC, but it will be the default situation as the public and private sector run mesmerised after the ‘dirty new gold’ and the lobbying for opening the shale-gas space with a policy void intensifies.

The NDP’s response to fracking is largely a result of public debates pigeon-holing shale-gas as an energy versus environment debate, and the NDP falls into the same trap. The ultimate issue is whether shale-gas will spur on the resource curse or rescue us from it because it has implications for other parts of the economy.

By pronouncing so early, the NPC has not stood back but chosen to weigh into the debate becoming a partisan interest rather than setting itself as a mediator of the conflict.

The wisest thing the NDP should have done is call for a moratorium on fracking.

There should be better studies on the boom and bust cycles associated with fracking, the cost of investing in infrastructure for shale-gas versus other options, the clarification of issues around the impact on water and ways to avoid the resource curse problems. 

The NDP should be applying the same critical advice it dishes out regarding the benefits of nuclear energy (in Chapter 4), to its position on fracking. Its excitement for fracking is disappointing and not clearly thought through.

The public was looking for an independent mediator. But the NPC, in its single-mindedness to trash environmentalists, has made itself an interested partisan rather than independent arbitrator. It has lost a golden opportunity to get it right from the start, because there is so much lack of trust around how decisions on fracking will be conducted.

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