By Themba Khumalo

Trade unions are fuming over state-owned oil company, PetroSA.

The company, which produces fuel from gas, is planning to retrench about 850 employees due to financial constraints.

In June of 2018, the Central Energy Fund, which administers PetroSA, conveyed to Parliament that PetroSA as company was likely to run out of gas and funds by 2022. At the time, PetroSA had given an account of immense costs, the vastest being in the 2014-2015 financial year when it suffered a deficit of R14,6 billion.

In a report on published in the Citizen, in December 2020, PetroSA CEO Pregasen Naidoo wrote a letter to Solidarity Union’s Holland Chapman, saying the company had in recent years experienced depleted gas reserves.

&PetroSA is in a precarious financial position which makes operational costs unaffordable. On 31March 2021, the forecast cash position was R1,9bn. Therefore, the company will not be able to fulfil its financial obligations unless drastic measures are taken to turn around the precarious financial situation it finds itself in,” wrote Naidoo.

He said PetroSA intended to engage the union about a possible staff reduction which would lead to the termination of employees’ services.

“The company has considered the option of retaining the current headcount. However, this option is not viable.”

Naidoo said the company had embarked on numerous interventions to trim costs, including:
• The review and adjustment of budgets.
• Negotiating discounts on third party contracts.
• Deferment of capital expenditure.
• External recruitment.

He stated that the company would explore other measures to limit headcount reduction such as offering voluntary separation and early retirement.

“At this stage the anticipated proposed impact of the restructuring will cut across all levels and will affect approximately 500 employees.”

It now appears that what Naidoo said has come to bitter fruition for employees of PetroSA.

The Chemical Energy Paper Printing Wood and Allied Workers Union (CEPPWAWU) and National Union the of Metalworkers of South Africa (Numsa) have called upon the government to stop retrenchments at PetroSA with immediate effect.

In a joint statement, CEPPWAWU and NUMSA said: In a joint statement, CEPPWAWU and NUMSA said, “We call on the ANC government, and in particular Minister Gwede Mantashe, to intervene on behalf of the South African public and defend the job security of workers in the refinery petroleum sector.

“Government must put a stop to the clearly orchestrated agenda by International Oil Companies (IOCs) such as Shell and BP, Engen, PetroSA, SAPREF and Chevron where these companies have taken a conscious, greedy decision to close refineries in South Africa and simply import the finished product, diesel and petrol into the country, using propaganda that crude oil is unaffordable, and citing government’s strict regulation on sulphur pollution.

“The essence of our message to government is that in the interest of the country, in particular the importance of stimulating economic growth and to preserve jobs and create jobs, government must not allow these greedy IOCs who have chosen a get-rich-quick scheme to shut down our local refineries and simply import finished products, abusing licences to import.”

NUMSA and CEPPWAWU condemned the issuing of Section 189(A) by PetroSA management which has consistently run down the company and failed to put together a turnaround strategy for PetroSA.

The South African Federation of Trade Union (Saftu) said it is disgusted by PetroSA’s decision to retrench workers.

“As a continuum of the December 2020 notice of retrenchments, PetroSA issued a new notice of retrenchments (Section 189 of the Labour Relations Act) on 3 December 2021, revising plans to reduce its headcount.”

Saftu further said: “Given that in the same notice it acknowledges ‘117 employees’ have ‘opted for voluntary retrenchment’ during 2021. If the retrenchments are carried through by the end of January 2022, the total number of retrenched employees will be 967.”

The union federation also pointed out that after these retrenchments, PetroSA will only be left with 300 employees, whom it holds forth, will be taken up by a key private sector partner.

Numsa and the CEPPWAWU maintain that the crisis in both the petroleum and the energy sectors is driven by and is as a consequence of maladministration, greed and corruption; an assertion that Saftu concurs with.

In a statement issued by General Secretary, Zwelinzima Vavi, SAFTU said: “Though PetroSA management cites ‘depletion of gas reserves’ and economic losses, its premise is not adequately substantiated. For instance, the public must know if the depletion of the gas reserves is the only reason the company is operating at losses that caused its operational expenses to exceed its revenue. To imply that such economic losses are simply as a result of depleting gas reserves would be plain false.

“The devastating graft that engulfed the public sector and in particular, the State-Owned Enterprises (SOEs), is partly responsible for the collapse of PetroSA.”

The federation said the premise for retrenchments, “has all the hallmarks of commercialisation and privatisation wrapped around it, even though they do not explicitly say so. Since they entered a trajectory of neoliberalism, the ruling party has looked for all perfect excuses to commercialise and use all opportunities to privatise&.

“Thanks to the thieves in government, who have hollowed out public companies for their personal enrichment, they have given the neoliberal strategists a pretext to accelerate the privatisation of SOEs.”

In an interview with Ray White on 702 Vavi said: “They (PetroSA) won’t take responsibility for the mess they have created. They won’t come up and say sorry South Africa, sorry workers whose life depends on our operations we’ve messed up. PetroSA used to be one of the best-run companies in the whole world which now is collapsing. They won’t say ‘we are guilty as charged’.”

Vavi called on workers at PetroSA to go on open battle in defence of their jobs.

PetroSA Disasters

In 2013, amaBhungane, an investigative journalism organization, exposed the looting of money in PetroSA during the 10-month term of Yekani Tenza as the acting Chief Executive of PetroSA.

In an article published in the Mail & Guardian in April 2013, they wrote: “Top managers at PetroSA ordered irregular payments of R200 million during a feeding frenzy at the national oil company that involved a well-connected lawyer and a fund manager, detailed evidence suggests. They also appear to have risked another R800 million in potential liabilities, raising the total in questionable spending decisions to a ballpark R1 billion.”

AmaBhungane said there were allegations that “some of the payments involved kickbacks these remain unproven, but a former director has told the police he believes anti-corruption laws were broken&.

AmaBhungane also revealed that they “found evidence of a large, unexplained payout to an unidentified third party&.

In what they labelled as Mega Deals amaBhungane detailed the following:

The bulk of the allegations involve two mega deals: PetroSA’s trumpeted acquisition last year (2012) of a company with crude oil acreage in Ghana, and PetroSA’s confidential plan to buy petrol stations across South Africa.

In the Ghana acquisition, Tenza and new oil and gas ventures head September negotiated &in reverse&, agreeing among other things to pay an extra R162m for the target company.

On conclusion of the deal, Tenza had a R11,4m ‘success fee’ paid to Sabelo, the lawyer, who had accompanied him to final negotiations in London. Much of the success fee appears to have flowed onwards to an unidentified third party, raising corruption red flags.

In the petrol stations deal, transaction advisers HSBC were fired, incurring a R19m cancellation fee; then Tenza replaced them with Mahloele’s Harith Fund Managers, a much smaller local firm. On completion, Harith was to earn a success fee of R371m or more – 10 times the R35m HSBC apparently would have earned had it stayed on.

This was renegotiated to R187m following Tenza’s departure, but still dwarfed HSBC’s fee.

They said Rain Zihlangu, then a director at PetroSA, likened Harith’s appointment to placing a player &to simply kick the ball [through] empty goalposts&, as HSBC had already identified a target company to acquire and done much preparatory work.

Zihlangu laid a complaint with the police. He, in the end according amaBhungane, submitted three affidavits.

In one of the affidavits obtained by amaBhungane, Zihlangu stated that he felt compelled to request an investigation as he suspected corruption.

One affidavit stated: “Having been a board member of PetroSA since 2006, I had never encountered such blatant abuse of public funds and the flagrant flouting of all procurement policies as was done by Mr Tenza whilst he was the acting CEO of PetroSA.”

Kaizer Nyatsumba, PetroSA’s Head of Corporate Affairs and Shared Services, at the time, refuted the allegations.

In March of 2018, according to the Mail & Guardian, the then chairperson, Nhlanhla Gumede, “passed a motion of no confidence in Mr Tenza and sent it to its governing body, the Central Energy Fund.”

Gumede, reported the Mail & Guardian, wrote to then minister of energy, Jeff Radebe, stating that the entity should appoint an acting chief executive from its ranks or the department. Gumede’s letter, which the M&G saw, stated that “the board’s efforts to fill positions have been frustrated by internal personnel trying to fill the posts with their preferred internal candidates and friends&.

“PetroSA is facing two primary challenges, each feeding off each other, namely the lack of a properly functioning plan and lack of effective leadership. Over the past few years, there has been a mass exodus of experienced people in leadership positions from PetroSA,” the letter states.

Department of Energy and PetroSA Board briefing

In 2016, Mr Neil Robertson, Vice President of New Ventures Upstream, PetroSA presented a technical review to the Energy Portfolio Committee on Project Ikhwezi (PetroSA’s flagship project to search for additional gas reserves off the coast of Mossel Bay).

He highlighted that the company had had a number of gas-producing fields since 1990 and the proposed development was to drill five wells. He told the committee the new field was different from the others, as it was significantly deeper and more pressurised and was also affected by significantly high temperatures.

He then addressed the findings of the technical investigation, which had included weak project management and governance, and a lack of proper risk mitigation. The project was not resourced adequately and no walk away trigger points were in place to ensure the minimisation of exposure.

In terms of cost management, the approved budget had been R19 585 305,600 billion, but only R17 778 328,000 billion was spent. Out of the five wells that were proposed to be drilled, four were actually drilled and only three were producing gas.

He said in the future there was a need for better appraisal before any development was done.

“Projects should not be fast-tracked, but rather front-end loading should be done appropriately. There should be a partnership strategy approach for future investment decisions to ensure that the organization was de-risked and the balance sheet cushioned,” said Robertson.

Will the PetroSA retrenchments spill over into an oily and flaming war? Only time will tell.