The Common Sense has estimated what South Africa stands to lose from not exploiting its oil and gas resources.

That estimate is based on assumptions and readers are free to alter these, of course. But the assumptions are conservative and we are confident that they at least get right the bottom end of the benefits that might accrue to South Africa’s economy.

The first assumption is that South Africa has at least in the region of 30 billion barrels of oil equivalent (BOE) oil and gas reserves sitting under the sea floor of the South African coastline. BOE measures both oil and gas and what the quantum of energy extracted would be if it were measured in terms of barrels of oil. This is a conservative number and there are estimates of double that amount – but given that even exploration efforts are being blocked it is hard to get a precise handle on just how great the resources may be.

Yet even at the 30-billion level the resources would place South Africa comfortably in the top 20 of a list of countries by estimated reserves.

A second assumption is that roughly a third of the 30-billion-barrel estimate is easy enough to extract. This is again conservative as extraction technology continues to improve.

A third assumption is that with enabling policy and the ensuing investment it becomes possible to extract a third of that resource over a period of 20 years.

A fourth assumption is an oil price of around $70 – which is around 85% of the current level and around 30% below the inflation-adjusted average price of the past two decades or so.

All of above means that South Africa could plausibly come to extract an average of around 1.36 million barrels a day or around 495 million BOE per year for two decades.

The result is extraordinary and South Africa would then stand, in today’s terms, as the 19th-biggest oil and gas producer in the world. The ranking is set out on the chart below.

Next was estimated the effect on the fixed investment rate and economic growth rate. This was done by modelling three sets of trendlines for investment and growth over a hypothetical 20 years.

The first set of lines assumed South Africa never exploits its oil and gas reserves. In that case the fixed investment and growth estimates hold as they are.

The second set assumed the oil and gas is exploited but no other significant industry is catalysed around that. It would all just be pumped and exported, with South Africa benefitting from the initial investment and then ongoing taxes and royalties. In that case the fixed investment rate would lift from the current near 15% to peak at between 19% and 20%, with years three to six being the peak years for pouring capital into the country. The investment rate would then slow again as the peak investment era in plant and equipment passed. As a consequence, the rate of economic growth would lift from the current (optimistic) near 1.5% of GDP to break through 3% early on and then settle back at around 2%.

The third set of assumptions is that the oil and gas is leveraged to enable a broader industrial economic expansion, from new port and rail corridors to new gas turbine power stations and some ancillary industries on the back of that — all very modest though and accounting for the slowness of politics. In other words, a realistic, leaning to conservative, set of upside estimates. In that case the fixed investment rate would break to 23% between years four and seven and then hold above 20%. The rate of economic growth would peak at 4% in year six and then hold at over 3% for the balance of the next two decades.

The following chart shows the fixed investment rate for South Africa under the three assumptions. The data start in 2026 to demonstrate what the effect would have been had the government got its oil and gas act together.

The chart below shows what the effect of the investment numbers would be on the economic growth rate.

From that growth data it becomes possible to calculate the number of jobs that would be created in the country’s economy. That is shown in the chart below.

The chart shows that under the status quo scenario of continuing without exploiting new oil, the estimate is that the number of people with a job would increase from 16.7 million in the present to 19.1 million in 2045. Under the second scenario, where the oil is exploited and exported, the number would likely increase to 22.3 million – assuming everything else in the economy remains as it is. Under the third scenario of oil production plus ancillary industrial development, the number is estimated to increase to 26.1 million in 2045.

Next is estimated the effect those jobs numbers would have on the unemployment rate. Those data are set out on the chart below.

The chart shows that under the no-oil scenario the unemployment rate would likely move from 33.6% today to 34.8% in 2045. The oil-alone scenario would be sufficient to drop the unemployment rate to 28.0% — assuming that everything else in the economy remained as it is. The oil-plus-ancillary-investment line would drop the unemployment rate to 20.1%.

It is possible to vary an assumption here and there around future oil prices and reserve levels and the like, but even where that is done the broader point stands that developing South Africa’s oil and gas industry would be just about the easiest low-hanging fruit catalyst to trigger a national economic recovery. South Africa’s government has spoken about doing this for more than 20 years and in the course of the research for this article a number of policy papers and documents and estimates produced by the government were uncovered. Nothing has come of it.