10th Inkaba yeAfrica/!Khure Africa (AEON) Conference/Workshop Lord Milner Hotel, Matjiesfontein - Karoo 29 September – 3 October 2014 SHALE GAS IN SOUTH AFRICA: CONTEXTUAIZING THE SOCIO-ECONOMIC and POLITICAL IMPLICATIONS Barry Morkel1 M.J. De Wit1 1. AEON-ESSRI (NMMU): Shale Gas Research Programme logo here… (Your home institute logo here)

OUTLINE Introduction Methodology and Approach Background and Context Critical Drivers: Socio-Economic and Political Socio-Economic Profile and Situational Analysis Risk Identification and Categorization (S-E,P) Strategic Risk Mitigation Factors: Sign-posts for Policy Makers and Regulators

Introduction This study seeks to achieve the following: To better understand the socio-economic and political implications of shale gas development within the Karoo; To develop a nuanced perspective on the social, economic and political context in which this “Game Changer” is unfolding (i.e. International, National and Regional) To identify and highlight critical risks, existing ‘blind-spots’, and responses to these factors for further investigation and analysis.

Methodology and Approach Contextualize the debate within its broader social, economic and political context; Situational analysis of key socio-economic and political factors in the debate (at a National, Regional and Local level); Based on available data (Stats SA, IDPs, Govt. publications, and documentary sources). Based on this environmental scan, identify associated Risks Identify responses for mitigation at a strategic level.

Methodology and Approach Contextualize the debate within its broader social, economic and political context; Situational analysis of key socio-economic and political factors in the debate (at a National, Regional and Local level); Based on available data (Stats SA, IDPs, Govt. publications, and documentary sources). Based on the above, to identify and categorize critical risks and implications for shale gas development in the Karoo; Responses are then identified for each of these risks.

Background and Context Considerable attention into SG potential for future energy security and as a catalyst for economic growth. This has been characterized as a “Game Changer” for South Africa? In the light of associated risks , this has ignited fierce debate and opposition in the Karoo. However, little is known of the socio-economic and broader political impact this sector might have on the Karoo. Background and Context

Critical Socio-Economic and Political Drivers behind the Shale Gas

Critical Drivers: Socio-Economic and Political Economic growth Employment creation and Poverty alleviation Rural economies& small towns Energy Security Reduction of the carbon footprint Critical Drivers: Socio-Economic and Political Reduce dependency on agriculture Anticipated ‘R1 trillion’ contribution to GDP Potential contribution to regional and local economies (i.e. EC Provincial Industrialization strategy, and LED) Stimulate local employment through industrialization Current levels of poverty in Karoo towns (CHMD & CDM) Alleviation from dependency on coal Reducing GHG related to coal burning power

Socio-Economic Profile in Affected Localities of the Karoo

Socio-Economic Profile and Situational Analysis: The Study Area

Socio-Economic Profile and Situational Analysis Finance, business sector General government

Socio-Economic Profile and Situational Analysis Low population density; The Cacadu alone covers approximately one third of the Eastern Cape’s land area, however it only houses 5.4% of the provinces’ population. Local economic development remains challenged across these LMs Average <1% growth in GDP(2001-2011) Camdeboo remains the only exception at 1.08% An average of 30% Unemployment across the affected LMs. Poverty levels are high with significant dependency on social grants (37% for Cacadu LMs*).

Socio-Economic Profile and Situational Analysis Agriculture is restricted to Extensive farming Characterized by agricultural production system that uses small inputs of labour, fertilizers, and capital, relative to the land area being farmed. This has contributed to: Typically low population densities; and, Scattered small inland towns as employment opportunities are fewer. Rural depopulation (movement of people to the more densely populated areas in search of employment). It becomes costly to initiate and develop new infrastructure in areas with low population density. The Population/Funding link in the Equitable share.

Socio-Economic Profile and Situational Analysis These low populated areas generally result in low liveability due to: Long transport distances to work; Low-density housing; Inadequate facilities (e.g. health, recreational, entertainment) Poor rates base to maintain and improve infrastructure. Also exacerbated by poverty and unemployment These areas still require further: Housing, and transport infrastructure; Health and Education; Community and safety services. If infrastructure grant allocation is dependent on population size? These LMs will continue to struggle

Socio-Economic Profile and Situational Analysis

Socio-Economic Profile and Situational Analysis

The Underlying Social and Political Landscape

Risk Identification and Categorization (S-E,P) Inadequate Public consultation with affected communities (by Govt. and Industry) A need for deeper and more extensive consultation and education Impact of this on social cohesion and tensions between communities The Social License to Operate Coordination and Planning across all spheres Areas such as Community health, Disaster Management, and Infrastructure Maintenance and Development Local Economic Development Spatial Planning and Land Use Management Current challenges not restricted to skills and funding, but also: Land Restitution (Land Rights Amendment Bill of 2013) Minerals and Petroleum Development Bill (MPDA, 2013) Will both have profound impact on communities in the Karoo, and The future development of Shale Gas resources Changes in the Regulatory Environment Small Town & Rural Municipalities already challenged in critical areas of service delivery Water Quality Management and provisioning (Blue/Green Drop compliance) Infrastructure maintenance (O&M) related to Water, Sewage and Waste disposal Roads and transport infrastructure Preparedness to deal with the Complexity and Uncertainty of SGD Risk Identification and Categorization (S-E,P)

Shale Gas development in the Karoo: Socio-Economic and Political Risk Identification

Critical Drivers: Socio-Economic and Political Environmental Risks: Contamination of Groundwater Pollution of the surface ecology Earthquakes and seismic activity Air pollution and GHG emissions Human Health Risks: Potential health risks associated with contamination of groundwater and pollution Safety risks associated with truck and freight movement The effects of a transient workforce on a relatively isolated communities Psycho-social impacts related to industrialization (i.e. noise, and influx) Social and Political Risks: Inadequate public consultation and the SLO Potential impact on social cohesion Inadequate institutional capacity within government (at all spheres, and between the spheres) to address the complexity associated with shale gas development Impact on existing economic sectors Knowledge Gaps and ‘Blind-Spots’: Uncertainty and Complexity of Shale Gas Shale Gas Economics, and long-term viability and sustainability Questions (still to be answered) Impacts with long-term and ‘inter-generational’ risks, to be paid by future generations (i.e. pipeline & well infrastructure etc.) Critical Drivers: Socio-Economic and Political

Strategic Risk Mitigation: Sign-posts for Policy Makers and Regulators

Deepening Public Community Engagement (SLO) Structured and sustained public participation and community engagement (effectively coordinated across various stakeholders and spheres of govt.) Integrate into LM public participation and IDP processes Initiate broad based Citizen Science Programs (e.g. Groundwater and ecosystems monitoring) Address specific sectoral and community concerns (i.e. Karoo farmers and poor local communities) Urgent focus on Human Capabilities and Institutional Capacities Complexities and Uncertainties Scientific and Engineering Competency planning, up-scaling and up-take into existing strategies (i.e. Research, and Scarce skills) and ‘Thinking Out of the BOX” Regulatory and Monitoring Capacity (Govt. and Industry) at the ‘Critical Zone’ Well construction and Extraction Processes Environmental and Natural Resources impacts (i.e. Water and Air Pollution) Improve coordination and integration capability “A Whole of Government Approach” Disaster Management Water quality, Infrastructure (OM) and monitoring Land Use Management and Planning Addressing “The Importation of Risks and the Exportation of Benefits” Assess the extent of the opportunity cost of the SG extraction sector for existing economies and livelihoods Reviewing existing Funding Models and Support Strategies for Local and Regional authorities (i.e. Small Towns)

Thank You