Shale Gas Development in the Central Karoo – Impacts on the Economy

Abstract

Shale gas development (SGD) has the potential to yield highly significant economic opportunities, but also bears risks engendered by the extractive nature of SGD. In both respects it parallels other divisions of the mining sector.
Previous South African research into the macro-economic opportunities associated with SGD reveals little agreement on likely benefits, their extent, or the appropriate mechanisms for their measurement. Despite this ambiguity and uncertainty, certain aspects are clear. Highly positive impacts on the balance of payments can be expected from SGD irrespective of whether they come in the form of import substitution alone or combined import substitution and export growth. If the large scale production scenario (Big Gas) is assumed, gas revenue could be equivalent to between 8% and 16% of the current account deficit thereby making a potentially substantial contribution to deficit alleviation. This has the potential to precipitate exchange rate appreciation. It is not, however, possible at this stage to predict the likelihood of such an appreciation or whether it would have potentially damaging effects on other sectors1.

This document, as well as the full CSIR report can be accessed at http://seasgd.csir.co.za/scientific-assessment-chapters/

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