R15bn PetroSA disaster unfolds in court
THE scale of the financial disaster unfolding at state-owned petroleum entity PetroSA has been exposed in court.
The R14.9-billion loss – revealed in documents outlining what the parastatal will face when it finalises its accounts for the past financial year – was previously only speculated on. The annual loss is by far the biggest faced by any state-owned company since 1994.
The documents also show PetroSA will miss all of its key performance targets for the year except one‚ and has been bitterly divided over various contentious projects‚ among them a politically backed plan to purchase Engen retail fuel stations.
The financial results are in an affidavit by company secretary Mokgaetši Sebothoma in response to an application by CFO Lindiwe Mthimunye-Bakoro to have her suspension‚ imposed last month‚ lifted.
Like many other state-owned companies PetroSA has been shaken by infighting‚ with the key divide between nonexecutive and executive members of the board‚ in particular MthimunyeBakoro and group CE Nosizwe NokweMacamo.
On June 19‚ the board suspended the two after they declined to take “gardening leave” while the directors investigated the company’s finances.
In the Cape Town High Court‚ Mthimunye-Bakoro will challenge her suspension on the technical grounds that despite being an executive director and member of the board‚ she was not invited to the board meeting at which the decision on her suspension was taken. She has applied for an urgent order. She also argues the board as a whole is responsible for the financial health of PetroSA and not the CFO alone. She says the board was under the influence of Energy Minister Tina Joemat-Pettersson in acting against her.
The board responds it acted correctly as it was not appropriate to invite her to a meeting where she would have been unable to participate since the agenda concerned her status directly.
The board also invited her to a subsequent meeting at which it again resolved to suspend her. It denies it was influenced by Joemat-Pettersson.
In his affidavit‚ Sebothoma also argues PetroSA is in a parlous financial state because of poor decision-making by Mthimunye-Bakoro.
The R14.9-billion loss includes a R14billion impairment resulting from the failed Project Ikhwezi‚ in which the intention had been to extend the life of Mossgas by drilling new wells. But the wells have yielded only 10% of the gas that was anticipated.
It was first disclosed to the board in May this year‚ says Sebothoma.
He says there were two failed projects in which Mthimunye-Bakoro played a central role: Project Ikhwezi and Project Irene. The latter was a highly controversial attempt by PetroSA to buy Engen‚ which includes a South African fuel retail business and oil refinery‚ owned by Malaysian state-owned company Petronas.
With regards to Project Ikhwezi‚ PetroSA says Mthimunye-Bakoro argued in the board for the continued drilling of the new wells despite “the negative project economics and the advice of the proposals committee”.
Project Irene is more controversial: PetroSA was repeatedly advised by both transaction advisers and the Treasury the proposal to buy the Engen stake did not make good business sense. However‚ the project was strongly championed by Joemat-Pettersson and President Jacob Zuma. In the end‚ the deal fell through due to lack of financing.
This is blamed on Mthimunye-Bakoro. — BDlive