An investigation into the controversial deal with Equator Holdings by Central Energy Fund (CEF) subsidiary PetroSA has been launched, and disciplinary action could follow, MPs were told this week.
The CEF gave this response to a question by DA spokesperson on mineral and petroleum resources James Lorimer, during a workshop with parliament’s minerals and petroleum resources committee on Wednesday. Numerous CEF executives briefed MPs on the activities of the group. CEF said the board had not approved of the deal.
Briefing the committee, PetroSA official Tsiea Morojelethe said the deal, which was signed in December 2023, had conditions precedent attached including proof of funding that Equator could not provide to PetroSA’s satisfaction, so “the agreement therefore did not come into effect.
“A submission recommending that the agreement be terminated was deliberated by executive committee on July 9 2024. Executive committee supported the termination. Submission presented to board on July 26 2024. Action items are being addressed and a follow-up board meeting is scheduled for August 23 2024. A formal termination letter will be issued to Equator following board approval,” Morojele told MPs.
According to a report by investigative journalism operation amaBhungane, Equator Holdings won a PetroSA bid to finance and refurbish PetroSA’s offshore gas infrastructure at a potential cost of R21.6bn. Equator, the report said, was owned by “notorious wheeler dealer” Lawrence Mulaudzi.
A joint venture between Equator and another company, Theza Oil and Gas, was also appointed to develop PetroSA’s offshore gas wells.
Mulaudzi was a key character in the Mpati Commission’s investigation into corruption and malfeasance at the Public Investment Corporation (PIC).
In a media statement earlier in 2024, DA MP Kevin Mileham said there was “ïrrefutable evidence that the granting of the R21bn tender to Equator Holdings was irregular as they did not meet the financial and technical requirements specified in the tender call for expressions of interests.
“The tender adjudicators at PetroSA failed in their fiduciary duty by either neglecting to conduct due diligence on Mulaudzi or choosing to look the other way despite the glaring red flags. Either way, prima facie evidence exists that PetroSA bent over backwards to ensure that Mulaudzi’s Equator Holdings was awarded the tender.”
PetroSA, Mileham said, had ignored a Promotion of Access to Information Act application by the DA asking for the record of decision that informed the awarding of the tender.
Lorimer said after Wednesday’s workshop he did not believe CEF was being sufficiently transparent about the deal, although it had admitted that the deal with Equator was being investigated. “The reality is that SA’s oil and gas sector has suffered a huge setback with the loss of potential jobs and massive state revenues. Somebody needs to be held accountable or this kind of ineptitude will continue to cripple our economy,” he said.
PetroSA CEO Xolile Sizani dealt with the challenges facing the company, including its difficulties in transacting with state owned enterprises because of its low BEE scorecard. Negotiations were still under way, he said, with the Russian Gazprom bank for the R3.7bn project to restart the Mossel Bay refinery. Gazprom still has to conduct a feasibility study of the refinery.
Gazprom’s technical site visit meeting had had to be rescheduled until further notice because of visa challenges.
CEF CFO Ditsietsi Morabe told MPs on Wednesday the group generated a net loss of R579m in the first quarter of the 2024/25 financial year, R302m higher than the budgeted net loss of R277m.
The technically and commercially insolvent PetroSA, which is responsible for the largely inactive gas to liquid plant in Mossel Bay, was the largest contributor (R422m) to the loss, though it generated R4.7bn of the total group revenue of R4.8bn.
The CEF group has assets of R36.9bn of which 40% is in cash.
MPs were told the merger of CEF subsidiaries PetroSA, Strategic Fuel Fund and iGas to form the SA National Petroleum Company was being operationalised.
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