PetroSA: another parastatal in peril
Disastrous management bleeds billions
PETROSA is the latest state-owned enterprise that might need to be bailed out by the government as it buckles under mismanagement, ill-conceived projects, billion-rand losses and overpaid board members.
There are now calls in some quarters to privatise the SOE and for the Energy Ministry to step in.
This follows the resignation of acting board chairman Wilfred Ngubane along with Thami Hlongwa, Johlene Ntwane and Banothile Makhubela last week, leaving behind only Owen Tobias and William Steenkamp, who are unable to form a quorum and make binding decisions.
PetroSA is yet another stateowned company that has come under fire for bleeding out billions in losses. The gas-to-oil company’s financial woes date back to the R14.5 billion loss recorded in the 2014/2015 financial year as a result of Project Ikhwezi. The project was set up to drill gas wells offshore to provide feedstock for PetroSA’s Mossel Bay refinery. When the project proved too costly and produced less gas than was anticipated, it was scrapped.
The disastrous project, however, saw R17.3 million being paid out in bonuses to 11 executives implicated in the project, which raised more questions about the board.
However, the board stated they paid out the bonuses based on legal opinions as the contracts entered included “retention bonuses” and were not performance-based.
One of the executives who received R2.3m in bonuses was Andrew Dippenaar, who had been suspended with then-chief executive Nosizwe Nokwe-Macamo and chief financial officer Lindiwe Mthimunye-Bakoro, pending an investigation into the failed project.
Another blow to the board came when the company was projected to lose up to R2.2bn for the 2016/2017 financial year.
The resignation of the four board members came after Luvu Makasi, the chairman of PetroSA’s parent company the Central Energy Fund (CEF), wrote to the board in March asking them to explain why they should not be removed from their positions.
In a 78-page report seen by the Weekend Argus, members of the board maintain they inherited many of the problems facing the parastatal, including a negative balance sheet, as a result of Project Ikhwezi.
“The issues raised in relation to the board in the CEF chairperson’s letter do not constitute a basis for requesting that members of the board resign or for CEF to remove any of the directors,” read the report.
“There is frankly no wrong- doing being identified in relation to any of the directors in question that warrant such a drastic move that it will in essence debilitate PetroSA.
“Removing the entire board in the manner suggested places at risk the implementation of the key strategies put in place by the board, and in so doing places at risk the operating business of PetroSA as a whole.
“The board is of the considered view that the wholesale removal of the board would have dire consequences for the business of PetroSA, and is not at all in its best interests.”
A source close to proceedings told the Weekend Argus the resignations came after it became apparent the board members were going to be removed from their positions irrespective of what they had to say in their defence.
“They found themselves in a situation where they were being blamed for a lot of historical problems they inherited from the previous board,” she said.
“They were basically bullied into resigning because a lot of the problems being pointed their way were issues that CEF was aware of, such as Project Ikhwezi, the bonuses issue, the hiring of a new chief executive.
“In the end, resignations were tendered by people who felt they had done their best to try and turn around the situation at PetroSA.”
The CEF is keeping mum on plans going forward with regards to plans to appoint a new board.
DA spokesperson on energy Gordon Mackay said the way forward to fixing the problems plaguing PetroSA was to privatise it.
“Insofar as the constitution of a new board, that is the prerogative of the CAF as the main shareholder with the minister providing oversight,” he said.
“PetroSA is like a problem child; their issues go beyond just getting a new board. What needs to happen now is parts of it need to be sold off in order to generate revenue; as it stands PetroSA is like a ticking bomb that requires urgent attention.”
Economist, Dawie Roodt said the problems at PetroSA were not surprising as most, if not all, stateowned companies were experiencing major problems.
“I am not surprised by what is happening at PetroSA as this is business as usual for all state owned companies in this country.
“Why is it that all of the state owned companies are failing? It cannot be that the problem lies solely with the people appointed to sit on the boards. Where is government to provide oversight?
“The only way forward is for the remaining two board members to resign and for the minister to step in and appoint a new board because nothing can happen at PetroSA when the remaining board members cannot form a quorum.”
I am not surprised by what is happening