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All gas and no work

Oct 29 2017 06:00
Sizwe Sama Yende

Concerned: Jorge Machoko (32) from Inhambane says villagers were unhappy that they could not get jobs at Sasol, which is extracting natural gas in the Inhassoro district. PIcture: Sizwe Sama Yende

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Sasol has been milking cash from its gas project in Mozambique with little benefit to that country or the people living close by, writes Sizwe Sama Yende.

IN Mangungumete village, Mozambique, there is a communal borehole where women and children take turns pumping it to fill up their water containers and carry them home on their heads.

A few steps from the borehole stands a towering tree. Its shade provides a cool place for those villagers from the town of Maxixe, in the coastal province of Inhambane, who come to this spot whenever they are summoned from their straw huts to thrash out grave issues.

Laura Mahanyele (48) vividly remembers the time, about 17 years ago, when a delegation from South African multinational Sasol visited the community to talk about extracting natural gas from their land.

The meeting took place under the gigantic tree.

Hopes were high, Mahanyele said, when the petrochemical company’s emissaries explained how the $1.2 billion (R17 billion) investment would uplift the subsistence farming community.

The villagers’ excitement was understandable as they were in dire need of jobs.

Little did they know that their government, fresh from a calamitous civil war, had signed a raw deal.

“The delegation was asking for permission to extract gas. The people could not say much because they knew that Sasol had already consulted people in high places before coming to us,” Mahanyele said.

Where are the jobs?

The jobs promised that day are today nowhere to be seen, while Sasol draws the fossil fuel and ferries it all the way to its operations.

Sasol has constructed schools and clinics, but that is too little, the villagers say.

The groundswell of dissatisfaction against Sasol triggered a one-off mass protest in 2013, but locals will only tell you that it was like pouring water on a duck’s back.

Since then, the community, Sasol and government have held one meeting, but no solution has been found.

Meanwhile, the villagers’ problems are piling up and threatening their agrarian livelihoods and food security.

They say their soil is becoming sterile and their water comes out of boreholes blended with oil.

“The trees are no longer green the way they used to be,” said Mahanyele, who has been living in Mangungumete since 1986.

“The seeds are no longer growing and the water is oil … These problems started after the gas project,” she said.

She added that the villagers desperately needed water.

The villagers say their soil is becoming sterile and their water comes out of boreholes blended with oil. (Photo: Sizwe Sama Yende, City Press)

Afonso Machungo, the administrator of Inhassoro district, is also disenchanted.

“It just doesn’t make sense that there are 28 gas wells in this district, but there is nothing to show that the gas is found here,” said Machungo from his posh state house.

“This is the opinion of the district government, but central government has the final say.

“Government gets little revenue from Sasol and is not able to do anything significant with that amount. We will continue to talk to Sasol and its attitude may change. You see … the river does not get bigger where it starts and that explains why people in Inhassoro don’t benefit.

“I believe that in Secunda [where the river ends] there are good things happening,” he added.

Social justice activists believe that the Petroleum Production Agreement, signed by Sasol and government in 2000, is the root of all the stress.

They suspect that the deal handsomely benefits the elite politicians of ruling party Frelimo and leaves a pittance for the state.

Last week, nongovernmental organisation Centro de Integridade Pública (CIP, translated as the Centre for Public Integrity), in partnership with Oxfam, released a report detailing how Sasol was milking the government and, by extension, ordinary Mozambicans.

Extraction: This is where the pipeline starts carr

Extraction: This is where the pipeline starts carrying natural gas from Mozambique to Secunda in Mpumalanga. (Photo: Sizwe Sama Yende, City Press)

The report, titled Sasol Will Continue to Milk Mozambique, analyses the revenues of Sasol and government since the beginning of gas production in 2004 to date.

The multinational company is, firstly, selling the gas, extracted from Mozambique, for six times lower than the price on international markets.

“During the first years of gas production, prices were in the range of $0.90 (R12.78) per kilojoule (kJ) in 2004 and $2.40 per kJ in 2014, corresponding to an average annual price of $1.50 per kJ – much below the international average price of $5.20 per kJ,” says the report.

The report also found that Sasol was extracting the gas in Mozambique and selling it to itself in South Africa, which “constitutes a moral hazard”.

These factors, according to the report, have translated into low revenue for the government and less development for villagers in Inhassoro district.

The World Bank, said the report, projected that the deal would generate $500 million to government coffers, while the country’s ministry of mineral resources and energy and the International Monetary Fund (IMF) had forecast a total revenue of about $2 billion over the 25-year lifespan of the project.

The Mozambican government collected $141.85 million in total from 2004 to 2014, which is 7.09% of the IMF’s projection.

Although government’s revenue after 2014 increased by 35.3% annually, from $46.25 million in 2014 to $78.97 million in 2016, it still did not meet the IMF’s expectations.


If the Mozambican people were short-changed in full glare of their government, surely somebody is reaping the rewards. CIP director Adrian Nuvunga believes so.

“I think there were wrongdoings from key Frelimo people when the first contract was signed in 2000. For example, no one is able to explain how and why the production sharing clause was removed from the contract,” said Nuvunga.

“What we see today is a blurred relationship between Sasol and government people … but it is not yet clear what sorts of incentives drive these ties. It is not transparent and Sasol is allowed to do whatever it wants in Mozambique.”

Novunga said CIP would report the matter to the African Union to investigate illicit financial flows. It would also meet with the ANC, since the Mozambican government had failed to pick up on this matter.

Spokesperson for the Mozambican government José Sixpence confirmed having received questions, but did not respond further.

Meanwhile, Joachim Gove (40) said villagers were waiting for Sasol to report back.

“People have been asking questions about how they are going to make a living with all the problems,” Gove said.

Jorge Machoko (32) said locals submitted CVs and certificates after the meeting under the giant tree, but “there is nothing positive and we see less and less production on the land”.

Sasol’s denial

The South African multinational has accused CIP and Oxfam of failing to acknowledge the value of its $3 billion investment in Mozambique.

This amount, said Sasol’s spokesperson, Alex Anderson, included corporate taxes, royalties and social investments, profit share and dividends paid out to state-owned entities.

“We find it unfortunate that the reports published by the CIP contain inaccurate and speculative statements,” said Anderson.

“We do, however, appreciate the role that civil society organisations play in promoting integrity and transparency.”

He said that, unlike oil, natural gas did not have global reference prices, but was driven by regional market dynamics which took into account alternative energy cost of users.

“The Mozambican gas price was intended to stimulate the development of a domestic gas market,” said Anderson.

“Sasol doesn’t charge the Mozambican government a handling and transportation fee, and is not involved in the selling of royalty gas.

“This, together with laws governing the respective countries and the agreed commercial terms, contributes to the difference in gas prices between the two countries.

“It is also important to stipulate that in South Africa gas prices are regulated by the National Energy Regulator of SA,” he added.

Sasol, said Anderson, created 300 permanent jobs in Mozambique, the majority being in Inhambane.

In addition, he said, youths were trained in entrepreneurship.

Regarding the deteriorating soil quality, Anderson said the company conducted regular and continuous soil, noise and air monitoring through an independent company.

He said the results had shown that Sasol’s project activities over the licensed areas in Mozambique had not materially disrupted nor prevented agricultural activities.

Anderson denied any favour or link to Frelimo politicians.

“Sasol is an independent international company and does not hold any association or affiliation to any political party in any of the locations in which we operate,” he said.

“Furthermore, as a publicly listed company on both the Johannesburg and New York stock exchanges, Sasol complies with all applicable laws.”

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