South Africa is facing real economic pressure. Years of declining investment, a shrinking productive base, and persistently high unemployment have slowed GDP growth and created a lackluster economy.
With GDP growth a mere 0.7% p.a. over the last decade, South Africa’s economy has suffered a long period of stagnation. Real GDP per capita is falling, leaving people worse off now than they were in 2007 after taking the impact of inflation into account. On top of that, the country is facing a weak appetite for large-scale development projects, a narrowing of the economy’s productive base, and degraded critical infrastructure, creating a feedback loop that jeopardizes economic recovery. South Africa’s unemployment rate in the first quarter of 2025 was 32.9%, one of the highest in the world.
We have partnered with the government and energy industry in South Africa for many years, and recognized there’s a data gap in understanding how a robust upstream energy sector can support South Africa’s economic recovery. EnerGeo Alliance commissioned a report to assess the economic opportunities that would derive from each phase of oil and gas exploration and production. While expanding the industry does not come without its challenges, early estimates show that the sector has the potential to generate significant revenue for the government, spark industrial growth, create thousands of new jobs, all of which would drive GDP growth. In addition, expanded oil and gas production would reduce reliance on volatile foreign fuel supplies and strengthen national energy security.
Methodology
This report explores the economic benefits of upstream oil and gas development over its entire lifecycle, spanning exploration, appraisal, development, production, and closure. It assesses both fiscal revenue for government and non-revenue benefits for government and communities. Fiscal revenue for governments includes the state’s share of production, royalty payments, the petroleum production tax, and income taxes. Non-revenue benefits include job creation, local procurement and enterprise development, infrastructure development, enhanced energy planning, energy security, and community development. It also highlights opportunities for South Africa to strategically position itself as a key logistical and industrial hub for the entire Orange Basin.
To put these economic projections into perspective, we compared them on scale with Namibia, Suriname, and Ghana, each country at different stages of upstream oil and gas development. Namibia is currently considered an emerging frontier, Suriname is undergoing rapid development, and Ghana is an experienced producer.
Findings
The report found that expanding the upstream oil and gas sector in South Africa offers a significant opportunity to stimulate GDP growth and generate much-needed revenue for the government, drive industrial growth, create thousands of new jobs, and strengthen energy security.
Generating Revenue and Fueling GDP Growth
South Africans are grappling with the effects of years of economic stagnation. Expanding the upstream oil and gas sector offers a direct path to boost government revenue and grow GDP.
Throughout the world, the oil and gas sector is a major economic engine. In the United States, for example, it contributes nearly 8% to national GDP. In general, governments directly receive revenue from the upstream sector through combination of royalties, corporate income tax, and sometimes a resource rent tax.
In South Africa, the Block 11B/12B alone could boost annual GDP by almost R23 billion. The Brulpadda and Luiperd project could contribute, on average, an additional R8.6 billion annually to the fiscus in taxes.
Industrial development
South Africa is also facing weak interest in large-scale development projects, a narrowing of the economy’s productive base, and degraded critical infrastructure, creating a feedback loop that jeopardizes economic recovery.Expansion of the upstream oil and gas industry could push back against this trend with growth in the manufacturing, heavy construction, and transportation sectors.
Furthermore, South Africa is uniquely positioned to partner with Namibia’s oil and gas development, which will require a comprehensive support ecosystem. While Namibia is beginning to develop local support services, particularly around the Port of Walvis Bay, it will not be enough. South Africa could step in with its advanced industrial base and top-notch port infrastructure, particularly the Saldanha Bay, to position itself as a hub for industry and logistics for the entire Orange Basin.
Employment and human capital development
In the first quarter of 2025, South Africa faced a 32.9% unemployment rate, one of the highest in the world. The youth unemployment rate (ages 15 to 24) is even worse at 62.4%.
The oil and gas industry demands a diverse range of specialized skills and provides stable employment opportunities. The Block 11B/12B could create just over 20,000 jobs, of which 2,420 jobs are expected to be created directly from the project. Roughly a quarter of the 2,420 direct jobs are expected to be in manufacturing. High demand for specialized technical and soft skills will ultimately lead to high-value job creation, which could help deliver a more equitable distribution of economic benefits.
Energy security
South Africa is highly dependent on oil and natural gas imports. Developing a domestic upstream oil and gas industry will reduce reliance on foreign fuel supplies. In turn, this would stabilize supplies, ease exposure to price volatility, and minimize geopolitical risks.
Recommendations
Developing a robust domestic upstream oil and gas industry in South Africa would put the country on the path for economic recovery through significantly boosting GDP growth and generating much-needed revenue for the government. Recent resource discoveries, such as Brulpadda and Luiperd, are just the beginning of the country’s potential. South Africa needs to adopt policies that attracts investment and prioritizes economic diversification and workforce development.
EnerGeo Alliance advocates for clear regulations and defined timelines that improve the permitting process and draw investment. We look forward to working with regulators to share our experiences, offer our expertise in creating a smoother permitting process, and partner with the governments and local communities to build a secure and reliable energy future in South Africa.
**Culled from December Issue of PAV Magazine
