Gas plant was just hot air
● Besides catching flak over its apparently lacklustre due diligence process in the Coega LPG saga, the Industrial Development Corporation (IDC) has also come in for criticism over a bid by another company to buy and take over the plant.
Oil and gas company Kili Energy, whose nonexecutive chair is former home affairs director-general Mavuso Msimang, has been trying to resurrect the project for two years, without success.
The company has financial backing, a technical partner and support from Eskom, which has viewed the business plan. Through Msimang, Kili Energy also sought the intervention of trade, industry & competition minister Ebrahim Patel.
“This has been an extremely frustrating experience,” Msimang told the Sunday Times. “A lot of work went into identifying potential private sector funders, nationally and internationally. We accepted direct financing and offered one company equity in the company, for which it was willing to pay.
“Absa indicated that it would provide working capital if we secured the necessary manufacturing facility and equipment. Oryx Energies, Easigas, Afrox and Indigas gave us commitments that they would buy our gas. We really had excellent private sector support.”
Msimang said Kili’s engagements with Eskom, including with former chair Mpho Makwana, had also been encouraging. But their efforts have come to nought.
The LPG gas cylinder factory, which the IDC backed to the tune of R170m, has been lying idle for more than five years. It was supposed to be a flagship job-creation project in the Coega Special Economic Zone to produce 1.5-million gas cylinders a year for the domestic market. It was held up in parliament as an example of how to fast-track growth and encourage localisation, but a financial fallout between the IDC and business owner Manana Bogatsu of MM Engineering meant it stalled.
Bogatsu’s lawyer, Gavin Simpson, alleged Bogatsu was a victim of IDC misconduct. “This whole project was Manana’s brainchild but the IDC has wrestled it away from her,” he said.
Five years later, Msimang says the IDC has been without question the biggest stumbling block.
“We proposed an offer to buy the unused equipment for R15m.
We await their response,” he said.
Some of the gas cylinder equipment has been damaged by thieves targeting electrical cables, and computers have been stolen.
Documents the Sunday Times has seen show that Kili Energy visited the facility in October 2022 and found equipment, bought in 2018, still wrapped and in crates. Rather than sell it, the IDC wanted to auction it to the highest bidder but with strict conditions including a hefty upfront payment.
Msimang and Kili CEO Mfanafuthi Dube wrote to the IDC in August, expressing dismay.
“This approach seems to be contrary to the mandate of the IDC of driving economic growth, promoting black industrialisation and in the process creating jobs. It would appear these processes are open to foreign entities and white-owned businesses acquiring assets intended for the black industrialist projects for next to nothing,” the letter reads.
Business rescue
However, the IDC this week said the disposal of MM Engineering’s assets was now in the hands of business rescue practitioners looking for potential buyers or investors.
“Kili Energy has been directed to provide its offer to [them],” said spokesperson Tshepo Ramodibe. “The IDC’s intention since inception was for the project to be beneficial for the economy, however it did not reach commissioning and hence the company is now in business rescue.”
Ramodibe declined to comment on the fallout with MM Engineering but confirmed IDC funds were used to buy the equipment.
“This equipment for which IDC holds security belongs to MM Engineering. There is indeed a value attached to the assets, which we can’t disclose.”
Dube confirmed Kili Energy was in touch with MM Engineering’s business rescue practitioners but was frustrated by the lengthy delays.
“Hopefully sanity will prevail,” he added.
Economist Duma Gqubule said developmental finance institutions have a major role to play in sparking the economic growth that South Africa sorely needs, but due diligence is important.
“When you can’t get such elementary things checked off, it causes a reputational risk for empowerment and tarnishes transformation,” he said.