It emerged during a briefing with Energy Minister Dipuo Peters last week that she had recently raced off to Pennsylvania, the scene of a measure of controversy over the extraction of tight gas. The only problem was that the minister couldn’t remember which small town she had visited “on the coast”, but she did remember that the whole operation was run by a woman.
Shale and tight gas is extracted at great depths below the earth by tunneling down vertically a few kilometres before blasting – with a mixture of water and chemicals – a number of legs laterally through the rock to extract the trapped gas.
After the minister was asked which town she had visited and whether anything she had seen had changed her positive attitude about the form of gas extraction, a sidekick said the town had been Marcellus.
The minister, however, didn’t appear to witness anything that turned her off the extraction process, which critics say has been responsible for contamination of water sources underground.
Peters was the guest of the state government but had also met industry representatives, including Shell. She hoped to meet representatives of community groups soon. Peters participated in the Group of Friends on Sustainable Energy for All discussion at the UN.
She also attended the Bloomberg New Energy Finance 2013 Summit in New York City. It was previously reported that she would visit “shale gas infrastructure and sites” in the Pennsylvania area.
Her department reported that following the lifting of the moratorium by cabinet, more research was required to inform South Africa on the potential and proposed development path “of this new energy source” in the Karoo.
Marcellus is the name of the geological layer of shale spanning Pennsylvania and West Virginia which is blasted in fracking. It is not a town in Pennsylvania, but there is a town of that name in Onondaga County, New York state.
Abil
The idea that the situation around African Bank (Abil) represents the beginnings of South Africa’s very own sub-prime crisis and that it will similarly end in a crisis for our financial sector makes for exciting deadlines, but is far from being an accurate reflection of the situation.
The important facts to remember are that Abil is making profits – and lots of them. In the six months to end-March it made R1 billion of profits. It is only five to six times leveraged, which is negligible compared with the sub-prime operators.
The 35th and last slide in an otherwise grim results presentation highlights just why Abil is a “strong business”.
Apart from the R1bn, which is equivalent to a 14 percent return on equity and compares with funding rates that have declined to 8.6 percent from a peak of 11.4 percent in 2009, it is also compliant with the rather tough requirements of Basel III.
So the Reserve Bank is absolutely right to say that the local banking sector “remains sound, well capitalised and profitable”.
But despite all of that, the government must be a little bit anxious; so too must Abil’s shareholders and funders be anxious as well as the shareholders, funders and management of all entities that rely on consumer demand, whether it’s for goods or money.
The issue is whether what is playing out in the unsecured lending market represents something of a hangover from a period – the last 18 months or so – when too many players piled into the market. If it is just a hangover then a period of calm consolidation should sort out the matter.
However, if it is something of a more structural nature then we could face a rather grim downward spiral of economic activity as lenders rein in their funds, putting more pressure on consumers, which in turn means pressure on retailers… and down and down the circle goes.
Mining
The ANC plans to unify and strengthen the National Union of Mineworkers (NUM) after the wildcat strike that shut down Lonmin, the world’s third-largest platinum producer, in Rustenburg last week.
Following a meeting of the National Executive Committee held over the weekend, the ANC spoke against the attacks on NUM. It would hold talks with officials from NUM and the South African Transport and Allied Workers Union (Satawu) to hear their challenges with the aim of strengthening both unions, it said.
“The meeting further noted the recent attacks on NUM and Satawu is in fact an attack on Cosatu as a federation on the congress movement as a whole.
“The ANC resolved to develop a comprehensive programme of engagement with individual unions,” Gwede Mantashe, the ANC secretary-general said yesterday. Mantashe also said unions outside Cosatu had a right to exist. The ANC can forget about finding an overnight solution to the complex labour challenges.
Calls by ANC deputy president elect Cyril Ramaphosa, for Rustenburg to be reclaimed by NUM during a May Day rally, were also irresponsible, seeing that there is tension between the Association of Mineworkers and Construction Union (Amcu) and the NUM.
The emergence of Amcu is no doubt a dilemma for NUM which was a majority union across the mining industry, through a 50 plus 1 percent recognition agreement with firms.
The rapid growth of Amcu in the platinum belt has been a nail in the coffin of NUM, the oldest union in the platinum sector. NUM shop stewards have joined the militant Amcu plant by plant. Last week Lonmin finally recognised Amcu after months of hesitation.
Amcu had 70 percent representation at Lonmin, it was recently announced. It represents 54 percent of the lowest-level employees at Impala Platinum, the world’s second-biggest platinum producer, while NUM had 8 percent.
Edited by Banele Ginindza. With contributions by Donwald Pressly, Ann Crotty and Dineo Faku.