The Central Energy Fund (CEF) sent communications to its subsidiary PetroSA in August warning it would withdraw financial support for key projects due to a lack of implementation progress.
This is believed to be one of the reasons PetroSA’s board placed CEO Xolile Sizani on suspension, pending an investigation. It is understood there were numerous clashes between the PetroSA board and Sizani during his eight-month stint over the matter and other issues, including his crafting of a new executive structure not approved by the board.
Sources said the board was unhappy with what they considered gross underperformance by the CEO and had even delayed converting his probation period into a permanent appointment.
Sizani’s suspension comes as PetroSA continues to struggle with a number of its operational goals. In an e-mail from Sizani addressed to an official of the CEF, he asks for more time to consult with the PetroSA board after the CEF warned in an earlier e-mail that the oil and gas company risked having financial support withdrawn due to “a lack of progress and seriousness on executive on the part of PetroSA”.
We have suspended the PetroSA CEO. It is related to operational issues and there is a process now under way that is being undertaken. I just wanted to be open about it and really just make the committee aware that we are managing the situation.
PetroSA has about 12 projects that together require billions of rands, including the establishment of the Mossel Bay special economic zone, a biofuel development project and the reinstatement of the gas-to-liquid refinery in Mossel Bay. Of these, half did not have a finalised budget.
Briefing parliament’s portfolio committee on Friday evening, CEF chair Ayanda Noah said investigations into the circumstances behind Sizani’s suspension were ongoing and the group would update the committee in due course.
“We have suspended the PetroSA CEO. It is related to operational issues and there is a process now under way. I just wanted to be open about it and really just make the committee aware that we are managing the situation,” Noah said. “We are looking at a pragmatic and transparent way of really resolving the issues and we do appeal that we be given time to deal with the issue and formal feedback will be given at an appropriate time.”
The CEF acts as the holding company of state-owned companies in oil, gas, and other resources, including PetroSA.
Sizani received a letter from the PetroSA board last week asking him to give reasons why he should not be suspended. He declined to comment on the letter when approached for comment on the sidelines of Africa Oil Week in Cape Town last week.
Business Times has asked PetroSA and CEF on several occasions about the circumstances behind the clash between the board and the CEO.
On Friday evening, PetroSA spokesperson Nonny Mashika again said the company would not comment while an investigation was under way.
In a statement on Thursday, PetroSA said its board had appointed former Transnet International Holdings CEO Mmete Fusi as acting group CEO with immediate effect.
“Mr Fusi has vast leadership experience and knowledge of the continent’s minerals resources, oil and gas, ports and railways infrastructure. PetroSA’s current Group CEO, Mr Xolile Sizani, has been recused from operations, pending the outcome of an ongoing investigation.”
In April, the department of mineral resources & energy named Fusi as one of six non-executive directors for the South African National Petroleum Company.
On Friday the CEF delegation also briefed the parliamentary committee on CEF’s 2023/24 annual report. The written submission acknowledged that the reporting period was “replete with several key strategic challenges emanating from internal and external drivers in [the] operating environment”.
The company reported a net loss of R522m in the period, though this was R2.3bn lower than the loss incurred in the previous financial year.
Noah said CEF was looking at reducing operational costs, improving the company’s bottom line and finding permanent feedstock, particularly for the resuscitation of the Mossel Bay refinery, which he said remained “a top priority”.
While Noah acknowledged that PetroSA faced significant challenges, she said its leadership remained focused on driving the execution of key outcomes in the past five years as they continued the realignment of the group.
“When we look at where we are today, you can really safely say that we have pulled back on some losses, we have also looked at the realignment of the group ... Of course, we are not out of the woods yet. There’s a long way to go and we are very conscious of that, but what is important for us is that we’ve got a plan and we are implementing that plan.”
Deputy mineral resources & energy minister Judith Nemadzinga Tshabalala told the committee several challenges persisted among state-owned entities under the department’s care that could affect the mining, oil and gas sectors, as well as the economy at large.
She said the department was committed to the government’s approach to restructuring strategic state-owned entities to optimise their efficiency and eliminate redundancies in operation and accountability to the executive and the legislature.
Adding to the sector’s broader troubles, Shell withdrew from South Africa earlier this year and TotalEnergies exited offshore exploration blocks on the southern coast.
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