PetroSA: an­other paras­tatal in peril

Dis­as­trous man­age­ment bleeds bil­lions

Weekend Argus (Sunday Edition) - - FRONT PAGE - TSHEGO LEPULE

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

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