The meeting had been called in May 2025 to settle long-outstanding debts between PetroSA and a junior fuel trader, Nako Energy.

PetroSA owed Nako R605-million for a cargo of petrol it bought in June 2024, but had struggled to sell because it was tainted with a problematic chemical additive. Nako, in turn, owed PetroSA R832-million for a cargo of diesel it had bought and never paid for.

• Read AmaBhungane’s Dirty Fuels investigation, which covers the diesel deal in part 1 and the unleaded petrol deal in part 2.

PetroSA should have had a R227-million upper hand, while Nako – whose claim to fame was largely its partnership with PetroSA – should have been grovelling.

Instead, Nako persuaded PetroSA to accept a new deal: PetroSA would buy another 11 cargoes of unleaded petrol from Nako and receive a discount of 45c per litre. Once PetroSA had sold 505 million litres of fuel, it would be R227-million richer, and Nako’s debt would – hey presto – be eliminated.

When PetroSA’s then interim CEO Sesakho Magadla appeared in Parliament last year, she said: “[W]e are both owed by Nako and we also owe Nako and in us trying to find a solution – that balances what we need to do and also make sure that PetroSA does not suffer losses – both parties have agreed in terms of the acknowledgement of debt, in terms of the commercial settlement and also finalising the repayment plan.”

Yet the deal is far worse than it appears because once Nako had PetroSA’s signature on an acknowledgement of debt, it ceded the document to its lenders who were demanding to be paid for the same shipment of fuel.

This is a classic bait-and-switch: PetroSA thought it was negotiating with a trusted partner and that the two opposing debts would cancel each other out. Instead, its half of the debt was ceded to Nako’s creditors, whose lawyers soon came calling.

Now – with a letter of demand in one hand and a toxic petrol deal in the other – PetroSA is facing liquidation. A memo, apparently written by acting CEO Nombulelo Tyandela and sent to PetroSA staff over the weekend, said that Nako had approached the Western Cape High Court on Friday for “an order placing PetroSA under provisional liquidation”.

“PetroSA is considering the application and is obtaining the necessary legal advice,” a spokesperson confirmed on Wednesday.

PetroSA’s last hope is that Parliament will pass the South African National Petroleum Company Bill, and roll all its debts into a new state-owned entity, funded by the taxpayer.

PetroSA declined to comment on the 59 detailed questions we have sent to them over the past two weeks, and all emails and calls to Nako’s sleek Melrose office went unanswered.

This is the story of how PetroSA made a bad deal much worse.

(If you recall last year’s Dirty Fuels investigations, skip to Part 2: ‘Worst. Deal. Ever.’ If you want a recap, read on.)

Part 1: The deal

PetroSA should have known better: in September 2022, a little-known fuel trader, Nako Energy, offered to sell PetroSA unleaded petrol at an unusually juicy price: 50c off the government-determined basic fuel price (BFP).

Fuel trading works on razor thin margins, and the other offers PetroSA received – from Glencore, Addax and Augusta – were uneconomical. But at BFP less 50c, Nako’s offer would generate a profit of R25-million for every vessel that landed in Mossel Bay.

“There’s 50 million litres [in a tanker], so PetroSA would make R25-million profit, which is higher than any diesel cargo. That’s when really the interest in Nako became bigger,” the company’s chair and majority shareholder, Nkosinathi Ngwenya, told us.

Yet as one experienced fuel trader told me, the first question PetroSA should have asked – when confronted with a deal that seemed too good to be true – was: what is in the fuel?

Instead, PetroSA agreed to a six-month trial with Nako Energy, which would automatically be renewed for another two years if things went well: a potential R11-billion deal that PetroSA hoped would help it capture the market for unleaded petrol in the Garden Route. 

What was in the fuel?

Within a month of Nako’s first cargo being delivered, customers at TotalEnergies and Caltex stations started complaining that the fuel was leaving stains on the paintwork of certain cars and motorbikes. By February 2024, complaints had arrived from Shell and Engen as well.

An internal PetroSA investigation would later conclude that the unleaded petrol “reacted to the car paint to the extent that these cars needed to be repainted. The [fuel] affected certain paints and not all of them and also seemed to affect older cars. This was confirmed by the panel beaters in Mossel Bay who treated a few of these cars that needed to be repainted.”

The Garden Route has a relatively small market for fuel. To save on costs, the oil majors share infrastructure and buy fuel from each other: “In Mossel Bay, the established arrangement is that the oil majors [had] supply agreements with PetroSA for all fuel products from its refinery, when it was operational. Currently, PetroSA supplies these companies using imported fuel,” Phila Mzamo, a spokesperson for the Fuels Industry Association, FIASA, told us in 2025, adding this this was a “common practice in the fuel industry, known as a hospitality arrangement”.

What this means is that unbeknownst to customers, many petrol stations in the Garden Route had sourced their fuel from PetroSA, who in turn had bought it from Nako.

Internal PetroSA tests would later establish that the fuel contained very high levels of N-methylaniline (NMA), a chemical additive that can boost the octane rating of a low-octane fuel, turning an 89 unleaded petrol into a 93 or 95.

“This particular blend it was supposed to be a gamechanger,” PetroSA’s then-head of trading Vusi Xaba, told us when we interviewed him last year.

However, NMA is also toxic and can cause the build-up of gum in the fuel, which damages car engines. As a result, it’s banned as a fuel additive in Europe, China and Russia – but not South Africa.

Prepaying for fuel

By April 2024, Nako’s third cargo of unleaded petrol was on its way to South Africa: 50-million litres abroad a tanker called Daytona. But PetroSA was also facing a mutiny from its downstream customers who had pulled the fuel from their service stations.

“[B]oth Sasol and Astron Energy analysed the product and found in excess of 6% NMA,” Mzamo told us. “The NMA recommended rate is only around 1.2% – it is known above this level that gum formation is accelerated and furthermore compatibility with other materials is brought into question.”

The problem is that NMA is not banned in South Africa, nor is it tested for, so technically the NMA-laced fuel can pass the South African National Standards (SANS) tests without issue.

PetroSA was faced with a choice: accept a third cargo of Nako’s fuel and face the possibility that none of the oil majors would be willing to buy it. Or reject it – and face a legal fight with Nako.

The problem was that PetroSA had already agreed to make R150-million prepayments to Nako on each cargo, meaning that by April 2024, Nako had allegedly already been paid for a portion of the third cargo.

So PetroSA doubled down: it issued an “irrevocable and unconditional” payment undertaking to Nako, and its UAE-based supplier, Blue Ocean, promising to pay for the fuel within 30 days of it being delivered.

The fuel was delivered two months later, but two years on, half the money remains outstanding and the payment undertaking PetroSA signed now threatens to bring the state-owed entity to its knees.

The terrible diesel trade

In April 2024, the cogs were already turning on another terrible deal for PetroSA.

PetroSA had ordered two cargoes of diesel from the Swiss trader Gunvor, that it hoped to sell to Eskom for its Gourikwa Open Cycle Gas Turbines (OCGTs), also outside Mossel Bay. However, there had been no loadshedding since March, which meant that as the OCGTs were not being used and PetroSA urgently needed to find another buyer for the diesel that was already waiting offshore.

Nako Energy should not have been PetroSA’s first choice, but for reasons that we unpacked in our first investigation, it agreed to sell 50-million litres of diesel to Nako at a R1.90/litre discount.

• Read more: Unpack the unleaded petrol deal and the diesel deal in detail in our original Dirty Fuels investigations.

Nako’s CEO, Nqobani Mkhwanazi, told us that major oil companies were offering discounts of up to R1.80/litre at the time adding: “an extra 10 cents is a good incentive. By no means is it preferential”.

So, by August 2024, PetroSA owed Nako R950-million for unleaded petrol and Nako owed PetroSA R933-million for diesel. And neither side was willing or able to pay.

Initially, Nako agreed to pay for the diesel cargo in R20-million/week instalments, but after four months, it stopped, citing PetroSA’s failure to pay for the unleaded petrol in return: “Nako has paid constantly, hoping that when we pay them, they’ll pay us for Daytona, but … nothing has ever come back to us,” Ngwenya, Nako’s chair, told us last year.

Part 2: ‘Worst. Deal. Ever.’ 

By the time amaBhungane published its Dirty Fuels investigation, in May 2025, what may be the worst deal in PetroSA’s history of bad deals, had already been signed.

On 19 May, just before our first exposé, Nako and PetroSA met to sign acknowledgments of debt (AODs): PetroSA agreed that it owed Nako R605-million while Nako agreed that it owed PetroSA R825-million.

But the AOD that Nako signed contained a caveat: “The payment for the abovementioned amount will be subject to a payment plan that will be developed and agreed upon by both parties no later than 31^st May 2025.”

This was a terrible deal for PetroSA: it was handing over an iron-clad “irrevocable and unconditional” undertaking to pay Nako R605-million. In return, it would get its money but only through a yet-to-be-negotiated repayment plan.

That plan, signed a few days later, was mortifying: PetroSA agreed to honour the unleaded petrol deal, signed in 2023, which meant it would buy another 11 cargoes of fuel from Nako Energy at basic fuel price (BFP) less 45c.

At current prices, the deal would cost PetroSA R7.4-billion. It would receive a 45c/litre margin, which after 505-million litres of petrol had been sold, would potentially produce R227-million in profit – the exact amount Nako owed if the two debts were offset.

This was a slightly worse deal than the 50c/litre margin at Nako had originally offered, and seemingly amounted to PetroSA agreeing to write off the R227-million debt in exchange for keeping the original unleaded petrol deal alive.

It’s hard to see why any executive would want to pursue the original 2023 deal though: a year after receiving the Daytona’s cargo, more than half of the NMA-laced petrol was still sitting in PetroSA’s storage tanks in Mossel Bay. PetroSA had managed to sell small quantities: Nako had bought back roughly 3.7 million litres at a R1.35/litre discount and sold it to fuel stations in Gauteng. PetroSA had also moved at least 8 truckloads to Bloemfontein – at a cost of R876,000 – so that the remaining fuel could be blended with untainted fuel.

In short, PetroSA had been trying to offload the chemically-laced fuel for a year but had so far only managed to shift half a cargo (25 million litres).

Yet somehow, the executives at Nako – Ngwenya and Mkhwanazi, who had positioned themselves not just as suppliers but as trusted partners – had persuaded PetroSA that it would find a market for another 505 million litres.

Nako had apparently suggested that future cargoes could come from other suppliers, suggesting that these would not have contained the toxic fuel additive NMA, but PetroSA’s own sales data suggests it would have struggled to sell that volume regardless: between April and August 2025, it had sold just 16 million litres. The Nako deal required PetroSA to move 50 million litres every month.

Yet, when PetroSA’s acting CEO Sesakho Magadla had appeared in Parliament in June 2025, she defended PetroSA’s partnership with Nako: “From a PetroSA perspective, that partnership would have generated value and also changed the landscape for us to produce [unleaded petrol] competitively and also create value for us – and we are now being attacked.”

She added: “We’ve faced challenges. The contractual arrangements that we [have] make sure that both parties manage and mitigate against any further losses, that’s in line with contractual arrangements that are done by the industry.”

But if PetroSA thought it was negotiating with a trusted partner, the letter that arrived in August should have shattered that illusion.

Part 3: The three-way deal

Plane Tree Capital in Sandton describes itself as “bridging the gap between investors and borrowers”: they take money from investors, and they use it to give loans, including to companies like Nako Energy.

In August 2023, Plane Tree had agreed to bankroll Nako’s unleaded petrol deal. It was risky: the buyer was PetroSA, a notorious state-owned entity with the track record of not paying its suppliers – it had closed out the 2023 financial year with R3.5-billion in unpaid trade payables.

The borrower, Nako, was seemingly no more reliable: when PetroSA asked Debtsource, a trade credit specialist, to review Nako’s credit worthiness, Debtsource had given the company their lowest rating of “E”, which stood for “Unacceptable risk – recommend cash terms only. This category embraces customers who are financially weak and/or chronically unreliable in payment habits.”

Extracts from PetroSA emails suggest that by January 2024 the relationship between Nako and its lenders was already strained. Nako had delivered just two cargoes and payment to Plane Tree on the second was seemingly already late.

“Yes the funds should be in the Nako account,” an unnamed Nako executive allegedly told Plane Tree in a Friday 26 January email. “I was sitting with CFO when she approved the payment on the system. It’s now up to the back office.”

By Monday, there was still no sign of the payment, and Plane Tree’s CEO, Richard Hart, was now irate: “This is now becoming an issue for us as we are once again at month end and this payment has still not been sent over. We have a number of clients awaiting funds and it is impossible for us to run our business with this lack of clarity. Please provide an update on when we can expect these funds,” he had supposedly written, according to an email extract.

Nako had forwarded Hart’s email to Tyandela, then PetroSA Group CFO, with a note to “humbly request an early payment for the cargo”, adding: “Our funders wish to close the book”.

Nako’s late payment hadn’t been enough to end the relationship with Plane Tree though, and when PetroSA agreed to accept a third cargo of unleaded petrol, Plane Tree seemingly put up the cash to pay Blue Ocean, the supplier in the UAE.

After a 108-day delay, the Daytona finally discharged 50 million litres of unleaded petrol in Mossel Bay on 17 June 2024. PetroSA had signed that “irrevocable and unconditional” payment undertaking and was supposed to pay Nako (and in turn Plane Tree) within 30 days, but this, after all, was PetroSA.

Two years later, Plane Tree is still waiting to be paid.

Nako bares its teeth

In June 2025, the PetroSA CEO, Magadla, had told Parliament that she was working with Nako to find an amicable solution – “to make sure that both parties manage and mitigate against any further losses,” she said.

In reality though, Nako was working hard to protect its own interest: in August 2025, PetroSA received a letter informing it that Nako had ceded its debt book to Plane Tree Capital, and with it the “irrevocable and unconditional” payment undertaking (signed in April 2024) – which PetroSA had tried but failed to cancel – and the R605-million AOD (signed in May 2025). 

What this meant is that Plane Tree now owned PetroSA’s debt, and could collect the full R605-million from PetroSA whenever it wanted – even though PetroSA had signed the AOD and agreed to take more petrol from Nako in the mistaken assumption that would be part of a broader settlement.

In fact, PetroSA and Nako had drafted an over-arching settlement agreement that would have ensured that the two AODs were offset against each other. This would have left PetroSA in the comfortable position of being owed R227-million by Nako.

But before the settlement agreement could be signed, Nako had ceded its debt book to Plane Tree and PetroSA had seemingly been out-manoeuvred.

In November 2025, Plane Tree’s attorneys, ENS, sent PetroSA a letter of demand – it now wanted R620-million plus interest: “Our client hereby demands immediate payment of R620,519,979 plus interest on this amount at the prescribed rate of interest from at least 20 May 2025 to date of final payment.”

Hart, the CEO of Plane Tree, declined to say how the R605-million debt had risen to R620-million. He did, however, confirm that as of September 2026, Plane Tree had not withdrawn the letter of demand: “This matter is subject to legal and commercial discussions with the parties involved. Accordingly, we do not wish to enter into public discussions about an ongoing matter,” he told us.

“As you have the contents of our letter, you have the basis for our claim against PetroSA. The letter of demand remains active.”

Part 4: Liquidation

The cession of Nako’s debt to Plane Tree complicates things for PetroSA: Plane Tree has already demanded R620-million from PetroSA, and can bring an application to liquidate the state-owned fuel company tomorrow if they don’t pay.

PetroSA has, according to records we’ve seen, recently reduced its debt to Nako to below R500-million, but this is still more than PetroSA can likely afford to pay.

By comparison, if PetroSA wants to demand money from Nako, it must first find R7.4-billion to buy the agreed-upon 11 cargoes of fuel, then sell 505 million litres of petrol that likely no one wants to buy, just to reclaim a fraction of what it is owed.

Once the 11 cargoes have changed hands, PetroSA is entitled to claim the rest of its money, but because Plane Tree owns Nako’s debt book, it’s likely the Sandton lenders would have first dibs on any money currently in Nako’s bank account.

In short, if PetroSA wants to stay out of liquidation, it’ll likely first have to find the money to pay Plane Tree. And if Nako is no longer in business when the farcical petrol deal concludes, PetroSA risks losing its R832-million claim for the diesel it sold to Nako as well.

We put 59 detailed questions to PetroSA at the end of August and to its parent company, the Central Energy Fund, last week, but both ultimately decided not to comment.

From what we understand, officials have told the board that, in their view, Nako’s cession to Plane Tree “cannot be executed or implemented in any form or shape”, but internally, PetroSA was advised to get an urgent legal opinion to see where it stands.

On Monday, amaBhungane received a memo, apparently written by Tyandela, who is now acting CEO, and circulated to staff over the weekend, informing them that Nako has brought an application to liquidate PetroSA.

 “Management is mindful that news of the application may understandably cause concern and uncertainty among employees,” Tyandela apparently wrote. “Employees will be kept appropriately informed of material developments as the matter progresses. We ask colleagues to rely on official PetroSA communications and to refrain from speculation regarding the proceedings.”

Nako could not be reached for comment, while a spokesperson for PetroSA said: “PetroSA confirms that it has received a court application from Nako Energy in relation to the company. PetroSA is considering the application and is obtaining the necessary legal advice. The matter is before the Court and PetroSA will respond through the appropriate legal process.”

The taxpayer to the rescue?

The one downside for Plane Tree – or anyone else seeking to liquidate PetroSA – is that the state-owned entity is already hopelessly broke: SARS is owed R4-billion and last year moved to seize the shuttered Mossel Bay refinery as collateral. PetroSA also owes over R700-million to fuel trader Addax, according to leaked records we have seen.

But things are looking up for Plane Tree because minerals and energy minister Gwede Mantashe has asked Parliament to pass the South African National Petroleum Company (SANPC) Bill, which would merge PetroSA with three other state-owned companies: SANPC, the Strategic Fund and iGas.

If the Bill is passed in its current form, both the debts and the assets of PetroSA would pass to the newly-enlarged SANPC. But, as amaBhungane has pointed out in a presentation to Parliament, the Bill would also open the door for government bailouts.

“The Minister of Finance may, from time to time, approve advances and grants to the company… the Minister of Finance may approve special levies to provide funds for the Company…” section 26 of the Bill reads. 

Opposition parties are pushing back though. Last month, in a rare show of unity, MPs from the DA, EFF, MKP and ATM backed a letter written by the DA’s James Lorimer, calling for debate on the Bill to be stopped until PetroSA makes a full disclosure of its financial affairs.

“The fact that PetroSA has remained so opposed to revealing full details of its operations must on its own give rise to a suspicion of malfeasance or gross failure that is being concealed in order to save staff or officials from accountability,” Lorimer wrote in a letter read out by the chair of the Portfolio Committee on Mineral and Petroleum Resources, the ANC’s Mikateko Mahlaule. 

On Tuesday 22 September, officials from the Department of Mineral and Petroleum Resources are scheduled to appear in Parliament to answer questions about rapidly deteriorating state of PetroSA’s finances.

The main culprit on PetroSA’s balance sheet? Nako Energy.

The post PetroSA was owed R227m. It may end up losing R1.4bn instead. appeared first on AmaBhungane Centre for Investigative Journalism.

Four months later though, Equator was liquidated for failing to pay a R725 000 debt to a First Division soccer player. 

“This discovery,” he later told the Johannesburg High Court, “shocked me considerably”.

The liquidation application had been granted without his knowledge, he claimed, and against the wrong company. And the sheriff who was supposed to serve the papers on him had instead left them stapled to the gates of a construction site that had once been his home address. 

“To make matters worse, the first time that the liquidation proceedings came to my … knowledge was on 25 July 2024 when I saw an article by Susan Comrie of amaBhungane.”

• Read our original investigation: Own goal – How PetroSA’s multibillion-rand offshore gas deal was thwarted by an unpaid soccer player: https://amabhungane.org/own-goal-petrosas-multi-billion-rand-offshore-gas-deal-thwarted-by-unpaid-soccer-player/

And while Mulaudzi was trying to get up to speed with a case he had never heard of, PetroSA’s new CEO moved to cancel his contract.

“I engaged [my attorneys] for assistance … investigations into the matter were conducted, including the reason [Equator] was liquidated, by whom, when and how.”

The only problem? Mulaudzi’s story under oath seems to be a fabrication. 

Instead, court papers suggest that the man tapped to lead the roll-out of the country’s gas infrastructure lied to the court in a bid to escape liquidation, then – when that didn’t work – reached a cash settlement with the soccer player and the liquidators to withdraw from the case.

The result: the liquidation of Mulaudzi’s company, Equator Holdings, has been reversed, and according to a report from Africa Intelligence, there are attempts to resurrect his R20-billion gas deal with PetroSA as well. 

“The winding up of the company was set aside by the High Court on 23 October 2025,” Mulaudzi’s lawyer, Nicqui Galaktiou, confirmed to us in December.  

But when we asked for a copy of the judgment, Nicqui Galaktiou Inc – notorious among journalists for their aggressive defence of their clients – went quiet. 

When we followed up with them in January we were told: “Please note that we no longer represent Mr Lawrence Mulaudzi. In the event that amaBhungane intends to publish any article in this regard, we request that this firm be excluded from the content thereof. Thank you.”

They weren’t the only ones ducking accountability: from Mulaudzi to the lawyers to the soccer player and PetroSA, no one wanted to talk about this case. Here’s why.

The broke soccer team

Draw a line on a map from the offshore gas fields near Mossel Bay to the furthest point on South Africa’s border. The last town on the line is Thohoyandou in Limpopo, home of Tshakhuma Tsha Madzivhandila Football Club (TTM).

Two worlds – gas and soccer – that would never have met, if it wasn’t for the club’s owner, Mulaudzi, and a piece of paper he filed with the National Soccer League.

In July 2022, former Bafana Bafana player Cheslyn Jampies agreed to join TTM as the captain. 

“The first month came, our monies were short,” Jampies told us when we interviewed him in 2024. “Obviously, me as the club captain I stand as the mouthpiece between the management and the players. When we go and ask, ‘Hey, what do we tell the boys?’ Because we are the senior players, they come to us to help them financially… so we needed answers and we never got that. We were brushed off many times, we were told, ‘just hang on’.”

By November 2022, the club had stopped paying him altogether and both sides agreed to part ways. At this point, it owed Jampies two months’ salary. Total: R70 000. 

When the club failed to pay, Jampies approached the Dispute Resolution Council of the National Soccer League (NSL), who ruled that the club should now pay him three months’ salary. Total: R105 000. 

When the club ignored the ruling, the NSL awarded Jampies a damages claim. Total: R725 000.

Relegation

According to Mulaudzi, who is both the owner and chair, it was the team’s untimely relegation that was blamed for TTM not paying its debts.

“At the time of the award TTMFC was a member of … the National First Division [and] entitled to a monthly grant of R575 000 during the season,” Mulaudzi told the Johannesburg High Court. “The grants constitute the main source of income for the vast majority of PSL member clubs and are consequently used … to pay players’ salaries.”

The plan, he told the Court, was to use the monthly grant to pay Jampies: “However, at the end of that season … TTMFC was relegated to a lower league … The consequence of this relegation was that TTMFC was not entitled to receipt of any grants. It was therefore unable to make payment.”

The relegation shouldn’t have come as a surprise though. The final match of the season had been played in May 2023. So by June, when the NSL ruled in Jampies’s favour, the club knew it was out of cash. 

The controversial piece of paper

By July 2023, it was clear that Mulaudzi’s TTM had no intention of paying, so Jampies approached the NSL for a copy of club’s ownership record. (Soccer clubs are notorious for playing shell games with legal entities, his lawyer, Evert de Bruyn, previously told us.)

According to the NSL’s records, the legal entity behind TTM was Mulaudzi’s investment company, Equator Holdings. The same Equator Holdings that had just been selected as the winning bidder for PetroSA’s R20-billion gas infrastructure deal.

“The document it is factually incorrect in that the TTMFC is not owned by [Equator Holdings]. It is in fact owned by a company established … in 2017 for that precise purpose … Tshakhuma Tsha Madzivhandila Football Club (PTY) Ltd,” Mulaudzi told the Court in 2024.

“When I completed [the form] I must have got confused between the two companies… It was a simple error which anyone in my shoes could have made.”

The result, Mulaudzi would tell the court, was that the liquidation order, brought by Jampies in December 2023, “was … granted against the wrong company in these unfortunate circumstances”.

But the extent of Mulaudzi’s misleading narrative only became clear when Jampies filed his replying affidavit in January last year. 

Jampies didn’t hold back: “This explanation,” he told the Court, “is farcical and transparent … I will now deal with why it is also patently false.”

Another unpaid soccer player

Back in August 2021, Zimbabwean goalkeeper Edmore Sibanda had signed a deal to join TTM, which had just bought the Premier League status of Bidvest Wits for a rumoured R35-million. 

But things quickly soured after a career-ending injury forced him to retire and TTM failed to pay R600 000 that they owed him. After Sibanda complained to FIFA, the international governing body, the club was hit with a transfer ban. 

In January 2023, the club agreed to settle with Sibanda. But then, they accidentally paid him twice. 

In an email, attached to the court papers, TTM’s then-lawyer Kabelo Mashigo asked De Bruyn (co-incidentally also Sibanda’s lawyer), to refund one of the payments. To process the R390 000 payment, De Bruyn asked for TTM’s FICA (Financial Intelligence Centre Act) documents, including details of who owned TTM.

According to the letter that Mashigo provided – signed by Mulaudzi – TTM’s legal name was Equator Holdings. 

Blindsided

Mulaudzi has always claimed that the news of Equator’s liquidation had blindsided him, and that the first he heard of it was when amaBhungane published its article in July 2024.

We reached out to him before both this article and the 2024 article were published, but Mulaudzi ignored our calls and emails.

Instead, Mulaudzi told the Court: “Had I known that the liquidation proceedings had been threatened or launched, I would immediately have taken any necessary steps to oppose it and to procure payment of the award to [Jampies].” 

When the sheriff served the summons, his home in Sandhurst’s Oxford Avenue was undergoing a renovation: “The new entrance gate … was itself under construction at the times of the alleged services. It is presumably to this partially constructed gate that, according to the returns of service, the Sheriff allegedly affixed the relevant documents,” he told the court.

This blunder, he claimed, meant that he never received the papers: “I cannot say why the Sheriff did not make proper enquiries as to how he could access and enter the property in order to serve the document in question on a human being. Surely that was his duty? This state of affairs is wholly unsatisfactory. Not one of these services came to my attention or, to the best of my knowledge, to that of any responsible person who might have mentioned it to me.”

But here, again, Mulaudzi’s story falls flat.

‘Would Jampies take 200k?’

Court papers show that the final liquidation of Equator Holdings was granted on 7 March 2024. 

According to Mulaudzi, the first time he learnt about the liquidation was four-and-a-half months later. 

But barely a week after the liquidation order was granted, TTM’s lawyer reached out to Jampies’ lawyer to discuss a settlement.

“Mashigo informed De Bruyn verbally that his client, Mulaudzi, had informed him of a liquidation served at his property,” Jampies told the Court, attaching a confirmatory affidavit from De Bruyn.

We asked Mashigo if this was accurate, but emails to his sports agency, K4 Alchemy Consult, went unanswered.

There was also another reason for Mashigo to reach out: earlier that day, the soccer website KickOff had published an interview with Jampies where he claimed he had received a court order liquidating the club. 

Sunday World had already reported, back in December 2023, that Jampies was bringing a liquidation application, but now Jampies said the Court had ruled: “Because the outcome only came on Thursday [March 7, 2024], so they will serve Mulaudzi the papers around Monday,” he told KickOff.

In a follow-up email to De Bruyn, Mashigo asked for “all documents filed on behalf of Mr Jampies in relation to any claim again TTM FC and/or Mr L Mulaudzi”. After De Bruyn emailed a copy of the court papers, Mashigo sent a WhatsApp: “[W]ould Jampies take 200k full and final,” he asked.

Financial undertakers

In seems impossible that, by April 2024, Mulaudzi didn’t know that his soccer club – and thus his R20-billion company – had been liquidated. Yet he was still pushing deals in Equator’s name.

In May, he submitted a proposal to the National Skills Fund, requesting a R3.5-billion grant which would be used to train artisans at PetroSA and – conveniently – would include R1-billion in funding to repair PetroSA’s offshore oil and gas rig. 

• Read PetroSA’s R3.5-billion ‘raid’ on student funding: https://amabhungane.org/petrosas-r3-5-billion-raid-on-student-funding/ 

He was also still approaching funders in a desperate bid to meet the 10 June 2024 deadline imposed by PetroSA’s R20-billion gas infrastructure deal.

Legally though, Mulaudzi was no longer in control of his own company; it had been handed over to two liquidators: Bennie Keevy of Commonwealth Trust and Anneke Barnard of BDO.

The job of a liquidator is mercenary: where a business rescue practitioner is tasked with trying to steer a company out of financial trouble, a liquidator simply sells off the assets to settle any unpaid debts. More financial undertaker, than emergency surgeon.

In August 2024, the Master of the High Court asked retired magistrate Martin Kroukamp to hold a commission of enquiry to identify any assets that Equator may have. In a summons, attached to the court papers, Mulaudzi was told to present himself at the offices of Senekal Simmonds law firm and bring all Equator’s financial records.

Kroukamp wouldn’t speak to us about what happened: “Due to the nature of [enquiry] and the privacy entrenched in terms of section 417/418 [of the Insolvency Act], I am barred to disclose any information surrounding the matter,” he said in a WhatsApp.

He added: “the Enquiry never proceeded as the relevant parties reached a settlement before any evidence was taken.”

Equator’s co-director, Markam Naidoo, disputed this. He said he appeared at the inquiry and told them what he knew about the business but that Mulaudzi appeared to be “unreachable”.

Keevy, the liquidator, confirmed that Mulaudzi had appeared at the inquiry but declined to say any more.

Instead, Mulaudzi decided to fight.

The door opens

In November 2024, Mulaudzi approached the Johannesburg High Court to have the liquidation overturned. This is where the affidavits would be filed with Mulaudzi’s claim – “I must have got confused between the two companies” – and Jampies’ counter that this was “farcical and transparent”.

“Mulaudzi has not disclosed to the Honourable Court as to why he seeks to take [Equator] out of liquidation,” Jampies told the court in January 2025. “[Equator] has been awarded a significant tender by PetroSA. Until such time as [Equator] is taken out of liquidation, the tender awarded to [Equator] remains at risk.”

In April 2024, PetroSA had appointed a new CEO, Xolile Sizani, which was bad news for Equator. In July, after Equator failed to meet the funding deadline, Sizani asked the board for permission to terminate Equator’s contract. But then, in October, Sizani was suspended, and Equator seemingly saw an opening.

• Read: The deal that got PetroSA CEO suspended: https://amabhungane.org/the-deal-that-got-petrosas-ceo-suspended/ 

In a letter to PetroSA’s board chair, Mulaudzi’s then-lawyer, Galaktiou, complained about the hostility Equator had received from PetroSA: “With all due respect, Equator is of the view that of all stakeholders of the project, PetroSA has been the only stakeholder frustrating the process,” she wrote.

Equator, she added, “has not received any communication whatsoever from PetroSA as to the intended cancellation of the Agreement … as far as Equator and our client are concerned, the Agreement remains valid, enforceable and binding between Equator and PetroSA.” 

The application to overturn the liquidation order – which had been granted seven months earlier – was “imminent”, she assured the PetroSA board. 

In March 2025, the door opened even wider: Sesakho Magadla, the PetroSA official who had championed Equator’s cause and signed its contract, was brought back as interim CEO.

Getting Equator out of liquidation now became urgent. 

Endless promises

When Mulaudzi approached the Court in November 2024 to have Equator taken out of liquidation, he promised that all the creditors would be paid.

“I shall personally ensure that [Jampies] will be paid all the monies due to him,” he told the Court, adding that this would extend to anyone else Equator owed money to: “I shall ensure that whatever claims these creditors entertain against [Equator]  are paid promptly as and when they fall due once the liquidation is set aside…”

Mulaudzi has a history of leaving creditors unpaid, and one of them, Karen Fernandes, had heard these promises before. For years, she had been trying to get Mulaudzi to pay over R500 000 that he owed to her company, Sure Gullivers Travels.

“I haven’t received any money at all. I’ve had promises. Despite a lot of promises by Mr. Mulaudzi – he says he’ll pay when he has the money,” she told amaBhungane when we contacted her recently. 

She added: “He’s as smooth and slippery as they come. It’s inhumane – you can’t live a lifestyle like that [when you owe people money]”.

Fernandes was one of three creditors cited in the liquidation rescission case. The second creditor, Value Chain Construct, had done consulting work for Equator on a proposed gas plant. “We went the full course and settled with them through the courts,” director Jaco Human told us, adding: “We’re not owed any more. And most importantly, we’ve disassociated with them completely.”

The third creditor, Wood PLC, an international engineering consulting firm, confirmed that it also remained unpaid. “When Equator entered liquidation proceedings, an amount remained unpaid. Wood assessed the circumstances and decided not to pursue,” senior legal counsel Stefan van der Walt confirmed.

When Jampies filed his answering affidavit in January 2025, he begged the court to not believe Mulaudzi’s assurances that everyone would be paid. 

“I have set out my past experience with Mulaudzi, and in particular the empty promises he has made relating to payment to me in the past. I submit that this tender is nothing more than another one of his empty promises,” Jampies told the court.

In terms of court rules, Mulaudzi had 10 days to file a reply. Instead, eight months later, he presented the court with a settlement.

The cash settlement

In any liquidation, there is a strict hierarchy of who benefits from the assets. First in line are secured creditors, such as a bank that has issued a loan. Next are preferred creditors, such as SARS. And last are unsecured creditors, like Jampies. 

With one caveat: before any creditors are paid, the liquidator must get his or her fees. And because of the obvious potential that liquidators could overcharge, the Master of the High Court normally approves the liquidators’ fees.

By August 2025, Equator’s liquidators, Bennie Keevy and Anneke Barnard, had racked up fees of R350 000. So, when Mulaudzi approached the liquidators about a settlement, they were first in line. 

The six-page settlement, filed in court a month later, was a climb down: “Equator Holdings (PTY) Ltd T/A Tshakuma Tsha Madzivhandila Football Club acknowledges that it is truly and lawfully indebted to Cheslyn Chase Jampies in the amount of R725 000, together with interest,” it read, ignoring Mulaudzi’s earlier claim under oath that Equator was definitely not the legal entity behind TTM.

To settle with both the liquidators and Jampies, Mulaudzi agreed to “make payment to Cheslyn Chase Jampies and the Liquidators in the sum of R750 000 as a full and final settlement of the principal debt … together with the legal costs and administrative costs incurred by the liquidator”.

In other words, the R750 000 settlement would have to be split between Jampies and the liquidators.

Jampies did not wanted to speak about the case but Keevy, the liquidator, confirmed that their fees were paid: “[I]t was agreed between Mr Mulaudzi and Mr Jampies that Mr Jampies would pay the liquidators costs and disbursements… Mr Jampies (via his attorney) was provided with a breakdown of how the fees and disbursements were made up and calculated … and at the request of Mr Jampies, a reduced settlement figure was provided to him, negotiated and agreed upon,” he told us over email.

This would not be overseen by the Master of the High Court, but instead would be a private deal signed by the liquidators, Jampies, Mulaudzi and seven witnesses.

“[T]he Master’s Office has no involvement in any alleged settlement agreements,” a spokesperson for the Department of Justice confirmed. “The Master’s Office does not participate in, negotiate, or facilitate settlement agreements between private parties in matters of this nature.”

In exchange, Mulaudzi would get exactly what he wanted: “Jampies and the Liquidators, to the extent permissible, shall not oppose the application to rescind the … court order” that had placed Equator into liquidation. 

We asked Keevy and Barnard why none of Equator’s other creditors were included in the settlement. Keevy told us that none of the other creditors had come forward to prove their claim: “[A] liquidator can only have regard to proven creditors. Any other party who is not a proven creditor is simply a member of the public,” he said.

Fernandes, the travel agent, told us that Mulaudzi had persuaded her not to bring a claim. “He was saying I shouldn’t contact my lawyers because it’ll compromise the process. He refused to sign an acknowledge of debt – he says he can’t make promises to me,” she said.

The resurrection of Equator Holdings

Even with the settlement signed and paid, there was no guarantee that Equator would be resurrected.

“[S]etting aside a winding up order is akin to raising the dead,” Werksmans attorney Jennifer Smit wrote in a 2023 article memorably titled “When a séance to raise the dead is permissible”, adding: “it is not a matter of simply coming to court to say that the creditors can now all be paid and that business is solvent.”

As Smit went on to explain, a liquidation order could only be set aside in “exceptional circumstances” and only when the directors have a “satisfactory explanation” for why they didn’t oppose the liquidation in the first place and file an appeal.

In Mulaudzi’s case, he had told the Court under oath that he didn’t know about the March 2024 liquidation order until we published our article in July. But that claim was undermined by the WhatsApp and email trail showing that his own lawyer reached out about a settlement within days of the judgment being handed down.

All of this should have been weighed by the judge who presided over the rescission application in October 2025. But by this point, Jampies had withdrawn from the case – part of the deal in the settlement – and since the Master did not object, the judge granted Mulaudzi’s wish: Equator Holdings was back in business.

But when the newly resurrected Equator came knocking again, in November 2025, PetroSA should have shown them the door. Not just because of the liquidation, or Equator’s failure to find a funder, or even Mulaudzi’s apparent perjury, but because of a damning review by PetroSA’s own internal audit team.

The consortium

When PetroSA appointed Equator to act as its funder and infrastructure developer, in May 2023, it thought that Equator had been selected through a fair tender process. 

But in August 2024, PetroSA’s internal audit team had delivered a draft report to senior executives laying bare how flawed the original tender had been.

The non-negotiable was bidders “must be an established player, or credible financial institution”. Equator may have been trading as a First Division soccer team, but it was not a credible financial institution. 

So how, we had wondered in our January 2024 investigation, had Equator been selected?

• Read our original January 2024 investigation that exposed the Equator deal for the first time:  https://amabhungane.org/petrosa-taps-notorious-political-operator-for-massive-offshore-gas-deal/ 

“Management comments”, included the draft audit report, show that Equator had listed several “project partners” in their bid, including Wood PLC, the engineering company that was now owed money, and TotalEnergies, the French oil major: “The evaluation was based on Equator and their Project Partners as a collective,” the management team said.

“It is common for such complex project to have [a] consortium submission,” Sesakho Magadla, PetroSA’s then-acting COO, told the internal audit team. “The Evaluation team evaluated the bid holistically rather than just looking at Equator Holdings. The partners listed in this paragraph are well-known investment players in the industry. E.g One can look at local and international major projects in oil and gas. They are generally done by consortium which can nominate a leader.”

In other words, it didn’t matter that Equator wasn’t a major player because TotalEnergies and Wood were on board. Right?

We contacted TotalEnergies to ask if it had been part of a consortium bidding for the PetroSA tender – it ignored our emails.

Mulaudzi and TotalEnergies are partners indirectly: in 2014, the Public Investment Corporation (PIC) agreed to fund a R1.8-billion buyout of TotalEnergies’ BEE partner, Tosaco. Mulaudzi’s Black Gold Investments owned 10% of the new BEE consortium.

But this in no way meant that the French oil giant was on board for a R20-billion deal with a state-owned entity that was teetering on the edge of its own liquidation. 

Wood PLC, however, was unequivocal: “Wood was not involved in Equator’s bid for RFP0004/2023 and was not a project partner,” senior legal counsel Stefan van der Walt told us. “The company had no visibility of, or participation in Equator’s submission and any reference to Wood in Equator’s materials was made without our knowledge or approval.”

Scope creep

Another issue red-flagged by the internal audit team, was that Equator had bid only for a contract to provide funding to PetroSA’s infrastructure expansion, yet the contract signed in December 2023, appointed Equator to both bankroll and execute the R20-billion project.

These were very different offers: no one wanted to fund PetroSA, which is why the tender had attracted just five bids. But now, Equator would be in charge of executing a massive infrastructure project.  

Equator was not an engineering company, so PetroSA agreed to give Equator six months to provide “evidence that it possesses the necessary technical capability” to handle the contract it had already been awarded.

This, the internal audit team concluded, was not only a breach of the Public Finance Management Act, but PetroSA could face lawsuits from other bidders who weren’t given the opportunity to bid on the same terms. 

Magadla, who had been the acting COO and Project Sponsor, told the internal audit team: “During the negotiations one of the major challenges to overcome was the fact that the asset was to remain the asset of the state and was not to encumbered in anyway…. The funders needed assurance on how they would recover their investment.”

The only way to give that assurance was to sweeten the deal: “The only thing that was at PetroSA’s disposal is participation in the full project lifecycles,” she said.

PetroSA was so broke that it putting up funds itself was out of the question, she added: “it was even battling to cut grass on the basis of financial strain.” 

The penniless partner

When the internal audit team delivered its draft report in August 2024, the management team had assured the auditors that they were in the process of cancelling Equator’s contract. 

Technically, the contract had lapsed when Equator failed to deliver a funder by PetroSA’s June 2024 deadline. But even after Equator was placed in liquidation and control of the company handed over to the liquidators, Mulaudzi had kept fighting to keep the deal alive.

Over the next year, Mulaudzi negotiated, paid and signed the settlement with Jampies and the liquidators that would bring Equator back to life.

On 1 December 2025, a small article appeared in Africa Intelligence, a niche website that often has the inside scoop on PetroSA: “Against all expectations, this month PetroSA asked its internal governance committee to go back on the termination of the gas contract with Equator Holdings … the public company sought the committee’s approval to restart discussions with Equator,” the article said, citing a confidential memo. 

With a touch of salt, the article added: “The state firm has … reconfirmed its trust in this penniless partner.”

We tried to verify this with PetroSA, but the notoriously secretive state-owned entity would not budge. “PetroSA reserves its comment on RFP0004/2023 as the matter is currently sub judice,” it told us, adding that it was concerned about speaking publicly about matters that are before court.

• Public figures love to shout “sub judice” when confronted with tough questions. AmaBhungane’s advocacy co-ordinator Caroline James explains why they’re deliberately misinterpreting the law: https://amabhungane.org/outdated-reliance-on-sub-judice-hinders-the-constitutional-imperative-of-transparency/ 

There are no court challenges to the Equator tender (RFP0004/2023), but as PetroSA explained, there is a case against a related tender: RFP0001/2023 that was awarded to the sanctioned Russian bank Gazprombank. 

Ironically, the scope creep that the internal audit team had red flagged in its report, meant that Equator’s R20-billion contract had trespassed into Gazprombank’s scope of work. So for the foreseeable future, PetroSA would be staying silent.

Following publication, the liquidator confirmed that Mulaudzi had appeared at the 417 inquiry. The story has been amended to reflect this.

The post Delinquent soccer club boss seeking to revive $1.2bn gas deal with PetroSA appeared first on AmaBhungane Centre for Investigative Journalism.

Yet ANC chair Gwede Mantashe has suggested that these unemployed youths have only themselves to blame.

“The ANC has given you a fishing rod — must it now catch fish for you?” Mantashe, who is also the minister of minerals and petroleum, said during a recent SABC interview.

“I’m now over 70, I’ve never had government looking for a job for me, never. The difference is that today, because we have a progressive government, people expect government to go and give them jobs…”

Yet an amaBhungane investigation has uncovered how PetroSA – a state-owned entity in Mantashe’s portfolio – attempted to divert R1.2-billion from a fund earmarked to provide training to unemployed youth.

The National Skills Fund (NSF), which is financed by a 1 percent tax on every employer’s salary bill, is meant to fund training for unemployed youth, provide bursaries to students, and build technical and vocational education and training (TVET) colleges to train artisans.

The R3.5-billion grant that PetroSA requested from NSF in May 2024 would have paid for an opaque scheme to train 5 500 artisans who would supposedly become the future workforce for the oil and gas industry. But documents show that R1.2-billion would have been used to fix PetroSA’s ailing offshore oil rig.

The scheme was the brainchild of political operator and  soccer club owner Lawrence Mulaudzi whose company, Equator Holdings, had been awarded a contract to secure funding to pay for PetroSA’s offshore infrastructure revamp.

The project was ultimately never funded after both PetroSA and the NSF pulled out of the deal.

But what it illustrates – and why we’ve taken the time to write about a deal that failed – is how it is possible for the well-connected to extract billions of rands from the NSF, while desperate students and unemployed South Africans are left out in the cold.

Mantashe dodged the question of whether he had been aware of the PetroSA and Equator proposal: “Whether I’m aware of not it doesn’t matter. I am not an operator, I’m doing political oversight,” he told us.

Asked whether he thought it was appropriate to use R1.2-billion, intended for training, to repair a piece of infrastructure that would primarily benefit the oil and gas industry he said: “The amount is an operational matter. But if they are training artisans, I would support them.”

Equator was desperate

PetroSA is not officially bankrupt, but it is effectively insolvent, with its debts exceeding its assets and creditors going unpaid. The depth of its crisis was laid bare in December, when SARS moved to attach its Mossel Bay refinery over unpaid tax bills.

With the company’s assets largely idle, its only hope of being resuscitated is to breathe life back into its offshore oil and gas wells and, in turn, the Mossel Bay refinery.

In 2023, PetroSA signed a series of deals to do just that. The biggest had appointed an obscure company, Equator Holdings, to secure up to R22-billion in funding to refurbish PetroSA’s deep sea platform and build new oil and gas infrastructure.

The controversial agreement acknowledged that Equator had neither the expertise nor the money for a project this weighty, but PetroSA gave the company six months – until June 2024 – to come up with the goods.

By May 2024, Equator was desperate. A long line of suitors had been presented to PetroSA, but none had stuck around.

The first had been the Industrial Development Corporation (R1-billion), then Corban Energy ($200-million), followed by Hong Kong’s Hilong Petroleum Engineering Company, but none were willing to actually commit.

If Equator couldn’t secure funding by 10 June 2024, it would lose the entire offshore gas deal. What it needed was someone with a large pot of money who was equally desperate.

Enter the National Skills Fund

The National Skills Fund (NSF) is one of 26 entities that report to the Minister of Higher Education. While NSFAS – which provides student bursaries – is often in the news, the NSF mostly flies below the radar.

But with 58 percent of the country’s youth unemployed, there is pressure on the Fund to do more.

Over the next five years, the Fund plans to spend R34-billion on training. Counterintuitively, the problem isn’t finding the money for this ambitious target – SARS collected R24-billion from the skills development levy last year – it’s finding worthwhile projects to fund.

Last year, the Fund had a budget of R5.8-billion but only managed to spend R4.6-billion because, amongst other reasons, projects that were approved couldn’t meet milestones to justify releasing more money.

“This resulted in under expenditure of R1.2-billion,” Nkosinathi Sishi, the Director-General of the Department, wrote in the annual report. “This shortfall remains a serious concern, as it represents missed opportunities to deliver impact at the scale envisaged…”

The pattern is familiar: in 2023/24 the Fund underspent its budget by R3.7-billion. This, Tebogo Letsie, the chair of Parliament’s portfolio committee on higher education noted, was contributing to “growing despair among young people about their future prospects”.

In response, acting CEO Melissa Erra said that the Fund was struggling to approve proposals, some dating back to 2023. The Fund was short-staffed, she admitted, and the due diligences had become complex, which only made it harder to get money out the door.

To deal with the bottleneck – and achieve government’s goal of training 30 000 artisans a year by 2030 – the Fund has adopted a “massification” strategy to scale up successful projects and approve “fewer but larger programmes”.

So, when Equator placed a phonecall in May 2024, offering to take a few billion rand off the Fund’s hands, officials were seemingly delighted.

A catalogue of fraud

The Fund’s desperation to give away billions had already made it a target for fraud. Years of forensic investigations, audit warnings and unanswered questions have exposed a pattern of corruption, mismanagement and missing money.

In 2021, the Department commissioned Nexus Forensics Services to investigate ten projects after the Auditor-General discovered that R2.5-billion couldn’t be accounted for over the preceding two financial years.

The report reads like a catalogue of fraud and embezzlement. A R39-million project in Kwazulu-Natal was supposed to train 250 students to farm rabbits. The project promised to deliver 10 000 rabbits, but when investigators arrived, they only found 450 rabbits and a top-of-the-range Nissan Navara bakkie parked outside.

The revelations from the Nexus report should have made the Fund’s officials hyper-vigilant to any whiff of scandal, which, in Mulaudzi’s case, is not hard to sniff out.

Instead, the written record shows that Tendani Moila, the Fund’s acting director for Skills Development Implementation for the Western and Northern Cape, was enthusiastic.

In an email, sent six days after Mulaudzi’s phonecall, Moila asked him to “facilitate a meeting between the NSF and PetroSA to formalise the partnership”.

We managed to reach Moila earlier this month and asked why, on the basis on one phonecall, she had been so keen to rush into a deal with PetroSA and Equator.

“NSF did not go to PetroSA for the Equator proposal, not at all,” she told us. “Whether it has been submitted to the National Skills fund or not, the intention here was that a stakeholder – which is PetroSA – was identified. Even if it came through a particular individual or service provider, our role is to engage a state-owned entity.”

She added: “We don’t have any business with Equator. We didn’t go to PetroSA to discuss the application for Equator.”

The proposal

At 9pm, the night before the meeting, Mulaudzi’s 42-page proposal landed in Moila’s inbox – “as promised”. Together, Equator and PetroSA planned to offer:

• 2000 apprenticeships (3 years),
• 1500 spaces for graduates-in-training (2 years), and
• 2000 spaces for students who required practical, in-service training to complete their qualifications (2 years).

But only if the Fund agreed to give Equator and PetroSA R3 486 795 541.

Despite the audacity of the request – R3.5-billion was double what the Fund had spent in the previous financial year on all its training programmes combined – there was very little information about what training PetroSA and Equator planned to offer.

The closest the proposal came to firm commitment was: “PetroSA & Equator Holdings will ensure that trades that are in demand for the economy … such as diesel mechanics, instrument technicians, riggers, auto electricians and millwrights are prioritised.”

Equator had no experience in offering training. PetroSA’s own due diligence from six months earlier identified the company as “a special purpose vehicle” and “an investment holding company”.

PetroSA’s own training facility, the Centre of Excellence, was registered to provide NQF level 4 training for mechanics, electricians, riggers and several other trades, but it had never provided training on this scale.

In 2024, it had offered just 93 apprenticeships. Now, Equator was offering, on behalf of PetroSA, to recruit 5 500 students before the end of the year.

Magadla’s pet project

Despite being PetroSA’s then CEO, Xolile Sizani had no idea that the company he ran had offered to open its doors to 5 500 students. That news only reached his desk on 23 May 2024, when Moila and a delegation from the NSF turned up at PetroSA’s Mossel Bay plant.

Emails show that the visit had been co-ordinated by Sizani’s predecessor, Sesakho Magadla. An email, sent by Magadla to Moila, suggests that she had given the Equator proposal her full support:

“One of the critical partnership is the development of Block 9, Offshore Production Rig (FA Platform) and Gas Processing Infrastructure development in Mossel Bay. Equator Holding has entered into an agreement with PetroSA [for] Gas and Gas Finance and Redevelopment. This will require thousands of technical skills during construction and post construction,” she told Moila in a 13 May 2024 email.

But by the time Equator’s proposal landed in Moila’s inbox on the night of 22 May 2024, Magadla had been shown the door.

Magadla had briefly been acting CEO but was moved to the acting COO position in April 2024, when Sizani was appointed.

The demotion had created a toxic work environment, according to Sizani. In a subsequent letter to the board, he wrote: “I found her to be a very difficult person to work with and, unfortunately, extremely insubordinate and condescending … Our relationship had reached a stage where she did not respond to some of my emails or brief PetroSA GCEO [me] about certain meetings and events she was attending or attend hand-over meetings.”

One of the projects that Magadla had seemingly failed to mention: the potential R3.5-billion grant from the NSF.

Logistical flaws

A midday email shows that while officials from the Fund were being given a tour of the Mossel Bay plant, PetroSA’s new CEO was scrambling to get up to speed.

“Please have [a look] at the attached document in the context of training and whether it is aligned with our training strategy and budget,” he wrote, forwarding Equator’s proposal to executives in the legal, human capital and capital projects departments. “I am not sure if we have the infrastructure and human capital to train thousands of artisans in our training centres.”

PetroSA has a training campus in Mossel Bay – the Centre for Excellence – but as the head of human capital, Tumelo Mokwena, pointed out in a reply: “The upper limit of our own capacity is 120 learners per annum.”

PetroSA has previously puts the number at between 150 and 300, but still far short of the 5 500 envisaged. So where, we asked, would these students be trained?

This was one of 39 questions that amaBhungane recently put to PetroSA. Despite the damning implications, the company chose not to answer.

Sizani has been on suspension for over a year, and in his place, Magadla has returned to her position as interim CEO. “We will not be commenting on the questions shared,” a PetroSA spokesperson said in response.

Equator declined to comment as well. Instead, they sent their lawyer to tell us: “[T]hey do not wish to respond to the enquiries. They are of the view that regardless of any response the intended article will nonetheless be unfair and misleading.”

R634 000 per student

At R3.5-billion – or R634 000 per student – the Equator and PetroSA training programme would also be one of the most expensive on the market. To train as boilermaker or rigger generally costs around R200 000 for a three-year apprenticeship.

But this course would include some expensive extras.

To administer the project, Equator and PetroSA would pay themselves R242-million as a project administration fee. This was on top of the R363-million that would be spent on training, R780-million on accommodation and R826-million that would be distributed to students as a monthly stipend.

But the biggest single line item was the R1.2-billion earmarked for repairs to the FA platform, a deep-sea rig that is built on top of its now-defunct gas wells. And it’s here, at least, where alarm bells should have gone off.

Trickle down training

The NSF can fund infrastructure projects: over the next five years it plans to spend R4.2-billion on major upgrades to six TVET colleges, four of which are in the Eastern Cape.

But the FA platform isn’t a TVET college where generations of students would benefit from the investment in its infrastructure. The platform is 80 km offshore and can only be reached by boat or helicopter.

Currently, PetroSA spends around R100-million a year on the helicopter flights that rotate the roughly 100-member crew on and off the platform, and another R160-million a year on supply boats, making it impractical as a training facility for thousands of students.

Despite this, Equator told the NSF that their goal would be “to provide… apprentices with practical training experience in the offshore refinery during the refurbishment and planned maintenance”.

In addition to this, Equator argued that the investment in the FA platform would eventually trickle down to students: “This will accelerate production and optimise the operation [of the Mossel Bay on-shore refinery], which in turn will benefit the graduates and student with access to opportunities like employment and further training,” it wrote.

The maths isn’t mathing

Aside from being light on detail, the proposal that Mulaudzi sent to Moila the night before the site visit, was also light in other ways.

In the 42-page proposal, R1.2-billion had been earmarked for FA platform to repair things like fire suppression systems, life rafts and turbines. But the individual line items added up to only R894-million, with no explanation for how the other R324-million would be spent.

The FA platform needed the full R1.2-billion, according to PetroSA’s own internal estimates, but Equator’s proposal shows that it had drastically underbudgeted for the work required.

There were smaller errors in Equator’s proposal as well: a stipend of R5000/month for 24 months was recorded as R132 000 per student, when the number should have been R120 000. This was a minor difference of R500/month for each student, but which padded the budget by another R24-million.

A later version of the proposal corrected some of these mistakes, but the question left lingering is: why did officials from PetroSA and the Fund entertain a proposal that had the potential to spirit almost R350-million away from taxpayers?

Moila’s version

Moila maintains that the Fund never had any intention of approving the R3.5-billion proposal that had been submitted Equator and PetroSA’s name.

“We don’t fund anyone that it is not in the training space,” she told us when we spoke to her recently. “PetroSA is the custodian of the training centre … and that is the one NSF is interested in, not Equator.”

She continued: “Even if it’s a partnership, we expect PetroSA to apply and we are not going – I promise you this – we are not going to entertain Equator.”

As for the R1.2-billion for the FA platform? “The NSF does not fund infrastructure – it is not our responsibility to fund infrastructure. We only fund infrastructure that is focused on post-school education and training.”

She could not, however, adequately explain why “infrastructure” and “refinery in the sea” were topics on the agenda she prepared for the visit, or why she asked Mulaudzi to organise a tour of “the training centre and the FA platform so that we understand the nature of support required from us on infrastructure”.

Regardless, Moila told us that she left Mossel Bay having delivered a very clear message to PetroSA and Equator: “We said ‘PetroSA, here is your Centre of Excellence, we expect an application from PetroSA … not from Equator.”

Yet seemingly, neither PetroSA nor Equator got that message.

“Huge appetite”

Two weeks after Moila’s visit, Mulaudzi wrote to senior PetroSA executives, thanking them for welcoming the NSF – “Our Potential Funder” – to the Mossel Bay facility.

“We would also like to put it on record that we have been working tirelessly to secure funding for the Refurbishment of the FA Platform in order to fulfil our Conditions Precedent as stipulated in our Gas Infrastructure Financing and FA Platform Refurbishment Agreement.”

“We are also exited that our potential funder has express[ed] a huge appetite to finalise our application which is on the Due Diligence stage at the moment,” he wrote, copying Moila on the email.

The funders, he added, “also express appetite to avail some more funding for the benefit of the project to both Equator and PetroSA to further finance the training of Artisans”.

A new draft of the proposal had actually reduced the size of PetroSA and Equator’s request, from R3.5-billion to train 5 500 artisans to R2.7-billion to train 3 500 – less money overall, but the cost to train one artisan would go up to R771 000.

Tumelo Mokwena, PetroSA’s head of human capital, later told the new CEO (Sizani): “For the past three years we have undertaken very limited training because of lack of funds … we have been pursuing external funding opportunities from credible sources albeit with limited success. The apprenticeship training we offer is entirely sponsored by CHIETA (Seta) again due to lack of funds.”

It’s unclear why PetroSA, a state-owned entity and member of the department’s artisan development committee, needed Equator to unlock this bounty. But Mulaudzi’s email made it clear that he felt responsible.

In bold, capital letters he wrote: “NB: PLEASE TAKE NOTE THAT THIS IS EQUATOR HOLDINGS INITIATIVE AND WE WOULD APPRECITE [sic] PETROSA TO LIASE THROUGH US TO AVOID CONFUSION THAT MAY HAMPER PROGRESS THAT HAS BEEN MADE SO FAR…”

Staying quiet

If Mulaudzi was lying about the Fund having “huge appetite” for the proposal, this would have been a good time for Moila, who was CCed on the email, to put up her hand.

On her version, she had told PetroSA and Equator quite clearly that the Fund had no interest in the Equator or its proposal. Yet here was Mulaudzi, not only claiming that the Fund was interested, but that the proposal was being fast-tracked for approval.

Why, we asked Moila, did she not set the record straight?

“I was with them in the meeting … I spoke to them physically. So why was there a need for me to emphasise that in an email?” she told us.

Without being officially assigned to assess Equator’s proposal, she added, she had no mandate to respond, one way or the other: “We had a meeting with PetroSA, Equator was there. Our stance was clear, we told PetroSA. And what Equator and PetroSA wants to communicate, it is their business. NSF is not party to those politics – it is their politics.”

A letter attached to Mulaudzi’s email shows that the R3.5-billion version of the proposal had also been sent to the Fund’s then acting CEO David Mabusela, who confirmed that the project would be evaluated.

But the Fund told us that, according to its records, there was no evidence that Equator’s proposal had progressed to a due diligence, as Mulaudzi had claimed: “The Equator PetroSA proposal did not advance to the point of administrative compliance, technical evaluation, due diligence, Funding [and] Recommendation Committee nor Memorandum of Agreement and accordingly, it could not and did not receive approval,” the Fund’s spokesperson William Somo confirmed in a written response.

“These stakeholder engagements do not constitute an approval… recommendations are not processed on the basis of one official’s recommendation evaluation.”

We went back to Mulaudzi to point out that Moila and the Fund were essentially saying that he had misled senior PetroSA executives when he claimed there was an ongoing due diligence and that the Fund had “huge appetite” to finalise the proposal.

He is yet to respond.

The politics of the NSF

Last year, Parliament asked the Fund to explain how projects get approved for funding.

According to acting CEO Melissa Erra, unsolicited proposals – like Equator’s – were only supposed to be considered by the Fund after “engagement by [the] Minister of Higher Education and Training and/or the Director-General”.

If they give a green light, the proposal is supposed to undergo a six-stage assessment by at least ten different officials. But as officials confessed to MPs last year, the Fund is operating with critical staff shortages, with approximately 40 percent of its own job posts remaining vacant.

Adding to these concerns, CFO Zama Kubheka explained that the Fund’s financial reporting system relies heavily on a manual process. The reliance on manual processes – including to track expenditure – combined with too few staff and vacant deputy director positions, resulted in frequent errors, he said. In some instances, he added, a single assistant director was required to perform tasks that ordinarily should have undergone several levels of review.

Finally, the projects that make it through go back to the Director-General for approval and, for any project over R1-million, the Minister as well.

If Equator’s project had passed the evaluation, the final handshake on the R2.7-billion grant would have to come from the Minister of Higher Education and Training. The proposal had been submitted to Moila a month before the May 2024 elections, when Blade Nzimande was still the minister, a position he had held for an almost unbroken 15-year stint since Jacob Zuma became president in 2009.

When Nzimande was briefly removed as Higher Education Minister in 2017, Gwede Mantashe had publicly risen to his defence. This wasn’t surprising: as members of the South African Community Party’s (SACP) top six, Nzimande and Mantashe were close, and the SACP as a collective had become vocal critics of Zuma.

After the May 2019 election, President Cyril Ramaphosa had reinstated Nzimande at the Department of Higher Education.

If Equator’s proposal had passed through Nzimande’s hands, he may have been well-disposed to greenlight it: a year earlier, in 2023, Ramaphosa had appointed Kgosientso Ramokgopa as Minister of Electricity, essentially cuckolding Mantashe and his department.

With the all-important electricity portfolio gone, Mantashe’s job was to oversee the increasingly odious collection of state-owned oil, gas and mining assets, including PetroSA.

By 2024, PetroSA needed a bailout, and as Minister of Higher Education, Nzimande was in theory well-placed to deliver one. Yet when we asked Nzimande about Equator’s proposal, his spokesperson told us the minister had never seen it.

After the May 2024 election, Ramaphosa split the ministry and reassigned Nzimande to the new Department of Science, Technology and Innovation, a demotion in budgetary terms from R142-billion to R9-billion.

His replacement, Nobuhle Nkabane, was not from the SACP but had served as Mantashe’s deputy in Minerals and Energy. But whether this would have given her “huge appetite” for Equator’s proposal was never tested: by the time she was appointed as the new Minister of Higher Education, the plug had been pulled on the deal – from within.

Pulling the plug

Equator’s proposal should have failed on its merits. The fact that it was even entertained, should raise eyebrows.

When Sizani, the new CEO of PetroSA, caught wind of it, his question was: when did we appoint Equator to run our training?

The Gas Infrastructure Financing and Reinstatement Agreement that PetroSA and Equator had signed in December 2023, included a long list of potential projects including pipelines and infrastructure to help PetroSA monetise gas, ammonia and carbon capture.

The one thing it didn’t include was training.

In a draft response to Mulaudzi, circulated to colleagues, Tšiea Morojele, PetroSA’s acting head of capital projects, wrote: “Our agreement with Equator Holdings … does not include the skills training and development in its scope. As a friendly reminder we advise … Equator Holdings to pay particular focus on the Condition Precedents (CPs) in the aforementioned agreement in order to meet the deadlines.”

The most important condition: find a funder by 10 June 2024 or lose the entire R22-billion deal. And with just four days until the deadline, PetroSA had just rejected the “potential funder” that Equator had put forward.

No approval, no agreement, no disbursement

When we first approached the Fund in October, it told us: “The NSF has not entered into any funding agreement with either Equator Holdings nor PetroSA, nor has it released any funds.”

But after we sent more questions, the Fund came back to us with further developments: “The National Skills Fund obtained approval … in December 2025 to institute an investigation into the Equator Holdings proposal noting the media enquiry. Due process is underway in line with applicable legislation and governance frameworks.”

Moila, who has since been promoted to Deputy Director: Initiation for Gauteng, North West and the Free State, told us that she was unaware of the investigation.

The post PetroSA’s R3.5-billion ‘raid’ on student funding appeared first on AmaBhungane Centre for Investigative Journalism.

The petrol, known as Mogas 95, left stains on the petrol pumps. Worse, it had damaged the paintwork on some of customers’ cars. In some cases, the only solution was to have the cars resprayed.

Unbeknownst to Total, its rival Caltex was having the same problem in Knysna: cars and motorbikes that filled up with the petrol were coming back with stains as well.

• The Sunday Times and Top Auto first raised the alarm about contaminated fuel in April 2024. 

In December 2023, both Total and Caltex lodged formal complaints with PetroSA, the state-owned petroleum company that had supplied the petrol. 

By February 2024, Shell and Engen had joined the chorus: where exactly had PetroSA sourced this fuel, they wanted to know, and what was causing the stains?

A year earlier, PetroSA had been offered an enticing deal: a little-known company, Nako Energy, said it could secure unleaded petrol from the United Arab Emirates (UAE) at a very attractive price. 

PetroSA would make 50 cents for every litre imported, meaning every oil tanker would generate R25-million of pure profit.

“There’s 50 million litres [in a tanker], so PetroSA would make R25-million profit, which is higher than any diesel cargo. That’s when really the interest in Nako became bigger,” the company’s founder and majority shareholder, Nkosinathi Ngwenya, told us. 

He added, “[PetroSA] said, ‘No we don’t believe this is the case. Can you do a test cargo?’” 

• If you’ve read part 1 of our Dirty Fuels investigation, you’ll know that Nako would later secure a R933-million diesel deal from PetroSA that was riddled with irregularities.

Ngwenya had a background in mining, but Nako itself had been in business for less than a year. 

PetroSA had been in business for 58 years – long enough for cheap fuel from an obscure supplier to set off alarm bells. 

Instead, the traders agreed to buy 50 million litres –  a R668-million experiment, just to see.

Petrol on steroids

95 octane petrol can be produced in two ways: it can be refined from crude oil, or it can be blended. 

Nako’s fuel would be sourced from a supplier in Fujairah in the UAE that specialises in producing blended fuels.

The idea was to take a low-quality fuel – with an octane rating of 89 to 91 – and blend it with chemicals to boost the octane rating, turning an 89 into a 95 unleaded petrol. 

A bit like producing petrol on steroids. 

“This particular blend it was supposed to be a gamechanger,” PetroSA’s former head of trading Vusi Xaba, who oversaw the deal, recently told us.

Octane-boosters are an everyday part of the fuel business: until it was banned, lead was used to boost the octane of fuel. It has since been replaced by compounds like benzene and ethanol, but recently other chemical additives have been creeping into fuel as well. 

Tests would later confirm that Nako’s chemical of choice was N-methylaniline (NMA), which is banned as a fuel additive in Europe, China and Russia because of concerns about its toxicity and the damage it can cause to engines.

Where NMA is used, it’s normally in concentrations of below 1.2%. At 3% NMA can boost the octane rating of fuel by up to 8 points, but at such high levels NMA causes other issues, including gum that leaves deposits on engines and causes seals to swell, increasing the chance of oil leaks.

According to an internal PetroSA investigation, tests later found that Nako’s fuel contained 6.6% NMA.

It’s unclear how much the PetroSA trading team knew when they placed the order.

They evidently knew enough to tell the board, in June 2023, that Nako’s fuel had a “pre-blend” octane rating “of 89-91”, making it a very low-quality fuel that would be boosted to a 95 “using low-cost approved components”. 

Ngwenya told us that PetroSA had sent a technical team to view its suppliers’ blending facility in the UAE: “From January until about May this was the back and forth, testing and verifying, ‘Is this sanctioned product, who are your suppliers?’ … eventually they were satisfied.” 

But Xaba was coy about whether PetroSA knew the fuel contained NMA: “Let’s put it this way, when a trader trades gasoline, they would say this has got intellectual property, so they wouldn’t actually be telling you … what components they bring and at what ratio – they would not necessarily share that with you.”

R150-million prepayment

In July 2023, Nako’s first shipment of unleaded petrol arrived in Mossel Bay, but for the next three months the oil tanker Sea Adore just sat waiting to discharge.

Part of the problem was that Nako – a brand-new company with no track record – did not qualify for credit and so had to pay its supplier upfront. 

According to the internal PetroSA investigation, which was concluded in February this year, the contract was then amended to give Nako a R150-million prepayment.

Public finance rules don’t allow state-owned entities to make prepayments, except in exceptional circumstances, so another amendment was drafted in August 2023 to turn the R150-million prepayment into a payment for a small portion of the fuel that would be discharged first.

Ngwenya, however, blamed the delay on PetroSA: “[T]hey were not ready to receive that cargo, because they also didn’t believe that it would actually arrive, they didn’t believe the price, so by the time it arrived everybody had to run around to try get it right.” 

By September, PetroSA was satisfied that Nako could actually deliver the fuel at the price it promised. Without waiting for Sea Adore’s test cargo to discharge, PetroSA signed a cooperation agreement with Nako.

The cooperation agreement was just a prelude to a binding joint venture agreement that would need to be signed within 30 days. This agreement would make Nako (50%), PetroSA (25%) and its UAE supplier (25%) partners in a three-year contract. 

It’s unclear how much the contract would be worth, as demand and the price of petrol would go up and down, but a rough estimate is R11-billion.

In October 2023, the Sea Adore discharged the first 50 million litres of unleaded petrol into the storage tanks at Mossel Bay. Six weeks later, complaints started arriving about the petrol.

The market for petrol

If you’ve read Part 1 of our Dirty Fuels investigation, you’ll know that PetroSA was importing cargoes of diesel into Mossel Bay to be sold to Eskom and burnt in the open cycle gas turbines, which helps keep loadshedding at bay.

The market for petrol is different: Eskom doesn’t need it, but there are plenty of petrol stations along the Garden Route that do. 

“In Mossel Bay, the established arrangement is that the oil majors have supply agreements with PetroSA,” Phila Mzamo, the spokesperson for the Fuels Industry Association (FIASA) explained. “Currently, PetroSA supplies these companies using imported fuel… The oil majors collect their fuel from the Shell Voorbaai depot, which is supplied directly by the PetroSA refinery.”

Each fuel company can add their own secret sauce later – Caltex adds Techron, a cleaning additive, for example – but the underlying petrol is the same. 

The risk, however, is that a contaminated batch of fuel can quickly spread to petrol stations throughout the region. 

According to the internal PetroSA investigation, complaints about Nako’s petrol first surfaced at Total stations in the Garden Route and Caltex stations in Knysna about a month after the Sea Adore discharged.  

Two weeks later, in December 2023, Nako delivered another 50 million litres of unleaded petrol at a cost of R585-million, and by March 2024, a third cargo worth R634-million was waiting to offload.

But by now, PetroSA couldn’t ignore the clamour of complaints coming from its customers, which included Total, Caltex, Shell, Engen and eventually even the farming co-op SSK. 

Colour-changing fuel

In March 2024, PetroSA put together a six-person team to investigate the complaints. 

Over the next month, they collected and tested samples from garages, PetroSA’s tanks and even the fuel aboard the Daytona, the third vessel anchored off the coast of Mossel Bay waiting to discharge.

What they noticed was that under a UV light, the fuel changed colour: “[T]he ULP 95 reacted to the car paint to the extent that these cars needed to be repainted. The ULP 95 affected certain paints and not all of them and also seemed to affect older cars. This was confirmed by the panel beaters in Mossel Bay who treated a few of these cars that needed to be repainted,” the internal investigation later concluded.

“Further tests were done using painted panels from the panel beater… It was confirmed that the ULP 95 did stain these panels which confirmed what the customer experienced.”

At this point, the investigation team wasn’t sure what was causing the fuel to change colour – the high gum content, additives, octane boosters, dyes or contaminants – but according to the report, Nako had at least been willing to confirm that the fuel contained NMA. 

Tests passed with flying colours

When Nako’s fuel arrived in South Africa it was tested – and passed.

“We can … confirm that over 90 tests were conducted on the product, all of which verified compliance with the required specifications,” Nako’s CEO Nqobani Mkhwanazi told us in a written response. “We therefore find it difficult to understand the ongoing issue about the quality of the product supplied by Nako.”

The problem is that the official South African National Standard (SANS) for unleaded petrol doesn’t include limits for NMA. It refers to “additives” that can be used to improve the performance of fuel, provided these don’t cause cars to malfunction. 

It’s debatable whether NMA, which can damage both paintwork and engines, clears this bar, but because there is no threshold for NMA, the standard tests won’t look for it. 

Even a fuel pumped full of NMA can therefore still pass the tests with flying colours.

PetroSA’s internal investigation would later conclude that more comprehensive testing should have taken place given that the fuel was a new product. 

“At the time of the arrival of the Sea Adore (first cargo), there was insufficient communication to all relevant stakeholders to highlight that the ULP 95 purchased was not tested and was a blended product,” the report concluded.

And because there was no disclosure about the chemicals in the fuel, “the standard testing methodology was exercised which did not initially always include potential gum, mainly because ULP 95 previously had low existent and potential gum”.

It was only after customers complained that “a series of tests were conducted on the samples of all 3 vessels”, the report noted.

The results

The rest of the industry, meanwhile, wasn’t waiting for PetroSA to fess up to the problem.

In March, Engen had reached out to the Fuels Industry Association (FIASA) about “potential contamination issues” with petrol in the Mossel Bay area.

“The query was forwarded to Shell who confirmed same and confirmed that they had contacted Astron to analyse the product. FIASA then contacted Sasol who expressed a willingness to assist,” spokesperson Phila Mzamo explained.

Soon, samples had been collected and sent to Sasol and Astron’s labs for testing.

This had enraged Ngwenya, Nako’s founder: “Nako has had its samples handed over to the industry without proper consultation or adherence to established policies and procedures. This allowed the majors to conduct analyses on our product and request information that seriously infringes on our intellectual property,” he later wrote in a letter to the Department of Mineral and Petroleum Resources.

On 5 April 2024, FIASA convened a meeting of all the big players: Engen, Shell, BP, Total, Astron, Sasol, Puma and a reluctant PetroSA. 

The tests, run by Sasol and Astron, had found NMA at a concentration of 6.6%, according to the investigation report.

“This would indicate (in alignment with Astron thinking), that the base octane without N-methylaniline addition is very low,” the report added.

Neither Sasol nor Astron would speak to amaBhungane, but FIASA confirmed the findings: “[B]oth Sasol and Astron Energy analysed the product and found in excess of 6% NMA,” Mzamo told us.

She added: “The NMA recommended rate is only around 1.2% – it is known above this level that gum formation is accelerated and furthermore compatibility with other materials is brought into question.”

The tests run by Sasol had also found “extremely high gum content”, putting the fuel out of specification with SANS standards. PetroSA’s own tests found high levels of gum, but not high enough to flunk the tests.

According to FIASA, PetroSA asked the two labs to run the tests again on a new sample of Nako’s fuel.

“Samples were sent to Astron and Sasol – Astron analysed these and found similar results. The Sasol sample never arrived since it was recalled by PetroSA,” Mzamo said.

In a follow-up response, however, Mzamo told us that PetroSA’s actions had been more aggressive: “At a subsequent meeting PetroSA confirmed that the Sasol sample had been intercepted – recalled is too polite – and requested Astron to destroy their samples.”

We asked PetroSA why it asked Astron to destroy the samples considering that this was potential evidence of what was causing the problems, but this was one of the questions they chose to ignore.

Astron, having spoken to its lawyers, advised PetroSA that the samples “would not be destroyed”, Mzamo said.

Public denials

A week after the tense meeting with the oil majors, the Sunday Times reported that garages had been instructed to “immediately lock out all VP95 nozzles” and stop selling the fuel.

Publicly though, PetroSA was conceding nothing. When PetroSA’s chief operations officer Sesakho Magadla was interviewed on SABC later that day, she stuck to the line that Nako’s fuel had passed the SANS tests. 

“[A]s PetroSA, we would like to assure the motorists as well as the industry at large that the product we sell is compliant to the product specification of this country which is SANS 1598,” she said, without mentioning the high levels of NMA in the fuel. 

“[T]here has been no concerns with regards to the quality itself in terms of the product but what we’ve seen is … a general concern on the staining.”

This wasn’t even close to true. 

Concerns had been raised – loudly – not just about staining but about potential engine damage and the toxicity of the chemical.

NMA is classified as toxic if it is swallowed, inhaled or comes into contact with skin. Shell in particular had raised concerns about “the toxicity and the amount used” as well as “the threat towards groundwater”, the investigation team later reported. 

At the time, Magadla said PetroSA would investigate but was sceptical that the problem could be laid at its door: “Even though we know that we are selling a product that is compliant to the specification we have embarked … on an independent investigation … from the preliminary investigation there is no conclusive evidence that indicates that this concern that is raised by motorist could be isolated to the product that is sold by PetroSA,” she told SABC.

Neither innocent nor independent

For Ngwenya, Nako’s founder, the questions about the quality of Nako’s fuel weren’t as innocent or as independent as they seemed. 

“[T]he majors have used product quality as a weapon to undermine Nako’s operations,” he told the department’s director-general Jacob Mbele in an August 2024 letter. “Our products have been subjected to numerous tests, often leading to demands that Nako and [our supplier] disclose our blending formulas and mix ratios for producing ULP 95.”

Nako, he added, “have resisted these demands to protect our intellectual property”.

The 17-page letter to Mbele failed to mention the high levels of NMA found in the tests. Instead, Ngwenya took aim at the “monopolistic practices” of the oil majors. 

“Every vessel we have imported has been met with what can only be described as war like tactics,” he wrote. 

This view was echoed by others in PetroSA. When Magadla was interviewed by SABC in April when the questions over Nako’s fuel first surfaced, she said: 

“[I]t’s quite interesting that with these concerns, there has also been interesting competition tactics being deployed by our competitors … so it is not only the technical issues that we need to investigate, it is also the competition behaviour by our competitors.”

At the heart of the problem, she and others believed, was PetroSA’s decision to take back the supply of unleaded petrol to Mossel Bay. 

“When this issue of self-supply was changed, it was not liked by the majors. They hated it, they hated the whole notion,” former head of trading Vusi Xaba told us.

PetroSA did not want to respond to the 78 questions we sent them, but Xaba told us that in his view, Nako’s fuel passed the SANS tests, so what was the problem?

This didn’t matter though: the industry was no longer willing to buy it.

Cargo #3

The question now was what to do with Nako’s third cargo of unleaded petrol?

The Daytona had been moored off the coast of Mossel Bay since 1 March 2024, quietly running up a demurrage bill of an estimated $50 000 (R900 000) a day. (This is unusually high for demurrage which normally costs $35 000 or R650 000 a day.)

By mid-June 2024, the demurrage bill on the Daytona had reached R99-million, according to an internal document. Technically the fuel had passed the SANS tests, which meant that PetroSA might be legally obliged to accept it. 

Faced with a difficult decision, PetroSA agreed to take another 50 million litres of unleaded petrol from Nako at a cost of R634-million.

Leverage 

It’s at this point that our two Dirty Fuels investigations come together.

If you’ve read Part 1, you’ll know that PetroSA had been trying to sell a cargo of diesel that had initially been intended for Eskom. On 10 June 2024, it had agreed to sell the cargo to Nako, despite Nako failing to put up payment guarantees.

Ngwenya would later tell us: “For us, our interest is being able to be paid what we are owed [on Daytona]. So we said to PetroSA, ‘Okay, we’ll buy, since you are asking us to buy this cargo [of diesel]’ … considering that they are already sitting with close to a billion rand of our product, that is enough security for them.”

The Jag Pushpa would discharge 50 million litres of diesel into Nako’s tanks in Durban, just as the Daytona was discharging 50 million litres of the tainted unleaded petrol in PetroSA’s tanks in Mossel Bay. 

The deal was a bad one for PetroSA: it had effectively swopped a valuable cargo of diesel for a cargo of unleaded petrol that no one wanted to touch.

Selling off the fuel

For the next four months, the unleaded petrol sat in PetroSA’s tanks.

PetroSA still had another 10-million litres of Nako’s second cargo and after testing the bottom of the tanks, the Technology Support department had raised concerns that the remaining product could be damaging them, “especially given that the product was not evacuated as planned and left for months”.

“Shell was saying there’s an issue with the quality, that product must be sold for next to nothing,” Ngwenya told us. “We know there’s no issue with the product so we’re saying, ‘let’s go pick it up’.”

Nako, he told us, agreed to buy back a portion of the fuel at discount; it would then be trucked to its own network of 60 garages across the country and sold. 

When we interviewed Ngwenya, we did not have the results of the internal PetroSA investigation. In follow-up questions we asked him whether Nako had told its customers that the fuel contained NMA, but by this point, Nako said it couldn’t answer any more questions. 

This still left PetroSA with at least 50-million litres of chemically tainted petrol that urgently needed a buyer.

The plan, according to a senior PetroSA source, had been to move some of the unleaded petrol to PetroSA’s storage tanks in Bloemfontein, where buyers were apparently unfazed by the chemical content of the fuel. 

PetroSA had also been talking to Shell about the possibility of diluting Nako’s fuel with other cargoes of unleaded petrol. But Shell had been outspoken about the risks posed by the NMA and according to the investigation report “refused to accept fuel that contained NMA”.

Ngwenya insists that Shell did eventually agree to buy some of the fuel. “The same product that they said a year ago there were quality issues, Shell has been picking up,” he told us.

We put this to Shell, but it refused to answer our questions. Instead, it offered a bland response, saying it was “committed to quality control processes” and would stop supply if any petrol was “found to be of concern”.

“As a matter of principle, Shell Downstream South Africa does not comment on commercial relationships about its business partners,” it added.

So, whether any of the fuel has been moved or sold remains a mystery. 

The final page of PetroSA’s investigation report, written in February this year, notes: “Based on the serious hazard and dangerous classification … PetroSA could still be exposed if the product is released into the market.”

A bid for intervention

In August 2024, Nako had written to Jacob Mbele, the director general in the Department of Mineral and Petroleum Resources, asking him to intervene on Nako’s behalf.

“We formally lodge a protest and complaint against the ongoing attacks, sustained investigations, and insinuations that we may be receiving preferential treatment or undue attention,” Ngwenya wrote. 

Of course, it would be hard to deny that Nako had received undue attention. In the space of two years, PetroSA had sold Nako two cargoes of diesel for R1.5-billion, bought three cargoes of unleaded petrol for R1.8-billion and proposed a three-year deal worth roughly R11-billion.

Nako had so far done little more than connect PetroSA to its supplier in the UAE, but in March 2024 a joint venture agreement had been drawn up to give Nako the lion’s share (50%) of the partnership, with PetroSA and the supplier taking 25% each.

Long term, Nako’s ambition was to set up a fuel blending project in South Africa. 

However, PetroSA’s head of legal had refused to sign the joint venture agreement: “Nako was labelled by PetroSA’s head of legal as an untrusted company that should not be allowed to conclude a joint venture with PetroSA,” Mgwenya told the Department. 

“This characterisation was based on our supposed youth, inexperience, and lack of trustworthiness – despite the fact that we have over 60 years of combined experience and the support of one of the UAE’s most successful blenders.”

We asked Mbele what action he took after receiving Nako’s letter with Ngwenya’s plea for “immediate intervention”. 

Sources have told us that the Department repeatedly raised the issue with PetroSA. 

In a written response, however, the Department downplayed its involvement, telling us: “As this was a commercial issue between Nako and PetroSA, the Department referred the letter to PetroSA who indicated to the Department that they were engaging with Nako Energy to resolve their commercial disputes.”

Settlement

Nako not only wanted PetroSA to pay for the third cargo of unleaded petrol (R634-million), it also wanted R168-million in demurrage fees for the three cargoes that had spent months waiting offshore.

In his August letter, Ngwenya had told the Department: “Our outstanding invoices now exceed R950 million, and our demurrage invoices have accumulated to over $12 million [R214-million]”.

In short, Nako now wanted almost R1-billion from PetroSA, while PetroSA was asking for roughly the same amount – R933-million – for the cargo of diesel that Nako had taken. The only difference was that Nako could sell the diesel, while no one wanted to buy unleaded petrol with high levels of NMA.

Initially, Nako had been paying for the diesel cargo in R20-million/week instalments, but after four months, it stopped: “Nako has paid constantly, hoping that when we pay them, they’ll pay us for Daytona, but … nothing has ever come back to us,” Ngwenya told us.

In December 2024, PetroSA’s executive committee agreed to investigate Nako’s unleaded petrol deal and appoint its chief economist and head of corporate planning, Mxolisi Landu, to head up the team. 

The report, which we have been quoting from throughout this article, concluded that PetroSA had suffered “financial losses, reputational damage and loss of customers” as a result of the Nako fuel debacle.

FIASA told us that the major fuel companies no longer buy fuel from PetroSA in Mossel Bay and “have been servicing their network from Cape Town, Port Elizabeth and East London since this incident”.

Under lessons learnt, Landu wrote that PetroSA had failed to identify the risks and “possible challenges in the oil industry accepting the ULP”. 

The introduction of this new product “did not follow appropriate processes and procedures” or align with “statutory and regulatory requirements”, he wrote. There had also been a lack of consultation with PetroSA’s Technology Support division and a “lack of transparency from the suppliers of ULP 95 that contains NMA”. 

The conclusion? The fuel contained “high concentration of NMA impacting on the potential gum [which] raises several concerns regarding the potential risks and exposure to PetroSA”.

Within days of Landu’s sobering report being delivered in February 2025, PetroSA’s leadership was shuffled: acting CEO Mmete Fusi, under whom the investigation began, was replaced by Sesakho Magadla, the former COO.

Back in April 2024, it was Magadla who had confidently told SABC that there was nothing wrong with Nako’s fuel, despite PetroSA having evidence to the contrary. 

But the efforts to sweep the Nako fuel debacle under the carpet may have an expensive conclusion.

Last month, Ngwenya told us that PetroSA and Nako were discussing a settlement. “It’s fairly advanced, we’re just arguing around the demurrage,” he told us. “They’ve acknowledged that they owe us. We’re now at the point where we’re [discussing] offset arrangements.”

Two weeks later, he told us that PetroSA and Nako had quietly reached a deal: “With regards to PetroSA and Nako our accounts have been settled,” he told us over WhatsApp. “[W]hatever issues we had, have been resolved amicably. And all amounts settled.”

The post Dirty Fuels Part 2: PetroSA’s R11-billion ‘contaminated’ petrol deal appeared first on AmaBhungane Centre for Investigative Journalism.

Their destination: Mossel Bay, where the diesel could potentially be piped into Eskom’s open cycle gas turbines and burned to keep loadshedding at bay.

When the tankers arrived, however – Jag Pushpa on 11 May and Centennial Matsuyama on 16 May – they found there was no room at the inn: PetroSA’s storage tanks were full.

With demurrage costs increasing at $35 000 (R650 000) a day, PetroSA “scanned the market” looking for a buyer and settled on a little-known company, Nako Energy, who offered to buy the diesel at a hefty discount.

Nako didn’t qualify for credit and PetroSA would make a R19-million loss, but hey, this was an emergency.

***

This, at least, is the story that PetroSA employees concocted in an internal memo in a bid to explain why they handed over R933-million worth of diesel without Nako paying for it or providing payment guarantees.

The memo was compiled in August 2024, a month before Nako was due to make full and final payment for the diesel. Almost a year later, however, Nako still owed PetroSA R825-million.

PetroSA declined to comment: “PetroSA has considered the questions provided and will not be providing any commentary in this regard,” spokesperson Nonny Mashika-Dennison told us.

Nako’s CEO, Nqobani Mkhwanazi, was more forthcoming: “PetroSA approached Nako to urgently assist in offloading diesel cargoes under significant time pressure … Nako stepped in at PetroSA’s request,” she told us in a written response.

But even she conceded that the deal was irregular.

“No guarantees were provided for these cargoes by any financial institution,” Mkhwanazi confirmed in a follow-up response.

As for a written contract governing the almost R1-billion sale? “To our knowledge, no such agreement exists,” she said.

Yet the evidence suggests is that the Nako deal – with its hefty discounts and missing paperwork – is just the tip of the iceberg: PetroSA has been gambling recklessly in its diesel trading business and hiding its losses behind claims of commercial secrecy.

A secret business

As the state-owned petroleum company, PetroSA’s role is to ensure that the country has access to petrol and diesel.

Historically that meant refining, but since 2020, when its Mossel Bay refinery closed, PetroSA’s only real business has been trading fuel. And although it is technically insolvent, PetroSA has been kept afloat largely by one client: Eskom.

Thanks to loadshedding, which has created an unslakable thirst for diesel, PetroSA’s revenue grew from R11-billion in 2019 to R23-billion in 2024. Figures provided by Eskom show that at the height of loadshedding, 80% of Eskom’s diesel was supplied by PetroSA.

This covert bailout – funded by Eskom and electricity users – may have injected as much as R500-million into PetroSA in the last financial year.

This wouldn’t have happened if the Department of Minerals and Petroleum had granted Eskom a fuel wholesale licence, but it refused, arguing that Eskom did not qualify as a wholesaler. Without a wholesale licence, Eskom cannot apply for a diesel import licence and is forced to buy from importers like PetroSA.

This comes at a premium: another internal memo from March this year shows PetroSA discussing how it would make a profit of between R29-million to R50-million on a cargo of diesel sold to Eskom, while noting that it would barely break if it sold the same cargo to the oil industry.

That doesn’t mean that PetroSA is charging Eskom more than the oil majors – in fact, Eskom told us that PetroSA offered it the best discount on the market. But what it does show is how costly PetroSA’s role as an unnecessary middleman to Eskom has become.

Worryingly, PetroSA’s booming fuel trading business has also ushered in an era of extreme secrecy. And despite being a major public entity PetroSA refuses to publish its annual report or disclose the names of the companies that supplied it with diesel and profited from these contracts.

The details that leak out – like the Nako deal – show why.

A mad strategy

It’s hard to understand just how bad the Nako deal was without understanding what should have happened had this been a normal transaction.

To start with, PetroSA should never have ordered R1.3-billion worth of diesel if it knew it didn’t have space in its storage tanks in Mossel Bay.

However, buoyed by the loadshedding crisis – the money it stood to make from Eskom – PetroSA had adopted a “supply-led” strategy of ordering tankers of diesel without necessarily having a buyer, storage or funding lined up.

Vusi Xaba, PetroSA’s then head of trading, recently told us that “there was a task to bring in 3.5-billion litres per annum. So as trading your job is to bring in minimum five vessels a month… It was the corporate strategy of PetroSA, to remain afloat.”

This gamble, however, also meant that PetroSA was caught out when loadshedding dramatically dipped.

In October 2023, with multiple oil tankers queued up in Mossel Bay, PetroSA told journalists that the tankers were being used as temporary storage to ensure diesel was available for Eskom’s Open Cycle Gas Turbine.

This is, to put it bluntly, a mad strategy.

Firstly, PetroSA has storage tanks in Mossel Bay and Eskom has additional storage tanks at the Gourikwa power station, so the supply of diesel can be managed without the need for queuing ships.

Secondly, when an oil tanker has to wait to discharge, the clock starts running on demurrage fees, which for an oil tanker are typically $35 0000 (R650 000) a day.

Between 2023 and 2024, PetroSA’s demurrage bill skyrocketed from R34-million to R389-million – an elevenfold increase thanks to the supply-led strategy.

Eskom was quite clear that it does not pay these demurrage fees, adding that it had never asked PetroSA to keep tankers waiting as a way to avoid loadshedding.

Instead, these costs hit PetroSA’s bottom line: its 2024 financials, which it refuses to make public, show that even as PetroSA sold more fuel at a bigger profit, its ballooning demurrage bill wiped out any gains.

In 2024, rather than making more money, PetroSA’s operating losses actually increased from R1.5-billion to R1.7-billion.

The strategy – approved by PetroSA’s all-powerful chair Nkuleleko Poya and implemented by Xaba’s team – was so nonsensical that there was widespread speculation someone was getting kickbacks for every tanker ordered, although no evidence has emerged to support this claim.

Poya didn’t respond to calls or emails, but Xaba told us that he was aware of these rumours and underwent a polygraph test in a bid to disprove them.

The ambitious diesel-buying strategy was partly about ensuring security of supply for the country, he said, but added that “from time to time, we as trading pushed back”.

When Xolile Sizani was appointed as the new CEO of PetroSA in April 2024, he committed to curb the “excessive demurrage costs” by implementing a more rational diesel-buying strategy, according to the annual report.

By this point, however, two more cargoes of diesel had already slipped through.

A traffic jam in Mossel Bay

By April 2024, loadshedding was in remission. Unperturbed, PetroSA’s trading team had placed an order with Swiss commodities trader Gunvor for 100-million litres of diesel.

Shipping records show that there were already three vessels in Mossel Bay waiting to discharge: Daytona, carrying 50-million litres of unleaded petrol, had arrived on 1 March; Sti Aqua and Nord Victorious, each carrying 50-million litres of diesel, had arrived in mid-April.

PetroSA had managed to postpone two more cargoes of diesel that had been scheduled to arrive in April, but Gunvor refused, saying that its fuel had already been loaded.

When Gunvor’s two vessels arrived in May – Jag Pushpa from the Mangalore refinery in India and Centennial Matsuyama from the Fujairah refinery in the UAE – they joined the growing queue of oil tankers.

With no demand from Eskom and no way of offloading the diesel in Mossel Bay, PetroSA’s trading team began looking around for another buyer.

South Africa is a net importer of diesel so any of the major fuel suppliers – Total, Engen, Shell – would be potential buyers. Instead, they settled on a company that seemed to have an inside track at PetroSA.

Enter Nako

Nako Energy is virtually unknown outside of PetroSA. Established in 2022, the company’s founder, Nkosinathi Ngwenya, comes from the mining industry, while its CEO Nqobani Mkhwanazi has a background in finance.

In just two years, however, Nako had become a favoured partner of PetroSA.

In January 2023 it was one of the bidders for the gas-to-liquids refinery in Mossel Bay. It lost out to Russia’s Gazprombank but instead secured a three-year contract to supply unleaded petrol.

“Nako is one of the very few independent black-owned traders that have consistently delivered in this space, while others have exited or failed,” Mkhwanazi told us.

Internal records list at least five cargoes – together worth R3.5-billion – bought from or sold to PetroSA in the space of a year. As we shall see in part 2 of our Dirty Fuels investigation, however, these have not been without catastrophic fallout for PetroSA.

No contract, no guarantees

When PetroSA agreed to sell the two cargoes of diesel, it did so on the understanding that Nako would provide guarantees. This is standard in any fuel transaction and normally the guarantees would need to be in place before the vessel even puts to sea.

According to the memo concocted by PetroSA’s trading team, the guarantees Nako provided came from two boutique asset management companies in Cape Town: Taquanta Asset Management and Khumo Capital.

Asset management companies are not normally in the business of providing guarantees for billion-rand cargoes of diesel, and almost immediately there were issues: “PetroSA’s finance department reviewed these guarantees and consulted with Debtsure, which advised against granting credit based on these guarantees,” the trading team wrote.

When we put this to Taquanta’s chief investment officer, Raphael Nkomo, he baulked.

Nkomo told us that his firm was interested in funding the Nako transaction when it was presented to him by Ngwenya, the Nako founder and shareholder. On 17 June 2024, he issued a provisional payment undertaking – not a guarantee – for R500-million.

Within days, however, he had retracted the offer because Nako had been unable to produce a valid contract with PetroSA.

“We needed a valid contract,” Nkomo explained. “Three days later, no contract was produced. We pleaded with them for a contract so we could take it to the credit committee. On 20 June we issued a retraction to that letter.”

Nkomo provided us with letters and emails from PetroSA to show that Taquanta had retracted the offer. Mkhwanazi reiterated this, saying that “it is important to place on record that PetroSA never declined or rejected Taquanta’s payment undertaking”.

Still, we asked Nkomo why he had retracted his letter so quickly, waiting just three days to pull the plug. He told us: “I did not see any material whatsoever that could allow me to put pensioners’ money at risk … I asked once, twice, three times – when it isn’t forthcoming I retract.”

The letter had seemingly served its purpose though: a day after it was received, the Jag Pushpa set sail for Nako’s storage tanks in Durban. By the time it arrived, the letter had been withdrawn.

According to the memo, a second guarantee had supposedly come from “Khumo”, which is likely a reference to Khumo Capital, where Mkhwanazi works as the managing partner of the unlisted property fund (in addition to her position as CEO of Nako Energy).

However, Khumo’s lead of governance, Glenville Retief, told us: “We do not provide, and have never provided, guarantees for any clients. Khumo does not have, and has never had, a business relationship with Nako Energy … or PetroSA.”

Mkhwanazi told us that ultimately: “No guarantees were provided for these cargoes by any financial institution.”

Guarantees, she explained, require a valid contract. “To our knowledge, no such agreement exists”.

A R106-million discount

Regardless of when or why the funders withdrew, when the Jag Pushpa arrived in Durban on 21 June Nako had no contract and no guarantees in place that would allow it to take possession of 50 million litres of PetroSA’s fuel.

It’s worth pausing for a moment to remember that these are assets owned by the state. It’s a bit like deciding to sell Orlando Stadium without a tender and being asked to hand it over with no contract and no guarantee you’ll be paid.

PetroSA had already decided to keep the second cargo – from the Centennial Matsuyama – and sell it locally, leaving just the Jag Pushpa and its R650-million cargo on the table.

However, with no evidence that Nako could pay for the fuel, PetroSA was well within its rights to cancel the deal and look for a serious buyer. Instead, PetroSA agreed to give Nako further discounts.

“Due to evolving market conditions, Nako Energy requested amendments including a revised pricing structure, adjusted payment terms, and immediate cargo discharge to secure the berthing slot,” the PetroSA trading team wrote in the August memo.

It’s unclear what price Nako had originally offered to pay, but now Nako told PetroSA it wanted to pay less: “Nako reverted with a request for an increased discount of [R2.10/litre], this was at the back of engagements and negotiations with their customers.”

With just over 50 million litres of diesel on board, Nako was asking for a R106-million discount.

A R19-million loss

At this point, PetroSA claims that it “scanned the market to check if there were any other interested parties”.

Again, any of the major oil companies would have been potential buyers. Instead, PetroSA picked another unknown company.

Skyeline Oil & Gas had only been registered for a month, so it’s unclear how PetroSA found Skyeline, but the company confirmed that it had entered into negotiations with PetroSA to buy the R650-million cargo of diesel.

“The discussion fell through due to lack of alignment on the price,” the trading team wrote.

PetroSA then went back to Nako and agreed to sell the diesel at a R1.90/litre discount from the wholesale price.

Mkhwanazi told us that the R1.90/litre (R96-million) discount was market-related. Major oil companies, she told us, were offering discounts of up to R1.80/litre at the time. “[A]n extra 10 cents is a good incentive. By no means is it preferential,” she added.

PetroSA – whose entire profit margin had already been eaten up by demurrage and falling fuel prices – would take a hit of 40c/litre and ultimately make a loss of R19-million, according to the memo.

Mkhwanazi, however, maintains that the alternative was worse: “You … reference a R19-million loss on the cargo without considering the extent of losses PetroSA might have faced had Nako not stepped in to assist with the offload … PetroSA would have been left in an even more precarious position given the declining domestic fuel price, lack of committed offtake, no storage capacity, and an environment of reduced demand due to load shedding—all of which would have necessitated a distressed sale,” she said.

When the trading team asked senior executives to sign off on the sale a month later, they made a similar argument: “Remaining in Mossel Bay would have resulted in a total demurrage of R64.8-milion. Therefore, the sales results in cost containment / avoidance to the value of R39.5-million for the company,” they wrote.

This, of course, is a false dilemma, but if the trading team approached any other credible buyers to take the Jag Pushpa’s cargo, they didn’t mention it in the memo.

Taxes, penalties and irregular credit

By July, the Jag Pushpa was ready to discharge but Nako still wasn’t ready with its funding, so PetroSA begrudgingly agreed to act as the official importer.

This meant that PetroSA would be liable for another R306-million in duties owed to SARS. According to an internal PetroSA document, Nako promised it would settle the duties by 12 July.

When Nako failed to pay, SARS hit PetroSA with another R30-million in penalties.

“Nako Energy was put on notice for all penalties and interest payable to SARS resulting from late payment,” the trading team wrote in the August 2024 memo. (We asked Nako a series of follow-up questions on the money owed to SARS, but they declined to say anything more.)

The risk was that 50 million litres of PetroSA’s diesel was now sitting in Nako’s storage tanks in Durban.

Nako still hadn’t paid for the fuel or delivered a guarantee, so PetroSA kept a holding certificate over the fuel, meaning it couldn’t be sold without “the green light from PetroSA”.

In August, then-CEO Xolile Sizani and CFO Nombulelo Tyandela were asked to “approve credit to the value of R933.4-million to Nako with no credible guarantee”.

The memo is ambiguous about whether this meant that Nako was now free to take the fuel or whether PetroSA still expected a guarantee before the holding certificate would be lifted.

PetroSA declined to comment and Sizani, who is on suspension, could not be reached for comment, but a source within PetroSA told us that the idea was that the holding certificate would only be lifted once Nako had delivered a guarantee.

The trading team had been keeping up the pretence that a guarantee was still coming. In the August 2024 memo, they told executives that Nako was working on “a contingency plan in case the guarantees from Taquanta and Khumo were not approved”.

Yet as far as we have been able to establish, there were never any guarantees from Taquanta or Khumo and the provisional funding that Taquanta had offered had long since evaporated.

“The suggestion that Nako received preferential or irregular credit requires context,” Mkhwanazi, Nako’s CEO, told us. “PetroSA approached Nako to urgently assist in offloading diesel cargoes under significant time pressure … Nako stepped in at PetroSA’s request.”

Nako doesn’t pay

Nako had been given 60 days to pay the R933-million to PetroSA, “which will allow Nako to make collections from their clients”, the trading team wrote.

When Nako paid, PetroSA would in-turn pay Gunvor, the Swiss commodities giant who had provided the diesel in the first place.  

Sixty days later though, Nako still hadn’t come up with the almost R1-billion. Instead, records show that Nako began paying PetroSA in R20-million/week instalments.

It’s unclear whether PetroSA had, by this point, lifted the holding certificate and allowed Nako to take the fuel on credit. A source within PetroSA alleges that the holding certificate was quietly lifted in September, while Ngwenya told us that Nako had instead arrange to pay for the fuel in cash in tranches.  

Either way this was a bad deal for PetroSA: at R20-million a week it would take Nako almost a year to pay for the fuel.

“The terms and structure of those instalments formed part of evolving commercial arrangements, which remain the subject of ongoing discussions,” Mkhwanazi told us.

She also insists that her company ultimately made very little money off the Jag Pushpa deal, and that any discounts it received were swallowed up by the falling fuel price or passed on to its clients.

In December 2024, Nako made one last payment of R1.7-million and then stopped paying altogether. Internal records show that in April this year, Nako still owed PetroSA R825-million.

No one from Nako would explain why they stopped paying. All they would say was that PetroSA owed money to Nako as well and that this gave Nako the opportunity to negotiate. 

“It is important to note that PetroSA currently owes Nako a substantial sum. This is not consistent with the narrative of one-sided benefit,” Mkhwanazi told us in April. “Both parties are presently engaged in detailed discussions in order to reconcile trades, which is an industry norm.”

Holding the state to ransom

Again, it’s important to go back to what should have happened. If this had been a normal trade and Nako had provided a guarantee, PetroSA would have called up the guarantee as soon as Nako missed the 5 September deadline.

With no guarantee in place, however, Nako could hold PetroSA to ransom, insisting that the diesel now be used to settle unpaid debts on another dubious contract.

And with no signed contract Mkhwanazi is even casting doubt on whether a deal exists at all. Sure, Nako took the diesel and sold it, but where is the proof, she asked, of what Nako agreed to pay:

“[N]o purchase and sale agreement existed between the parties prior to Nako offloading the cargo, regardless of PetroSA’s assertions. This is precisely why PetroSA has since entered into negotiations with Nako to reach an amicable resolution.”

Last week, in response to a list of 59 follow-up questions, Ngwenya told us that Nako had reached an undisclosed settlement with PetroSA: “With regard to Nako and PetroSA our accounts have been settled and due to confidentiality I cannot respond of comment on them.”

He added: “Whatever issues we had have been resolved amicably. And all amounts settled.”

Dirty Fuels

“[I]f you want to expose the business of PetroSA you are basically killing it.”

That was Minerals and Petroleum Minister Gwede Mantashe’s take when we asked him, at an October 2023 press conference, why PetroSA refused to disclose the details of its diesel trading business.

“PetroSA is trading with fuel and that is a highly contested space in the market. Nobody in that market will publish their suppliers and their [customers] – nobody. Now you want PetroSA to do that I am saying it’s a formula to close it down,” he said.

• AmaBhungane’s advocacy co-ordinator Caroline James explains why we’re taking our fight to the Information Regulator in order to finally answer the question: who really profited when the lights went out in South Africa?

On 26 March 2024, loadshedding came to an abrupt halt, which was great news for the country and terrible news for PetroSA.

“Eskom was a big blow for PetroSA,” Vusi Xaba, then head of trading, conceded when we spoke to him recently.

Anticipating another bad winter, PetroSA had scheduled 200 million litres of diesel to arrive in April 2024.

However, between May (when the Jag Pusha arrived) and July (when it discharged), Eskom’s two Open Cycle Gas Turbines had produced 260 GWh of electricity, down from 1 165 GWh a year earlier.

With the tide going out, PetroSA was left scrambling.

The Nako deal – concluded under PetroSA’s veil of secrecy with no contract and no guarantees – had resulted in a R19-million loss to PetroSA according to the internal memo, while Nako had walked away with a R96-million discount.

What our investigation suggests, however, is that the bigger prize for Nako was leverage.

For months, PetroSA had been sitting on a cargo of problematic fuel provided by Nako that PetroSA couldn’t sell. Nako wanted R648-million. And now it had a way to get it.

That’s in part 2 of our Dirty Fuels investigation.

The post Dirty fuels: Inside PetroSA’s shambolic diesel trading empire appeared first on AmaBhungane Centre for Investigative Journalism.

This is just the latest in a series of stories we have published on PetroSA’s financial machinations and its fundamental role in the country’s ability to keep the lights on.

• Read our whole series on PetroSA here.

With loadshedding and the cold weather returning, Eskom’s use of diesel is once again in the spotlight, but the finances and workings of PetroSA – its main supplier of that diesel – are most certainly not.

The lack of transparency within PetroSA remains staggering.

A reminder: PetroSA is a major public entity and a wholly-owned subsidiary of the Central Energy Fund, a state-owned company. Its stated mandate is to “ensure the security of energy supply for South Africa”.

Given the central role PetroSA plays in South Africa’s energy architecture, its operations are clearly in the public interest and deserving of true transparency. PetroSA, however, don’t think so: they haven’t published an annual report since 2021, don’t award diesel contracts via tender and refuse to report irregular contracts to National Treasury’s Office of the Chief Procurement Officer as required.

In short, it appears that PetroSA has unilaterally decided that the laws governing public procurement and its monitoring do not apply to it. Strangely, no one seems very perturbed by this, at least not Minister Gwede Mantashe or the Parliamentary committee tasked with its oversight.

But we are.

We have repeatedly sent requests for documents under the Promotion of Access to Information Act (PAIA) and sent questions to PetroSA throughout our investigations. Every time we are met with either stony silence or curt refusals.

We sent the first of two applications for access to information to PetroSA in December 2023.

The requests were for a list of companies that supply diesel to PetroSA, the volume of diesel each supplied and documents relating to multi-billion rand tenders, including the deal awarded to Russia’s Gazprombank for the refurbishment of the offshore gas-to-liquids refinery in Mossel Bay.

When neither request was responded to, we approached the Information Regulator.

• Read more in our joint piece with Open Secrets, here.

The Information Regulator is a brand-new body, established in the Protection of Personal Information Act (POPIA), and is responsible for overseeing public (and private) bodies’ compliance with PAIA.

Late last year the Regulator asked PetroSA why they had not responded to our PAIA requests and why they had refused to disclose the requested information.

In their response to the Information Regulator, PetroSA has maintained that the names of its diesel suppliers and the volumes it procures are “commercially sensitive” and confidential. In response to our request for tender documents, they believe that sharing the information would “erode the bidders’ ability to compete.”

This response is the first time we’ve been able to see PetroSA’s justifications for refusing to make information public. That the Information Regulator was able to get an answer is a positive step and demonstrates the potential value of the role of the Regulator in the PAIA process. Previously, the only option if a government department or public entity refused (or ignored) our PAIA request was a costly legal battle in the courts.

In our PetroSA complaint, the Information Regulator gave us the opportunity to provide our response to PetroSA’s arguments and we explained why their refusal simply isn’t in line with South African law on disclosure of this type of information.

PetroSA believes that it does not have to be transparent about any of the dealings on which we wanted more information. These deals involve diesel contracts worth R45-billion and offshore gas and infrastructure deals worth R30-billion, and no transparency means no scrutiny.

PetroSA may like it this way, but it is inconsistent with our constitutional framework.

The South African Constitution is clear that “public administration must be accountable” and “transparency must be fostered by providing the public with timely, accessible and accurate information.” It also requires that all public procurement must be “fair, equitable, transparent, competitive, and cost-effective”.

PetroSA, as a state-owned company, is bound by these principles and required to conduct transparent procurement.

The courts have frequently ruled on the importance of accessing documents related to the procurement of public goods and services. Most recent and pertinent is the decision from the North Gauteng High Court, which ordered Eskom to disclose information related to their coal and diesel supply contracts and rejected Eskom’s arguments that disclosure could cause commercial harm to its suppliers. The Court said that the allegations of irregularities in the contracts meant that transparency had to prevail over concerns of commercial confidentiality and so ordered that the contracts be disclosed.

The Information Regulator has the power to investigate whether PetroSA’s refusals of our PAIA requests and their justifications are valid – including by requesting to see the documents we want and then issuing a finding. From our (limited) experience, that finding could then be sent for evaluation by the Regulator’s enforcement committee – a panel of external experts tasked with assisting in the resolution of complaints made to the Regulator.

But we also believe there are more effective ways PetroSA could adhere to their obligations to conduct their business in a transparent manner.

PAIA obliges public bodies to disclose information when requested to do so (if there are no legitimate grounds for refusal). However, for over three years we have been advocating for proactive disclosure of tender documents through our work on the Public Procurement Act. This would mean that all public bodies would have to publish tender adverts, bids received and contracts awarded automatically in detail – and not only when investigative journalists come knocking.

Giving the public access to documents throughout the tender process allows for real-time monitoring and helps identify irregularities and corruption before they go too far to be stopped.

If this were happening, then the risk of the type of deal we see in the Nako fiasco would be significantly less.

Many countries around the world have this proactive disclosure of tender documents – a clear illustration that PetroSA’s argument that disclosure harms “bidders’ ability to compete” is bogus.

Minister Mantashe has told us that exposing the business of PetroSA would “kill it”, but if the deals PetroSA make can only survive in secrecy, are they really deals that should ever be made?

The post Advocacy: Deals done in secret, the PetroSA way, are bad business appeared first on AmaBhungane Centre for Investigative Journalism.

That’s how consultants from the professional services firm Mazars described notorious wheeler dealer Lawrence Mulaudzi in an October 2023 due diligence report.

Mazars made the assessment even though they knew that Mulaudzi had allegedly channelled money to ANC and EFF politicians and that his house and luxury cars had been repossessed over unpaid debts.

Within two months of receiving the due diligence report, the Petroleum Oil and Gas Corporation of South Africa (PetroSA) had signed two offshore gas deals with Mulaudzi: a R21.6-billion deal with Equator Holdings (100% owned by Mulaudzi), and a R5.2-billion deal with EquaTheza (30% owned by Equator).

Then, in March 2024, Equator was liquidated for failing to pay a soccer player on Mulaudzi’s Tshakhuma Tsha Madzivhandila team.

The liquidation of Equator was bad news for PetroSA, but potentially worse news for Mazars who, as the transaction advisors, had helped to green light both the Mulaudzi deals, as well as a third deal with the sanctioned Russian bank, Gazprombank.

Now PetroSA wants some of its money back and has been advised to investigate whether to have Mazars blacklisted from future government business.

“A letter was sent to Mazars on the 1st October 2024, requesting a refund of R1 076 720 within 7 days,” PetroSA’s group supply chain manager Comfort Bunting told the internal audit team in October. “We also intend to claim back the full amount for the due diligence that was done on the grounds that it may be sub-standard”.

Mazars – which is now part of the global firm Forvis Mazars – says it stands by its work: “We are confident with the process we followed and the quality of the advice provided,” the project’s lead partner Taona Kokera told us via email.

“PetroSA has raised concerns, which Mazars is handling. Many of these issues have been resolved,” he said.

Mazars, Kokera added, “strongly disputes the claim that due professional care was not exercised”.

But while the consultants have been keen to downplay their role, PetroSA’s internal audit team paint a jaw-dropping picture of how one of the world’s top 10 accounting firms enabled three disastrous deals.

Toxic partners

Despite the promise of millions of rands in fees, no one wanted the job of transaction advisor to PetroSA. At least not on these deals, which involved the sanctioned Russian bank Gazprombank and its technical partner Ural Himmash.

This nugget of information was revealed by an unnamed member of the management team who told Internal Audit that “Mazars was the only party on PetroSA’s panel that responded to the request for advisory services. Others declined on the basis of Russian links to the respondents of the RFPs and the subsequent US sanctions on certain Russian entities.”

But Mazars – which stood to earn at least R15-million in fees – accepted.

The job was to marshal financial, technical and legal advice on three proposed deals:

• The R3.7-billion Gazprombank Africa deal to restart the gas-to-liquids refinery (read: PetroSA’s Russian gas deal implodes)
• The R5.2-billion EquaTheza deal to develop offshore gas wells (read: The deal that got PetroSA CEO suspended)
• And the R21.6-billion Equator Holdings deal to finance the offshore gas project and refurbish infrastructure needed to bring the gas onshore (read: Own goal! PetroSA’s multi-billion rand offshore gas deal thwarted by unpaid soccer player)

When we first approached Mazars last year, director Rishi Juta was keen to distance his firm from the deals. “For the sake of clarity, I can confirm that Mazars did not advise PetroSA prior to its appointment of the preferred partners in terms of [the Equator deal],” he told us.

While technically true – the bid evaluation committee had scored the tenders and selected the preferred bidders – the board would not approve the deals without Mazars’ due diligence.

The fact that no one, aside from Mazars, was willing to work with PetroSA’s preferred bidders should have been an immediate warning sign. The problem was that PetroSA seemed more interested in green lights than red flags.

As part of the EquaTheza deal, for instance, Mulaudzi and his partners had agreed to pay $12-million (R227-million) to PetroSA as soon as the deal was signed, as their contribution towards the upkeep of the rapidly deteriorating offshore FA platform.

“The Acting COO [Sesakho Magadla] at the time was under pressure to conclude the [tender] with the partners because of the much needed $12 million to support PetroSA’s liquidity position,” an unnamed member of the management team told Internal Audit.

Adding to the pressure, EquaTheza allegedly told PetroSA that if it didn’t sign soon, the funds would be diverted elsewhere.

“Equatheza, in particular, had also placed pressure by indicating that the funder requires a signed agreement in order to secure and retain funding for the project else it will be allocated elsewhere to other projects.”

To get the deals over the line, PetroSA turned to Mazars.

The intern

When the project began in September 2023, Mazars found itself stretched thin.

“Based on the CVs submitted by Mazars, we observed that 70% of the work will be subcontracted to other companies. Out of the 17 staff members proposed by Mazars … only 5 are Mazars employees,” the internal audit team noted.

Instead, a large chunk of the work would be carried out by the law firm CLG – formerly Centurion Law Group – owned by the powerful gas lobbyist NJ Ayuk. And it’s here where problems arose.

One of the internal audit team’s concerns was that consultants had been substituted at the last minute, without their CVs being assessed. As they note, “the quality of due diligence report may be compromised as it might have been performed by unqualified individuals with insufficient knowledge, skills and experience required.”

One example flagged by the internal audit team was that PetroSA was billed for 223 hours of work by a senior legal consultant on CLG’s team, a role that required at least six years’ experience.

Yet, when the internal audit team looked into the consultant in question, they concluded that she had just two years’ experience. In fact, the consultant’s LinkedIn profile shows that when Mazars began working on the project she had just 10 months’ experience: eight months as a legal intern and two as a junior legal advisor.

We asked both Mazars and CLG to explain how someone freshly promoted from an internship had been billed out of as a senior legal consultant at R2 000/hour.

Mazars initially side-stepped the question, telling us: “The individual was not involved in delivering the due diligence report … [She] was involved in legal work separate from the due diligence report.”

This, we pointed out, didn’t make it okay. Asked whether the rest of the details were nonetheless accurate, Kokera told us: “This relates to a subcontractor. The rate allocated to [the consultant in question] is currently being resolved with PetroSA.”

The preliminary due diligence

A “Desktop Preliminary Investor Due Diligence” was presented to PetroSA’s Investment and Procurement Committee (IPC) on 22 September 2023.

This was a critical meeting, but the preliminary report was mostly made up of marketing material sourced from Mulaudzi and his partners.

The slides, which carry the Mazars logo and those of its partners, regurgitate a range of uncritical claims, including that EquaTheza’s “hydrocarbon experience put them in an advantageous position to reduce carbon emissions. Their values are underpinned by their knowledge and capabilities and driven by good corporate governance.”

EquaTheza was, in reality, a dormant special purpose vehicle that had been registered just two months earlier.

Under key personnel, Mulaudzi’s brief stint in 2003 as the Chief Technology Knowledge Officer for the Presidential National Commission was mentioned; the 2019 Mpati Commission’s investigation into alleged corruption and malfeasance in his multi-billion-rand PIC-funded deals was not. 

The presentation carried more weight than normal: as a sub-committee of the board, the IPC would normally be only one step in the chain of command. Under PetroSA’s dictatorial chair Nkhululeko Poya, however, the PetroSA CEO’s delegation of authority had been capped at R50 000 and executive decision-making had instead been vested in the three-member IPC, chaired by Poya himself.

When we asked Mazars about its presentation, Kokera confirmed that a team had attended the meeting but flat-out denied that any due diligence had been presented: “This is not accurate. No representative from Forvis Mazars presented our due diligence findings at an IPC workshop on 22 September 2023.”

Mazars, he added, only began its due diligence on EquaTheza five days later, on 27 September. 

As for the 15 slides bearings Mazars’ logo, and described  as a “Desktop Preliminary Investor Due Diligence,” Kokera declined to answer any further questions.

The final due diligence

The official due diligence report delivered two weeks later was more comprehensive: the work, Mazars told us, “was completed by forensic experts with over 20 years of fraud investigation experience”.

But the end result was similar: Mulaudzi and his partners were “low risk” and the kind of people PetroSA could do business with.

This time around the due diligence flagged “negative press” about the colourful Limpopo businessman: “We identified negative press/media relating to alleged corruption by [Mr Mulaudzi’s] company Blackgold Oil and Gas. It is alleged that [Mr Mulaudzi] and his company Blackgold Oil and Gas made payments to a transfer attorney in favour of Former Health Minister Mr Zweli Mkhize’s company (ZLM Trust).”

In fact, Mulaudzi had allegedly been paying other politicians as well, including then deputy president of the EFF Floyd Shivambu.

In 2017, Shivambu had sent Mulaudzi a series of WhatsApp messages telling him that there was “a great need for urgent intervention” and providing the bank account details for Grand Azania, the company fronted by Shivambu’s brother Brian. Between 2016 and 2017, Mulaudzi paid R500 000 into Grand Azania’s bank account, according to Daily Maverick.

Mulaudzi had also bankrolled a beauty salon owner at the behest of then-PIC chief executive Dan Matjila, around the time that Mulaudzi was securing multi-billion-rand loans from the PIC.

Mulaudzi later told the Mpati Commission that he had no hesitation about paying the R300 000 to the young woman who had Matjila’s ear: “At no point did I regard this as a loan. This was based on the request made by Dr Matjila … it was only natural for me to comply with his request, as I have been funded by the PIC in my business ventures.”

The Commission had even uncovered a “highly irregular relationship” between Mulaudzi and the PIC’s transaction advisor from Nedbank, who had received an undisclosed R400 000 loan from Mulaudzi, paid into his wife’s bank account.

In 2019, UDM leader Bantu Holomisa told the Mpati Commission: “We think it would be wise to inquire … why it seems so easy for Mr Mulaudzi to gain access to PIC funding.” Referring to one of the messages, he said it “seems to reinforce … the idea that Lawrence Mulaudzi had a hotline with the PIC management”.

Yet when Mazars queried this episode, Equator’s finance director Lot Magosha told them: “Mr Mulaudzi volunteered to spearhead the process of appearing before Mpati Commission of the PIC and provided credible evidence which helped the Commission to come to a conclusion to exonerate any unfounded allegations against the transaction.”

In fact, the Commission had recommended a forensic audit and, potentially, legal action to reclaim funds paid out.

It is unclear why Mazars accepted these claims at face value, particularly from Magosha, who had himself had been implicated in corrupt dealings at the PIC.

In 2018, advocate Terry Motau’s report on the collapse of VBS Mutual Bank identified two front companies that PIC executive Paul Magula used as fronts to receive apparent kickbacks from VBS and other PIC-funded deals: Investar and Hekima. Magosha had been the sole director of both.

Although the Mpati Commission failed to make the connection, Investar had been gifted shares in both of Mulaudzi’s PIC-funded deals worth roughly R24-million.

When we confronted Mulaudzi about this in 2019, he claimed he had been in the dark.  “[W]e held a special board meeting to address this matter and it was resolved that [the company] enters into a mutual separation agreement with Mr Magosha.”

Five years later though, Magosha was still very much in the picture as Equator’s financial director.

Asked why it had failed to raise a red flag about Magosha, Mazars told us: “Mr Magosha was not listed as a director on CIPC, and therefore checks on Mr Magosha were outside the scope of our assignment.”

Instead, Mazars said its due diligence was limited to conducting a security clearance and reviewing EquaTheza’s legal status and B-BBEE compliance. This, however, included looking into criminal records, conflicts of interest, the presence of politically exposed persons, directors and shareholders.

Even within this limited scope, however, Mazars had fallen short. Theza Oil & Gas, which owned 70% of EquaTheza, didn’t provide a share register to Mazars, saying that the shares were in the process of being transferred to various trusts.

The original shareholders had been local businessman Barend Hendricks (51%), and two Russian business partners: engineer Albert Iskhakov (25%) and Sergey Okhotnikov (24%), the former chair of a Russian state company.

“The transfer of the above shareholders into a trust may result in the ultimate shareholders and/or beneficiaries being unknown,” Mazars had noted, without stressing that the ultimate beneficiaries of the EquaTheza deal now appeared to be Mulaudzi and three unidentified trusts.

Mazars didn’t want to respond to our questions on this point but stressed that its due diligence was not a blanket endorsement.

Its assessment that Mulaudzi and his partners were “low risk” was supplemented by drawing PetroSA’s attention to the alleged payments to Mkhize’s trust and the fact that Mulaudzi’s brother, Thilivhali Mulaudzi, who was a director of Equator, was under debt review.

But whether PetroSA even noticed these caveats is unclear.

“Mazars, as our Transaction Advisors, through a due diligence identified … Equatheza and Equator as low risk and as a result did not foresee any reason not to proceed with the partnership transactions,” a member of PetroSA’s management team later told Internal Audit.

The final due diligence was delivered to PetroSA on 10 October 2023; the following day PetroSA signed a profit-sharing agreement with EquaTheza.

Inadequate due diligence

The $12-million EquaTheza had promised never materialised and in June 2024, PetroSA pulled the plug on the deal.

For months, EquaTheza had been arguing that it could not pay the $12-million until an agreement on how the FA platform would be operated had been signed. PetroSA’s view was that the profit-sharing agreement simply said “pay” and EquaTheza hadn’t paid.

Internally, questions about how EquaTheza had been appointed in the first place began to emerge.

In fact, the preliminary desktop due diligence – the September 2023 slides that Mazars has attempted to disown – had identified that there was a risk that EquaTheza would not be “sufficiently resourced to execute the [work programmes] (refers to both technical ability and the ability to secure debt funding)”.

To mitigate the risk, the plan had been to conduct a due diligence on the “commercial and technical competency of EquaTheza”.

Yet the “final due diligence” report – delivered in October 2023 – made no mention of EquaTheza’s financial capabilities. The report had briefly mentioned that Equator’s last set of financial statements was three years old and that Theza was “a [special purpose vehicle] that has not traded before,” but no conclusions were drawn from that.

“The due diligence is silent on the capability of the partners to technical[ly] and financial[ly] execute the work programs which we believe are critical indicators of the service provider’s capability,” the internal audit team noted in its draft report.

Barend Hendricks, the chair of EquaTheza, told us that Mazars had, in fact, asked questions about their funding, which was initially going to come from Russia’s Eximbank.

“Equatheza has submitted proof of funding on various occasions. When Mazars as part of their due diligence flag[ged] our potential funding source from Russia as political sensitive, we raised alternative funding,” he told us over email.

This didn’t make it into the report either.

“Due professional care was not exercised by Mazars,” the draft internal audit report concluded. An “inadequate due diligence” may have led PetroSA to take “uninformed decisions” and “get into business with unsuitable service providers”.

The internal audit team reached a similar conclusion about Mazars’ work on the Gazprombank due diligence. Although we haven’t seen a copy of this due diligence, a second draft internal audit report concluded that it too “may be sub-standard”.

“Dying slowly”

Unsurprisingly, Mazars rejects the criticism of its work.

In part, Mazars assumed that PetroSA had already assessed the bidders’ financial viability when it evaluated the bids. “[A]s part of the evaluation criteria, the bidders would have had to provide documentation indicating ‘sufficient funding to support proposal’ … Therefore PetroSA would have considered their partners’ capacity to sufficiently fund the project before our appointment,” Kokera told us.

He added that the “final due diligence” report, delivered in October 2023, was only the first step in the due diligence process and that a more detailed financial due diligence would have been done when PetroSA was ready to make a final investment decision.

“There appears to be a misunderstanding between the initial due diligence we conducted and the in-depth financial due diligence scheduled for a subsequent stage to support a final investment decision,” he told us.

In other words, the “preliminary” due diligence should be ignored, the “final” one should be treated as preliminary and the actual final due diligence was yet to be done.

It’s worth pointing out that there is no mention of this distinction in the “final due diligence” report that was delivered to PetroSA.

However, when Internal Audit raised this with management – in relation to the parallel Gazprombank tender – they confirmed that the intention was for Mazars to conduct further due diligence down the line.

“The risk with PetroSA [ is that] we ask for details needed at [final investment decision] … and when we don’t get those answers we restart and we keep reagitating without any significant progress,” Sesakho Magadla, the acting COO, told Internal Audit. “In that time the organisation is dying slowly.”

The other plank of Mazars’ defence is that the profit-sharing agreement gave PetroSA an exit strategy.

“Mazars played a key role in developing the conditions precedent in the profit-sharing agreement and advised PetroSA regarding termination when these conditions were not met,” Kokera told us.

The profit-sharing agreement, he added, gave PetroSA “legally permissible exit clauses if the partners did not deliver”.

Reading between the lines, it appeared to us that Mazars wasn’t about to tell PetroSA that the partner it so desperately wanted was lit up like a fire truck with alarm bells, and instead added an escape route for when cooler heads prevailed.

We asked Kokera if he and his team had felt pressured to approve PetroSA’s chosen partners.

“We conducted ourselves professionally and acted without undue influence from the client or elsewhere,” he told us.

The problem is that not everyone agrees that the conditions precedent gave PetroSA a foolproof exit strategy. EquaTheza – which dropped Mulaudzi as a partner in January – has threatened to sue PetroSA over its decision to cancel its contract.

“Should it become apparent that PetroSA intends to persist in its contrived termination of the [agreement], our instruction are … to institute review proceedings to set aside the unlawful decision taken by PetroSA,” its lawyer told PetroSA in June.

“Equatheza has worked for over 8 years on this project,” Hendricks told us last week.

“Equatheza can confirm that it is ready, able and willing to commence the work and will exercise it rights as per the profit share agreement to the benefit of PetroSA and the country at large.”

Double dipping

Despite the cursory nature of Mazars’ work, the 12-member transaction advisory team still billed PetroSA for 1 898 hours of work between September and December 2023.

This wasn’t just for work on the due diligence: the legal team had drawn up the profit-sharing agreements, while others had drafted memos for the board and for Cabinet.

When Internal Audit reviewed the billing, however, it noticed issues, including a partner from CLG who worked an improbable 10-hours a day for two months straight at a cost of R4 160/hour.

“Of concern is that individuals charged out at Partner rate e.g. R4 160 per hour, generally worked longer hours compared to the assigned team. Furthermore, the individual charged out as the Legal Partner exceeded the average 40 hours per week for both September and October 2023,” a second draft internal audit report noted.

The partner in question, Oneyka Ojogbo, is the Deputy Managing Partner at CLG in Johannesburg. According to the draft internal audit report, PetroSA was billed for 158 hours of her time in September 2023 and 220 hours in October 2023 – the equivalent of working from 8am to 7pm every day of the week.

The internal audit team found this unlikely and instead suggested that Mazars may have been double-dipping on fees, i.e. billing PetroSA for an hour of Ojogbo’s time on the Gazprombank deal and billing it again for the same hour of her work on the Equator and EquaTheza deal.

In the draft report, the internal audit team advised PetroSA to “initiate a process to investigate the validity of the excessive hours charged by Mazars and investigate the possibility of duplicate charges being made in terms of the same individuals working simultaneously on [the Gazprombank deal] & [the EquaTheza and Equator deals].”

Mazars denies that it engaged in overbilling. “We dispute that excessive hours were billed … The project’s tight timelines necessitated work on weekends, so substantial overtime was incurred. PetroSA reviewed and approved all submitted invoices, substantiated by evidence of work performed,” Kokera told us.

However, when we asked Kokera if he was arguing that Ojogbo’s 220 hours of work billed in October 2023 could be explained by overtime and work on weekends, he prevaricated: “This relates to a subcontractor. Please approach [CLG] for comment,” he told us.

We reached out to Ojogbo and CLG’s chief executive but received no response.

Conflicted

There was another problem with CLG, Internal Audit noted: the controversial law firm appeared to be acting as transaction advisors to PetroSA while also acting for Mulaudzi.

As legal advisors to PetroSA, CLG would play a critical role in drafting the contracts that PetroSA and Equator would eventually sign. Its lawyers were also involved in the due diligence, and its legal opinion on the sanctions risk of the Gazprombank deal was a critical green light.

Yet according to Internal Audit, Equator’s bid listed CLG as its partner.

Whether there was a partnership and whether Mazars knew, is contested.“We were unaware of any conflicts with Equator and Centurion Law Group when we completed the due diligence,” Kokera told us.

Early drafts of the internal audit report still include reference to a “possible conflict of interest on law firm,” but it was removed in later versions after CLG told Internal Audit that it had no relationship with Equator.

At the very least, the internal audit team concluded, Mazars should have queried this during the due diligence.

“Had Mazars conducted the due diligence adequately on Equator’s partners, it would have revealed that the claimed partnership between Equator and CLG was non-existent (as per the email from CLG). This would raise concerns about the reliability and legitimacy of the proposal information submitted by Equator,” the draft report noted.

Pay back the money

In October last year – after the Equator and EquaTheza deals had been cancelled, and with Gazprombank’s on life support – PetroSA wrote to Mazars “requesting a refund of R1 076 720 within 7 days”.

 It is unclear how PetroSA reached this figure, but it appears to be based on consultants charging higher rates than their job titles allowed. To speed up the process, management told Internal Audit that it planned to deduct the money from Mazars’ final invoice.

So far, that hasn’t happened.

“We reviewed PetroSA’s explanation of how they reached this figure and noted that it was informed by incorrect assumptions and / or lack of information that has since been furnished to PetroSA,” Kokera told us.

We pointed out that despite Mazars’ explanation, negotiations were still ongoing three months later, suggesting that PetroSA was unconvinced.

“PetroSA has raised concerns, which Mazars is handling. Many of these issues have been resolved,” Kokera said. Mazars, he added, “has not refunded any fees nor committed to any refund. PetroSA has not deducted any amounts”.

PetroSA – as is its custom – declined to answer our questions. “We are cognisant of … the important role played by media in ensuring integrity and transparency through access to information. As PetroSA, we reserve our right not to provide any comment,” Nonny Mashika-Dennison, the general manager of communications, told us.

If PetroSA remain unconvinced, the potential consequences for Mazars, which took ultimate responsibility for the project, are severe.

“If these hours cannot be substantiated and are not aligned with the deliverables and/or actual hours worked, the incurred expenditure will need to be reported as fruitless and wasteful expenditure and be recovered from Mazars,” the internal audit team wrote. “Appropriate action should then also be instituted against the supplier that will include recovery of the money and being ‘blacklisted’.”

Blacklisting by National Treasury is the most severe form of sanction a company can face. Of all the firms implicated in State Capture the only one to be blacklisted is Bain, the consulting firm that helped to gut Sars.

If Mazars is added to Treasury’s list of Tender Defaulters, it would be banned from public sector work for the next 10 years.

We asked Kokera whether the firm was concerned about the reputational damage the three failed deals could cause. “Mazars did not appoint the partners, nor did we provide a ‘greenlight’ … The scope of this due diligence was insufficient to provide a go or no-go decision,” he told us, adding: “We are confident of the process we followed and the quality of advice provided at every stage of the project.”

The post Trouble for Mazars over failed PetroSA deals appeared first on AmaBhungane Centre for Investigative Journalism.

The choice of a sanctioned Russian bank was seen as risky by some and suicidal by others, but with Cabinet’s seal of approval, the R3.7-billion deal had the political cover it needed to go ahead.

Now, a year later, Gazprombank appears to have reneged on the deal, leaving PetroSA scrambling to find a new partner for the mothballed refinery, which is costing PetroSA upwards of R500-million a year to maintain.

The details of how the Russian deal soured are set out in two draft internal audit reports and letters exchanged between PetroSA and Gazprombank, obtained by amaBhungane from a number of sources.

The documents suggest that Gazprombank’s bid should have scored just 40 points out of 100 – not 80 – which would have put its bid in distant third place.

They also show that the bank has failed to deliver the $200-million (R3.7-billion) in funding it had promised, or even the $3-million (R56-million) needed to complete a bankable feasibility study.

“[I]f you fail to deliver … PetroSA will have no further option but to recommend termination of any further engagements with [Gazprombank],” PetroSA told the Russians in August.

“Based on the serious deviations identified in this report … Internal Audit recommend that Management consider the cancellation of [the Gazprombank tender] prior to finalising definite agreements,” three senior members of PetroSA’s internal audit team told executives in a draft report circulated in October.

When acting CEO, Mmete Fusi, appeared in Parliament a few days later he told MPs: “We should know whether we continue or not continue with the current partner – we are at that decision point.”

The only qualifying bidder

When Gazprombank was announced as the winning bidder of RFP 0001/2023 in November 2023, it looked like a stitch up: 20 companies had bid and 19 had been eliminated on technical grounds, leaving the Russians as the only qualifying candidate.

Adding to suspicions is the fact that the Russians had made an unsolicited bid for the refinery in 2022, before the tender specs were written, but when PetroSA’s internal audit team was asked to review the scores last year, they immediately picked up irregularities.

Restarting the atrophying gas-to-liquids refinery is a major undertaking, so bidders had to prove that they had access to upwards of $200-million (R3.7-billion) in funding by providing a letter of interest, a credit guarantee or a term sheet.

The Russians provided nothing.

Instead, PetroSA officials went online, found the annual report of the Gazprom Group, and concluded that this was good enough. (Score: 20/20)

To show they were serious, winning bidders would also be required to put up $5-10-million (R189-million) to fund the development of a bankable feasibility study.

Gazprombank only promised $3-million (R56-million), but still scored 10/10.

When the internal audit team reviewed these scores, they baulked. “We did not find sufficient supporting evidence … to substantiate [Gazprombank’s] scoring of 80 points,” they wrote in a draft report delivered to management in October last year.

Instead, a score of 40 points out of 100 was more appropriate, the internal audit team concluded. 

This would have put the Russian bid in distant third place, behind the bids from two private companies, BB Energy Gulf (75/100) and Phezulu Natural Energy Resources (72.5/100).

The officials who initially gave Gazprombank 80/100 were asked to comment on the internal audit’s findings.

Some of the reasons they provided were partly defensible: for instance, Gazprombank said that it needed only $3-million for the bankable feasibility costs, meaning their offering was fully funded and 10/10 was justified.

Other reasons beggar belief: for instance, the evaluation team overlooked Gazprombank not providing proof of its financial commitment because the tender said that “this could take the form of a letter of interest, or credit guarantee, or term sheet”.

“[T]he language was not prescriptive,” group supply chain manager Comfort Bunting wrote, underlining the word could. “The Evaluation Team considered the annual report and since Gazprom is a public entity, the Team accepted the information as sufficient evidence.”

As the internal audit team pointed out, Gazprom – Russia’s state-owned oil and gas company – wasn’t even the bidder. Gazprombank Africa, the local arm of an opaquely owned Russian bank was. 

But in coming to its conclusions, the three-member internal audit team also had the benefit of hindsight. By the time the draft report was delivered in October 2024, the Russians had reneged on the deal.

Ultimatums and threats

By January last year – two months after Cabinet’s announcement – it should already have been clear to PetroSA that Gazprombank wasn’t going to fund the project itself.

A note from a 31 January workshop involving PetroSA and Gazprombank read: “Next steps included that Gazprom to search for investors and present to PetroSA.”

Five months later, Gazprombank was still looking.

“The second important component of our work for now is the selection of an investor. As you know, two large Russian oil companies have expressed interest in participating in the project, as well as three international investors,” Gazprombank Africa CEO Murad Bagliev wrote in a June 2024 letter to PetroSA’s acting COO Tsiea Morojele.

As for the $3-million (R56-million) to fund the project development costs? Gazprombank now wanted South Africa to put up the money: “[T]wo grant applications have been prepared and submitted to the relevant authorities, which will allow our BEE partners to begin the process of Feasibility study,” Bagliev wrote.

A month earlier, PetroSA had erroneously told Bloomberg that “the feasibility study is currently underway.” Instead, the letter reveals, Gazprombank would only begin the feasibility study once an unnamed BEE partner had secured a grant from Infrastructure South Africa, an SOE housed within the Presidency.

Morojele had evidently tried, in an earlier letter, to impose some deadlines on the Russians, but Bagliev pushed back, reminding the PetroSA COO that the project had political cover from, amongst others, Minerals and Petroleum Minister Gwede Mantashe.

“It should be noted that the Minister and other officials supported and approved this Plan. I would especially like to add that the industry management did not set any strict timeframes for us,” he reminded Morojele.

This was especially galling because Gazprombank had committed to an aggressive schedule to get the refinery back on track.

Now, however, the Russians refused to be rushed: “We also cannot accept your ultimatum to sign the Co-operation Agreement within five days, by 28 June, with your threats to review the results of the national tender approved by the Cabinet and Parliament of South Africa,” Bagliev wrote. “In such circumstances let me ask – has this approach been agreed upon with the Strategic leadership of the Energy Industry?”

Visa challenges

Over the next six weeks, the problems multiplied.

The Russians wanted to be able to take ownership of the gas-to-liquids refinery in Mossel Bay, but PetroSA said no, noting that “the partnership … will not involve ownership of PetroSA’s assets as such assets remain state property.”

The deadlines – which had been a key criterion when evaluating the bids – were now stretching off into the distance. The schedule that had been provided to PetroSA turned out to be “not the actual schedule” but rather an internal document.

In fact, Gazprombank said that it needed to do a technical inspection of the plant before it could agree to any deadlines.

A visit to the Mossel Bay refinery with a technical team had been planned for late July, but at the last minute the Russians told PetroSA they weren’t coming.

“[D]ue to reasons beyond our control, namely the non-working electronic visa issuance system of South African Home Affairs and the inability of the South African consular in Moscow to issue visas for the technical team in a short period of time, the visit was postponed until the necessary approvals were obtained for all participants. Once visas have been obtained for all assigned technicians, the team will be sent to Mossel Bay,” Bagliev, the Gazprombank Africa CEO, told PetroSA in August.

When PetroSA officials appeared in Parliament in that month, they repeated the line about “visa challenges” and said that a new invitation letter had been issued to the Russians.

Behind the scenes, however, PetroSA was fuming: “Equally concerning is that [Gazprombank] had confirmed on the 23rd July 2024 to come to Mossel Bay, even if it means that they will have to leave a team member behind. It was also surprising to be told on the eve of the scheduled visit, that the trip has been postposed, without prior arrangement with PetroSA,” then-CEO Xolile Sizani wrote in response.

PetroSA, he said, had offered to intervene with the South African Embassy and had requested copies of the visa applications, but the Russians had failed to take them up on the offer.

Leniency we can no longer afford

When Gazprombank was first picked as the preferred bidder, PetroSA’s management had warned the board against putting all its eggs in the Russian basket.

“It was pointed out that Russian delegations are hard negotiators and if PetroSA had to wait until the negotiations are completed with the Russians before moving onto other potential partners, that process might take PetroSA a long time,” minutes from a special board meeting read.

By August 2024, those chickens were coming home to roost.

“By the way again, PetroSA wants to emphasise the fact that your appointment in this contract is on the basis that you have access to funding. So this condition that funding must be secured first before the schedule is develop is totally unacceptable,” Sizani, the then-CEO, told Bagliev in a letter.

“As much as we have shown leniency with regard to the project schedule in the past, we can no longer afford to do so.”

Gazprombank Africa did eventually deliver a letter to “confirm that we will be able to secure funding in the required preliminary amount of up to US$60,000,000”.

But the letter, the internal audit team noted, wasn’t even signed, and committing to provide $60-million would only have earned Gazprombank Africa 5 points out of 20 when the bids were scored.

Government foots the bill

As for the initial $3-million urgently needed for the feasibility study?

“[Gazprombank Africa] was appointed as the preferred partner on the basis that it would be able to finance the feasibility studies, based on the premise that it is a subsidiary of Gazprombank JSC [the bank in Russia partially owned by the state], which has more than sufficient funds to fund this project,” Sizani reminded Bagliev in August.

By September, PetroSA had come up with a plan B: “Infrastructure South Africa (ISA) has approved our application, and this will see PetroSA and ISA partnering in developing a bankable Business Case for the Refinery reinstatement,” PetroSA told staff in an internal memo.

We asked Infrastructure South Africa if it was aware that it was potentially giving Gazprombank a $3-million free pass by funding the feasibility study the Russians had committed to paying for, but chief director of external communications, Nombulelo Nyathela, avoided the question:

“The project preparation support entails the procurement of necessary skills, including but not limited to the transactional advisory, to support the project development and overseeing implementation of the work and payment of invoices,” she told us over email.

Infrastructure South Africa would still control the funds, but Nyathela declined to say how much government had agreed to spend.

The question is, would the deal still involve the Russians?

Decision time

By October last year, the Gazprombank deal seemed to be tentatively back on track.

The final details of a co-operation agreement were being ironed out, and following the rescheduled site visit, Gazprombank was ready to present three potential solutions to PetroSA.

Around the same time, however, the internal audit team delivered its 100-page draft report slamming the deal and recommending that PetroSA pull the plug. Out of the 11 deviations identified in the report, 10 were considered high risk.

These “significant governance concerns” included a potentially “sub-standard” due diligence, Gazprombank’s failure to meet key project milestones and concerns that Gazprombank may have had access to more information than other bidders thanks to its early unsolicited bid.

“The RFP Project team was not part of the negotiations taking place with Gazprom/Gazprombank Africa during the unsolicited bidding process that pre-dates [tender],” the internal audit team noted.

Transcripts of some of these early meetings weren’t available, and the fact that Gazprombank didn’t ask for the documents that were shared with the other shortlisted bidders only added to suspicions that PetroSA officials had given the Russian delegation a wealth of information before the tender was even advertised.

This could expose PetroSA to “potential litigation from unsuccessful bidders” leading to “litigation costs and financial losses,” the internal audit team warned. 

Then there was the issue of sanctions.

An international pariah

When Gazprombank Africa was selected as the preferred bidder in May 2023, PetroSA had been concerned that sanctions against the Russian parent company would trickle down to South Africa.

Centurion Law, PetroSA’s legal advisors, had assured them the risk of official sanctions was low, but warned that there may still be blowback.

“[I]t is important for PetroSA to consider the potential reputational impact/international geopolitical repercussions (and even the potential threat of the imposition of secondary sanctions) that could result from doing business with a sanctioned entity that is effectively owned and controlled by the Russian Federation,” it wrote in a September 2023 legal opinion.

“Another consideration is whether the transaction presents difficulties to any of PetroSA’s commercial contractual counterparties (including local and international financial institutions) who are themselves typically bound by the sanctions regime due to the global/multijurisdictional nature of their businesses.”

Bizarrely, the draft internal audit report reveals that PetroSA officials had floated Gazprombank’s name on National Treasury’s e-tender portal in early September 2023, before the contract had been approved by the board.

This, project manager Abram Moloto later told the internal audit team, was “a risk management process and negotiating tactic to allow PetroSA to ventilate the geopolitical implications of the sanctions risks to South Africa without raising unnecessary alarms.”

Satisfied that it could survive the blowback, Cabinet had approved the Gazprombank deal in December 2023.

A year later, however, the association was beginning to stink: “The sanction risk relating to [Gazprombank] materialised and have resulted in timelines and deliverables not achieved and the potential loss of key business stakeholders,” the internal audit team wrote in its draft report.

Mazars had been the only firm willing to act as transaction advisors on the deal. “Others declined on the basis of Russian links to the respondents of the RFPs and the subsequent US sanctions on certain Russian entities,” an unnamed member of the management team told the internal auditors.

PetroSA’s insurers, Marsh, had also warned in August that “they will not continue to provide services if PetroSA continue with GazpromBank Africa”.

Yet when Minerals and Petroleum Minister Gwede Mantashe appeared before Parliament a month later he was bullish, telling MPs: “We cannot take a hostile position because the West feels so. We will work with them … I am not one of the people who is sensitive in working with Russia, and believes that working with them will translate to sanctions.”

PetroSA’s newly appointed CEO, Mmete Fusi, was more cautious: “There’s a commitment to turn PetroSA around, especially the reinstatement of the refinery, no matter how difficult it may be,” he told MPs in October.

Whether PetroSA is committed to Gazprombank is, however, less clear: “We should know whether we continue or not continue with the current partner – we are at that decision point,” Fusi said.

Secondary sanctions

When Gazprombank had been unable – or unwilling – to deliver funding in August, it blamed sanctions: “Gazprom supports the project, however, at this stage, they informed us that the Reserve Bank is not authorising direct payments from Gazprom due to the sanctions issue,” Moloto told the internal audit team.

It’s unclear why the Reserve Bank would have blocked payments back in August and no one from the bank was willing to comment. At the time, Gazprombank was under limited sanctions in the United States, United Kingdom and European Union, but was free to transact in South Africa.

In November, that changed.

The new round of sanctions announced by the Office of Foreign Assets Control (OFAC) in the United States is far-reaching and makes any deal with Gazprombank radioactive. Gazprombank Africa was called out by name. 

“The banks on the US sanctions list will be disconnected from the dollar-based financial system, and any entity cooperating with them may be subject to secondary sanctions and thus face similar restrictions,” the Centre for Eastern Studies in Warsaw warned.

PetroSA declined to answer any further questions about the status of the Gazprombank deal because it is currently embroiled in a court case with rival bidder Phezulu Natural Energy Resources, who is challenging the award.

Gazprombank’s local office simply ignored our emails.

If the Gazprombank deal has imploded, it will mean that all three of the multi-billion-rand offshore gas deals – concluded in December 2023 as a last gasp under PetroSA’s dictatorial chair Nkululeko Poya – are dead and buried.

The Equator deal to build and refurbish offshore gas infrastructure was cancelled in July after amaBhungane revealed that the company had been quietly placed in liquidation. The EquaTheza Oil and Gas deal to restart offshore gas wells was cancelled in June.

• Read: The deal that got PetroSA CEO suspended.

PetroSA, however, cannot simply walk away. The gas-to-liquids refinery, offshore platform and pipelines that bring the gas onshore represent a R10-billion environmental liability on their books.

Gazprombank’s plan would, at best, have seen the refinery reopen by April 2026.

The post PetroSA’s deal with Russia implodes appeared first on AmaBhungane Centre for Investigative Journalism.

The struggling state-owned entity refused to discuss the allegations against their CEO, even when Members of Parliament – from the DA, EFF and ANC – demanded answers.

Now, amaBhungane has obtained access to the letter suspending Sizani, as well as his response. These documents suggest that PetroSA rustled up a flimsy case against its own CEO after he threatened to sink what appears to have been a politically tainted gas deal.

On 14 June, Sizani terminated an offshore gas deal that amaBhungane had exposed as problematic because it involved cutting in notorious political operator Lawrence Mulaudzi.

Sizani noted the failure to achieve certain conditions precedent of the contract signed with EquaTheza Oil and Gas – the joint venture between Mulaudzi’s Equator Holdings and Theza Oil and Gas, owned by businessman Barend Hendricks and two Russian partners.

By this point, however, Mulaudzi had quietly exited the company and been replaced by another political heavyweight, former National Director of Public Prosecutions Bulelani Ngcuka.

The suspicion that Sizani’s suspension is linked to his failure to support controversial contracts is strengthened by another leg of the complaint against him.

The 8 October suspension letter also cited Sizani’s removal of PetroSA’s former chief operating officer, who signed two other scandal-plagued gas deals: another with Mulaudzi’s Equator and one with Gazprombank, a division of the Russian oil giant Gazprom, which is subject to international sanctions.

“When you put the CEO on suspension … it sends a very strong message, and [raises] very serious concerns about the stability at the level of the leadership, more so that the CEO has been in office for only, what, [six] months?” the ANC’s Tshiamo Tshotetsi said during the Central Energy Fund’s 18 October appearance in Parliament.

“It is indeed concerning,” PetroSA board chair Unati Figlan agreed. “However, when there is an alleged act of misconduct that is raised to us as a board we have to act, we have to investigate.”

The leaked correspondence – provided to amaBhungane by a PetroSA insider – shows that PetroSA placed Sizani on a precautionary suspension based not on formal charges, but on three allegations that are yet to be investigated.

“I have reached the conclusion that the allegations against you are serious in nature and therefore, given your seniority, your continued presence in the workplace will have corrosive effects on the investigations,” Figlan wrote on 16 October.

Yet a closer look at the allegations – and Sizani’s response to them – suggests that other motives may be at play.

Allegation #1: The other Russian deal

When Sizani was appointed on 1 April 2024, PetroSA had just embarked on a series of multi-billion rand deals to develop South Africa’s offshore gas industry:

• A R3.7-billion deal awarded to Russia’s Gazprombank to refurbish the gas-to-liquids refinery in Mossel Bay;
• A multi-billion-rand deal awarded to EquaTheza Oil and Gas to develop and restart offshore oil and gas wells; and
• A R22-billion deal awarded to Equator Holdings to finance the offshore gas wells project and to build gas infrastructure, both on and offshore.

The Gazprombank deal and the Equator deal have received the most scrutiny, the former because partnering with a sanctioned Russian entity placed PetroSA’s entire business at risk and the latter because Equator’s front man, Mulaudzi, is notorious for not paying his debts and for leveraging his political connections.

According to the leaked letters, however, it was Sizani’s decision to cancel the EquaTheza deal that potentially cost him his position.

This deal was for a project to restart offshore oil and gas wells that PetroSA had abandoned, and to develop new wells that PetroSA had identified but never tapped.

Originally, the deal had been awarded to a company called Theza Oil and Gas, owned by businessman Barend Hendricks and two Russian partners.

After Theza was selected as a preferred bidder, however, Hendricks was allegedly strong-armed into giving 10% of the deal to Mulaudzi’s Equator Holdings. “They were foisted on us … They don’t add any value to us as Theza,” a source in the company told us last year.

Hence, when the contract was signed in October 2023, there was a new company name on the paperwork: EquaTheza Oil and Gas Exploration. 

The deal had been a long-time coming: in 2017, Russia’s state-owned exploration firm Rosgeo offered to spend $400-million (R7.3-billion) to explore and develop blocks 9 and 11a, which are owned by PetroSA and sit alongside Total’s former discovery in blocks 11b/12b. When the deal collapsed, some of Rosgeo’s technical experts formed Theza.

The partnership between Theza and Mulaudzi’s Equator Holdings would not last. By the end of January this year, Mulaudzi and his brother had resigned as directors and sold their 10% stake back to the company.

A month later, Theza had a new partner: Vuwa Capital Partners, owned by a group of prominent black businessmen. Among this group is former NPA boss Bulelani Ngcuka, who is also Vuwa’s chair.

In February, Vuwa “was made aware of an opportunity to invest in Equatheza; having conducted its due diligence, Vuwa took a decision to invest,” CEO Lungisa Dyosi told us over email.

“The shares acquired in EquaTheza were paid for in cash, to fund EquaTheza’s operations … and were not bought from any existing shareholder of EquaTheza. To amplify this point, by the time [Vuwa] acquired the EquaTheza shares, Mr Lawrence Mulaudzi was neither a shareholder nor a director at EquaTheza.”

On the surface, however, it was still a risky investment, because by the time Vuwa bought in, EquaTheza’s offshore deal was already in jeopardy.

In breach

In terms of the Profit-Sharing Agreement, signed in October last year, EquaTheza had 60 days to pay PetroSA $12-million (R217-million) as its contribution towards the upkeep of the”FA platform”. This floating structure connects offshore gas wells to pipes that bring the gas onshore and would be a critical piece of equipment for EquaTheza’s project.

When EquaTheza failed to pay over the amount, PetroSA declared a breach of the agreement. EquaTheza was also required to deliver a Technical Work Programme, which had likewise not materialised within the 60 days.

In letters provided by another insider, EquaTheza told PetroSA that it was not in breach because one, no FA Platform agreement had been signed and two, PetroSA had been late in delivering the technical data.

PetroSA remained unmoved. It granted EquaTheza a 30-day extension, then another, but stuck to its position that EquaTheza was in breach and was at risk of having the entire agreement cancelled.

In March, Hendricks, the EquaTheza CEO, wrote to PetroSA confirming that “the issue around the [conditions precedent] is a critical risk … this is extremely serious as it puts the whole deal at risk if we cannot resolve this.”

Two weeks later, the Central Energy Fund (CEF) – PetroSA’s parent company – told Parliament that “work presented to date by EquaTheza is not inspiring confidence that they can deliver … By end of March PetroSA will seek way forward regarding dealing with EquaTheza due to their failure to deliver satisfactory technical work programme and funding solution.”

Enter Xolile Sizani

This was the situation that Sizani walked into when he joined PetroSA on 1 April this year.

On 18 April, after EquaTheza’s second extension lapsed, Hendricks sent a letter to Sizani imploring the new CEO to “regularise our relationship under the [Agreement],” which included signing an addendum that would extend the deadlines and take EquaTheza out of breach.

Hendricks told him that PetroSA officials had initially agreed to this, but that”unfortunately, we were subsequently informed that the addendum would not be signed and were given no reasons for this change of viewpoint,” he wrote.

EquaTheza had by this point delivered an initial work programme, and had estimated that there were 284 million barrels of oil and 10 years’ worth of gas in PetroSA’s offshore wells. Using their “conservative recovery rate of 25%”, this put the potential deal value at $5-billion (R95-billion) – just for the oil.

However, turning EquaTheza’s estimate into a bankable figure would require a lot more work, and PetroSA was unconvinced.

When the second cut-off date rolled around in June 2024, Sizani presented the Board with a resolution to pull the plug on the deal.

“I obviously was aware through media reports, that PetroSA was criticised from various quarters regarding its performance,” he told PetroSA in a 15 October letter in response to the allegations against him.

“While there are other matters relating to this particular contract, the prominent problem about it was the failure on the part of EquaTheza to meet ‘Conditions Precedent’… the details were deliberated in a Board meeting held on 13^th June … Significantly, the Board agreed that the profit-sharing agreement with EquaTheza was not beneficial to PetroSA. Instead, its continued existence was detrimental.”

The next day – 14 June – PetroSA sent a formal letter to EquaTheza terminating the deal. The reason given was EquaTheza’s failure to meet the deadlines for the conditions precedent.

Enter Bulelani Ngcuka

Although EquaTheza had known the deal was in jeopardy for months, they were furious with Sizani’s decision and went over his head.

On 25 June, Sizani was summoned to a meeting with CEF and EquaTheza – now represented not by Hendricks (the CEO) but by Ngcuka, the chair of Vuwa Capital, EquaTheza’s minority shareholder, as well as Dyosi, the CEO.

“The [Agreement] makes provision for a mediated process should any dispute arise,” Dyosi told us. “In line with this, and in the spirit of the [Agreement], representatives of EquaTheza, who happened to be members of [Vuwa] … approached the CEO of the CEF as the shareholder of PetroSA to mediate a discussion.”

Vuwa had bought a 5% stake in EquaTheza in February, when Mulaudzi had pulled out. It’s unclear how much they paid – Dyosi declined to say – but the PetroSA deal was seemingly EquaTheza’s only asset, meaning that their investment, which was risky to begin with, was about to be written down to zero.

At the meeting, however, Sizani told Ngcuka and Dyosi he would not change his decision to cancel the deal. “No promise was made to EquaTheza to alter, amend or modify the contract,” he later recounted.

Still not satisfied, EquaTheza’s lawyer wrote to Sizani the following day. Amongst other things, the four page letter argues that Sizani was not entitled to cancel their agreement, adding that PetroSA had “impermissibly approbated and reprobated”, “generally frustrated” and “deliberately prevented” the fulfilment of the conditions precedent.

“Should it become apparent that PetroSA intends to persist in its contrived termination of the [agreement], our instruction are … to institute review proceedings to set aside the unlawful decision taken by PetroSA,” the lawyer wrote.

The letter ended by demanding that PetroSA confirm, by 5 July, that it would back down and honour the contract: “Failing receipt of such unconditional undertakings, we are instructed to approach the High Court for an order in the appropriate terms against you, coupled to a claim for costs.”

“EquaTheza (and [Vuwa] as a shareholder) maintain that the cancelation is illegal and invalid. Our lawyer’s letters in your possession are clear on this,” Dyosi added.

Instead, on 3 July, Sizani sent back a one paragraph letter: “We take note of your assertion that the [Agreement] between PetroSA and Equatheza is still active. PetroSA hereby informs you that our position … remains unchanged, i.e. the [Agreement] is terminated.”

Empty threats

When Sizani was suspended three months later, the PetroSA board threw the EquaTheza deal back in his face: “You have withheld information from the Board in relation to the EquaTheza contract by failing to inform the Board of a dispute that was lodged,” Figlan wrote in her 8 October suspension letter.

Sizani denies this. “It is my humble view that this allegation is clearly a mistake or a misunderstanding because surely I was not aware … of what was in the mind of EquaTheza. The decision to terminate the contract was taken on June 13^th and the dispute was declared on the 26^th June 2024, clearly when that decision was taken on the 13^th June no dispute existed at that stage, I deny that I withheld information from anyone including the … Board,” he wrote on 15 October.

It is also unclear why the PetroSA board took the dispute so seriously.

On 10 July, EquaTheza’s lawyer had told Sizani: “We are in the process of preparing … legal proceedings … which will be issued and served on you in due course”.

To date, however, EquaTheza has not made good on its threat to go to court.

Instead, it appears that EquaTheza – led by Ngcuka, the incoming chair of EquaTheza  – kept trying to pull strings behind the scenes, including writing to Figlan, the PetroSA board chair, a week later “requesting her intervention”.

As Dyosi put it: “having realized that … in taking the decision to cancel, the PetroSA Board had not been appraised of all the information … attempts to find a mediated solution to the impasse continued.”

Figlan eventually told EquaTheza in September that “the matter would be further investigated”.

“We are still awaiting the outcome of that investigation,” Dyosi told us. “EquaTheza believes that it has a strong case … and has no intention of abandoning it legal challenge against this erroneous decision, but is giving the mediation process a fair chance.”

Importantly, Sizani’s letter reveals that by October, PetroSA had obtained a draft legal opinion from law firm Fairbridges, a recommendation from the transaction advisors Mazars and a draft internal audit report, all of which appear to have concluded that “the EquaTheza contract should be cancelled for not meeting the condition precedents”.

A week later, the PetroSA board suspended him. And with Sizani gone, the EquaTheza deal appears to be back on the table.

“Equatheza is looking forward to continu[ing] with the project,” Hendricks told us last week. “The dispute between Mr. Sizani and PetroSA is a matter between PetroSA and Mr. Sizani. We are looking forward to a very constructive relationship with PetroSA as this project is very important for the country and contributing to the economy significantly.”

Allegation #2: The difficult COO

The EquaTheza deal, the Gazprombank deal and the Equator deal had all been signed by PetroSA’s acting chief operating officer Sesakho Magadla, who had been seconded to PetroSA by its parent company CEF.

Before Sizani was appointed, Magadla had stepped into the PetroSA CEO role for two months. However, handing back the reins did not go smoothly: “I found her to be a very difficult person to work with and, unfortunately, extremely insubordinate and condescending,” Sizani wrote in his 15 October letter to the board.

“I made several attempts to talk to her by way of trying to instil corrective measures to her conduct but I failed because she ignored me and did so disrespectfully with condescending gestures and comments.”

On 20 May, Sizani terminated Magadla’s secondment and sent her back to CEF – a routine decision that nevertheless prompted two urgent meetings with Minerals and Petroleum Minister Gwede Mantashe.

On 26 May, Sizani and the group CEO Ishmael Poolo met with Mantashe “to discuss the … termination of Ms. Magadla,” Sizani wrote. “The outcome of that meeting led to a proposal on the working model between [myself] and Ms. Magadla.”

We asked Mantashe why he felt it was appropriate to intervene in an HR issue: “When the CEO fights a COO, in an entity that reports to me, I’m an interested person I must intervene and try to stop the fight. That’s what I should do,” he told us last week.

“If a new CEO … has a fight … it reflects on the character of the CEO, and I have a responsibility to guide the CEO, [to say] ‘listen man, listen first, don’t walk in there and try to kick everybody on the backside.’ Sometimes CEOs listen, sometimes they don’t.”

On 31 May, they met again with the minister, this time with Magadla present. “[T]he minister reprimanded Ms. Magadla about her unprofessional behaviour,” Sizani wrote.

Sizani seemingly believed that this was the end of the matter: “the matter of removal of Ms. Magadla never arose again. I am, therefore, not aware of any legal backlash or negative consequences to PetroSA resulting from my decision to remove her until today hence this allegation comes as a surprise to me.”

The allegation, contained in Figlan’s 8 October suspension letter, is that by terminating Magadla’s secondment, Sizani has inadvertently restructured the organisation: “This termination has the effect of restructuring the organisational structure … something that you were not authorised to do.”

“Futhermore, such termination was not done in consultation with the … Board,” Figlan added.

Much like the EquaTheza allegation, Sizani argues this is nonsensical. “The COO position still exists even in the new proposed structure and Ms. Magadla was replaced with another Executive who is performing the same functions in the same office,” he told Figlan in response to the allegations.

Sizani conceded that while he did not consult the board before firing Magadla, he met with the board two days later and presented reasons for his decision, which he claims the board never questioned.

Enter Gwede Mantashe

PetroSA’s decision to suspend its CEO, which so alarmed Members of Parliament, does not seem to have provoked any response from the Minister.

“The suspension of the CEO is handled at board level. I’ll wait for the report. I’ve not received it. And I must not go and fetch it because the board must do its work,” Mantashe told us last week.

Yet Mantashe could not explain why he had rushed to intervene not once, but twice, when the COO’s secondment was ended, yet took a hands-off approach when the CEO was suspended.

“[W]hen Sizani was suspended I asked CEF ‘what is happening there?’ I did ask … I’m waiting for them to come back to me to say, these are the findings of the investigation. Then I will determine at that point, what is the course of action to be followed.”

Asked what he thought of Sizani’s response to the allegations, Mantashe said: “If you have seen them you are lucky, I’ve not seen them.”

Allegation #3: The turnaround plan

In a sense, the fallout between PetroSA and its CEO was inevitable. Sizani joined PetroSA with the mandate to rescue it, while its parent company, CEF, is in the process of lowering the coffin into the grave.

Although PetroSA had a turnover of R24.5-billion last year, the company is technically insolvent. The solution proposed to the crisis at PetroSA is to strip the company of its productive assets – the diesel trading business and its investment in Ghana – and move these into a new entity: the South African National Petroleum Company (SANPC).

This would leave the problematic “legacy” assets – like the shuttered gas-to-liquids refinery in Mossel Bay – for PetroSA to manage.

“Your appointment as PetroSA Group CEO came at a time wherein a number of CEF subsidiaries … were in the process of merging into a single national petroleum company (SANPC) as directed and approved by Cabinet and directed by the Minister of Mineral Resources and Energy [Gwede Mantashe],” Figlan wrote.

“It should be noted that in implementing Your Turn Around Strategy for the organisation … differs with the already existing and approved organisational structure by the Board,” Figlan added.

The PetroSA CEO, Figlan alleges, was trying to run two parallel and contradictory process under the Labour Relations Act: a section 189 retrenchment process while a section 197 transfer was already underway.

Sizani disputes this. “I deny that I have embarked on the alleged process. In fact no steps have been taken in pursuance of retrenchments at all,” he wrote. “I was requested … to put together a turnaround plan for PetroSA … One of the propositions we considered … was the ‘right sizing of PetroSA’ … to assist in turning around the misfortunes of PetroSA,” he wrote.

But since the right-sizing project was not approved by the board, no retrenchments were ever made, he argues, adding that “my employment is threatened for only making a proposal”.

Keeping Parliament in the dark

When Figlan and the other CEF executives appeared in Parliament in October, they refused to discuss the allegations against Sizani, telling MPs that “we cannot divulge on what is happening because this is a Labour Relations Act [issue], which requires us to be confidential about it. Even worse, the employee involved his lawyers so we cannot divulge such information.”

Mikateko Mahlaule, the chair of the Minerals and Petroleum Portfolio Committee, was unimpressed. “The chair of PetroSA says ‘it’s a labour relations matter, I don’t think we must divulge the information.’ If we want it, we’ll get it. There’s no such thing that you can’t divulge this information, not here in Parliament. Not here.”

So far, however, Parliament hasn’t pushed for answers.

When we approached Sizani about the reasons for his suspension, he referred us to his lawyer Tukela Ningiza, who declined to provide said reasons but told us: “We are aware that the matter is that of public interest and in this regard, we have (on our client’s instructions) consented that the allegations and information related thereto can be disclosed to the parliamentary committee”.

PetroSA did not want to provide us with the information either.

“PetroSA reserves the right not to make public the reasons for the suspension of Mr. Xolile Sizani as the Group Chief Executive Officer (GCEO) … The provision of a response indicating the reasons of the suspension of Mr. Sizani would result in PetroSA transgressing the basic obligations of employee and employer confidentiality,” Figlan told us in a letter last week.

“PetroSA as a State-Owned Company and responsible corporate citizen acknowledges the requirement of transparency and public interest. It is through this understanding, that we have been open with the process of the suspension of Mr. Sizani from the onset.”

“Furthermore, it is noteworthy that an investigation is currently underway, therefore, it is key to ensure that this process unfolds and subsequent to which further communication will be provided in this regard. This is to afford the process the integrity of processing without any form of interference or possible prejudice.”

We wrote back to Figlan telling her that our insiders had, in the interim, delivered. We asked if she wanted to offer any further comment on the allegations, specifically our conclusion that PetroSA had suspended its CEO on spurious grounds and with ulterior motives.

PetroSA said it would not offer any further comment.

The post The deal that got PetroSA’s CEO suspended appeared first on AmaBhungane Centre for Investigative Journalism.

But aside from PetroSA, we wondered, who really benefits when the lights go out?

This is what we have been trying to find out. For months we have submitted requests to PetroSA under the Promotion of Access to Information Act (PAIA), asking them to name the companies that received roughly R20-billion in contracts to supply them with diesel.

And for months, PetroSA has resolutely refused to even respond to our requests.

PetroSA is not only refusing to disclose this information to us, however: National Treasury is also in the dark about their apparent deviations from standard procurement procedures.

In its recent annual report, PetroSA proudly proclaimed – in bold white letters on a midnight blue background – that “The spirit of Batho Pele, which means ‘People First’, underpins the PetroSA values”.

The question is: which people is PetroSA really putting first?

AmaBhungane’s recent investigations have also uncovered how Russia’s state-owned Gazprombank appeared to be cherry-picked for a tender to refurbish the Mossel Bay gas-to-liquids refinery; how a controversial businessman received massive contracts to build offshore gas infrastructure, seemingly without having the financial resources to carry this out; and how those contracts were scuppered by an unpaid soccer player who successfully placed the company in liquidation.

These controversial contracts could cost PetroSA many billions more. But when we submitted PAIA requests asking it to disclose records of how these contracts were awarded, we received the same stoney silence.

It’s a constitutional right

As a state-owned entity created to play a strategic role in the oil and gas industry, PetroSA’s success or failure has repercussions for South Africa’s economic development. Yet despite its professed people-centered approach, PetroSA treats information requests from civil society as an annoyance that can be ignored.

Our courts have recognised that the constitutionally-enshrined right of access to information is fundamental to the public’s ability to enforce other constitutionally protected rights and to the facilitation of transparency and accountability. The courts have also emphasised that civil society and the media should not have unnecessary obstacles placed in their way when performing this role. A civil society that is lively and engaged must act based on accurate information and so relies on requests for information under PAIA.

State entities are obliged to respond to PAIA requests and to provide the information sought unless clear grounds exist to refuse the request. All requests are also covered by a ‘public-interest override’ as the Act states that even where there are grounds to refuse a request – to protect commercial confidentiality, for example – if there is a significant public interest in the information and there is evidence of a ‘substantial contravention of the law’ or an ‘imminent and serious public safety or environmental risk’, the information must be disclosed. 

By the very nature of its focus on the oil and gas industries, PetroSA’s procurement contracts impact communities and the environment, cost a substantial amount of money, are long-term and are meant to ensure competitive operations in a sustainable commercial manner.

• Open Secrets just released an in-depth report on the shadowy influence of the oil and gas sector titled The Oil & Gas Majors

Timeously accessing the relevant contractual documents would afford the public the opportunity to assess the extent to which PetroSA, as a subsidiary of the Central Energy Fund, which in turn reports to Gwede Mantashe’s Department of Mineral Resources and Petroleum, is performing its responsibilities effectively and efficiently.

Despite this crucial public role, however, PetroSA seems to believe that the government’s obligations to act transparently do not apply to it.

At Africa Oil Week 2023, Minister Gwede Mantashe said that “if you want to expose the business of PetroSA, you’re basically killing it.”

The truth is quite the opposite: increased transparency leads to a more competitive environment and therefore lower prices. Procurement contracts secured in secret, and thus without meaningful oversight, risk costly and damaging outcomes such as corruption, unnecessary debt and, of particular concern to the energy sector, severe capacity constraints and grid instability.

Information Regulator

PetroSA’s apparent zeal to cultivate an environment in which secrecy thrives indicates that its professed ‘people first’ ethos is not in fact what it practises. The constitutional requirements of fairness, equity, transparency, competitiveness and cost-effectiveness are plainly eroded by the stifling of public participation in this manner.

Last week, amaBhungane and Open Secrets decided to approach the newly-established Information Regulator, who is tasked with adjudicating PAIA as well as POPIA (Protection of Personal Information Act) requests.

Together we have filed a detailed affidavit setting out how PetroSA has systematically ignored our official requests and why, in our view, PetroSA’s obsessive secrecy cannot be allowed to stand.

While we, as civil society, will continue to push against this unsustainable approach, we hope that the PetroSA leadership will internally reflect and revert to the Batho Pele value they profess to hold.

Caroline James is the amaBhungane Advocacy Coordinator and Qiqa Nkomo is a lawyer at Open Secrets.

The post Advocacy: AmaBhungane and Open Secrets challenge PetroSA’s diesel contracts secrecy appeared first on AmaBhungane Centre for Investigative Journalism.

However, a new court case threatens to crack open its two most controversial deals: the gas-to-liquids refinery deal with Russia’s Gazprombank and the gas finance-and-infrastructure deal with businessman Lawrence Mulaudzi.

Two weeks ago, Phezulu Natural Energy Resources, a rival bidder, filed a case asking the Cape Town high court to set aside Mulaudzi’s deal. However, in a novel legal twist, Phezulu is also demanding access to the decision-making records of the Gazprombank tender, which – it alleges – was illegally split for Mulaudzi’s benefit.

It’s a complicated story, so let me explain:

In January last year, PetroSA – the state-owned oil and gas company – issued a flurry of tenders designed to kickstart the offshore gas industry:

• RFP 0001/2023 would restart the mothballed gas-to-liquids refinery in Mossel Bay,
• RFP 0003/2023 would drill gas wells off the southern coast, and
• RFP 0004/2023 would source funding for the drilling program.

Then PetroSA went quiet – until December, when amaBhungane reported that PetroSA was planning to award RFP 0001/2023 – worth roughly R3.7-billion – to Gazprombank Africa, a local subsidiary of Russia’s state-owned gas giant.

The deal was controversial: Gazprombank had been selected after all 19 other bidders were eliminated for technical reasons. Dealing with a Russian entity, currently under Western sanctions, made it even riskier.  

PetroSA held a press conference defending its decision to award RFP 0001/2023 to Gazprombank, but didn’t mention that its executives planned to sign an even bigger deal as soon as they left the conference room.

In January, amaBhungane published a second exposé, showing how – hours after the press conference – PetroSA had held a private signing ceremony with Mulaudzi, which awarded his company, Equator Holdings, an expansive deal to finance and build all of the infrastructure needed to bring gas onshore.

The deal was potentially worth as much as R21.6-billion and would have made Mulaudzi an overnight oligarch. The scope of work awarded to Equator, however, strayed far outside of the original tender (RFP 0004/2023).

“It appeared that RFP 0004/2023 was potentially awarded irregularly by PetroSA

to Equator as it clearly included ‘scope creep’,” Phezulu director André Cilliers told the court.

Phezulu had submitted a bid for the gas-to-liquids refinery in Mossel Bay (RFP 0001/2023), but not for RFP 0004/2023, which was supposed to be limited to sourcing finance, not building infrastructure.

After the December press conference, however, it became clear that PetroSA had split RFP 0001/2023 in two: Gazprombank would only be given the portion of the refinery that deals with liquid fuels, while the gas loop, which Phezulu was interested in, was mysteriously cut out of the deal.

Phezulu would only realise where this portion of the tender had gone when Mulaudzi came knocking at their door the following day.

“Mr Lawrence Mulaudzi from Equator contacted me personally to enquire about the technical expertise of Phezulu and its consortium and technical partners, including financial capabilities. Mr Mulaudzi and I then arranged for an introductory meeting to be held between ourselves on 13 December 2023 in Cape Town,” said Cilliers.

At a meeting the following day, Mulaudzi showed Phezulu a copy of the Gas Infrastructure agreement he had signed with PetroSA and shared a photograph of the private signing ceremony. 

What Phezulu suspected was that PetroSA had taken half of RFP 0001/2023 and handed it to Equator Holdings. 

“[I]t can hardly be contested that the scope of both RFP 0001/2023 and RFP 0004/2023 was irregularly and unlawfully amended to allow for the gas portion of the [gas-to-liquids] Refinery to be transferred from RFP 0001/2023 to RFP 0004/2023 or excluded from RFP 0001/2023,” Cilliers would later tell the court.

Worse, it appeared that some of the bells and whistles from Phezulu’s bid had now been offered to Equator as well.

As Cilliers explained, “Phezulu’s [proposal] included various elements not specifically provided for by PetroSA in RFP 0001/2023, such as additional upgrades to the [gas-to-liquids] Refinery; the complete rebuilt of ancillary critical gas infrastructure; an LNG import terminal, development and future use of domestic gas resources and a fully integrated gas-to-power energy hub solution.”

According to Cilliers, at the meeting in Cape Town “Mr Mulaudzi stated that, at the behest and direction from PetroSA, Equator was to engage with Phezulu to comply with and satisfy the technical requirements… of the project… This was apparently due to the technical expertise and financial capability demonstrated by Phezulu … under RFP 0001/2023.”

In other words, what Cilliers is alleging is that PetroSA knew that Phezulu had the technical and financial skills for the project but decided to award the project to Equator, which had neither, after which it told Equator to have a chat with Phezulu. 

This, if true, is a classic example of how tenders are manipulated: an unqualified company wins the contract and then subcontracts a rival bidder that actually has the skills to complete the project.

It’s worth pointing out that neither PetroSA nor Equator have filed their replying papers in the case, so both may dispute this.

However, Equator appears to have been self-conscious about this perception, because after amaBhungane sent questions to Mulaudzi in January, he allegedly called Phezulu saying “that the Gas Infrastructure Agreement is getting a lot of attention, including from the press” and that he wanted to sign contracts with the technical partners directly, rather than going through Phezulu.

“In the words of Mr Mulaudzi,” said Cilliers, this was “to ensure that ‘Equator does not look like a middleman subcontracting the services.’”

Leaked records obtained by amaBhungane show that Equator had been one of the 20 bidders for RFP 0001/2023 but that it had scored 0 points out of 100 and was eliminated because the “[a]uthenticity of entity could not be established.” Phezulu had also been eliminated, but had at least scored 67.5 points out of 100. 

To add insult to injury, it later emerged that Equator was facing a liquidation application when it was awarded the contract over its failure to pay a R725 000 debt to a soccer player. In March, a final liquidation order was granted.

Discovery

Phezulu is asking the court for two things: one, to set aside the decision to award RFP 0004/2023 to Equator, and two, to force PetroSA to disclose all the documents that led to the two tenders being awarded.

Phezulu says that it has, for now, no objection to Gazprombank keeping the tender that awarded it the liquids portion of the refinery. It simply wants PetroSA to award the gas portion properly.

“A chunk of work advertised as forming part of RFP 0001/2023 was awarded under RFP 0004/2023. One can hardly imagine a more fundamental flaw in a tender process than this,” it told the court.

Critical to Phezulu’s case, it argues, is that it requires access to all records leading up to the decision to award the two tenders – documents that PetroSA has bluntly refused to disclose.

Phezulu, through its attorney, has been requesting these documents since February.

When MP Kevin Mileham submitted a Promotion of Access to Information Act (PAIA) request to PetroSA in January, PetroSA refused. 

In a press release in January, Mileham wrote that “based on the evidence at hand, it is safe to conclude that PetroSA may have made a predetermined decision to award the tender to Mulaudzi’s Equator Holdings, despite overwhelming evidence that the bidder did not qualify.”

In June, amaBhungane and Open Secrets submitted a joint PAIA for this same information, which PetroSA simply ignored.

Phezulu, however, is using a different tactic: it argues that the documents should be disclosed as part of the discovery process of its court case. This “rule 53” disclosure – which is a standard part of such litigation – will be much harder to resist.

As amaBhungane’s advocacy co-ordinator, Caroline James explains: “The courts have taken a dim view of litigants hiding behind spurious reasons for not providing the full record of a decision to award a tender. PetroSA’s actions go against the Constitution’s requirement of procurement transparency but also the rule of law and a respect for the legal process.”

There are two legal hurdles that Phezulu will have to clear though: one, it has waited longer than 180 days to take PetroSA’s decision on review, and so it must first ask the court to condone its late filing. And two, PetroSA has already told Parliament that it is in the process of cancelling Equator’s contract, which could weaken Phezulu’s claim that it needs access to the documents that would reveal how and why Mulaudzi’s company briefly landed the contract of a lifetime. 

The post Rival bidder takes PetroSA to court over Gazprom/Equator tenders appeared first on AmaBhungane Centre for Investigative Journalism.

Three months later the deal was dead, killed not by environmental groups or Russian sanctions, but by 34-year-old soccer player Cheslyn Chase Jampies.

Last year, Jampies asked the Johannesburg High Court to liquidate Tshakhuma Tsha Madzivhandila Football Club (TTM), after the club failed to pay his R35 000 a month salary.

With time and interest, Jampies’ claim against the club rose from R70 000 to R725 000.

TTM, which is owned by Mulaudzi, failed to oppose the case. And on 7 March this year, the court ordered that TTM be placed in final liquidation.

Records from the National Soccer League, filed in Jampies’ case, show that Tshakhuma Tsha Madzivhandila Football Club (Pty) Ltd is NOT the legal entity behind the club. Instead, Mulaudzi registered the club in the name of his investment company, Equator Holdings (Pty) Ltd.

This is where PetroSA and the R21.6-billion gas deal comes in.

Gas baron

In January 2023, Equator bid for the R3.7-billion contract to refurbish PetroSA’s gas-to-liquids refinery in Mossel Bay (RFP 0001/2023). That deal went to Russia’s Gazprombank Africa. But Equator bid for and won an even bigger contract: RFP 0004/2023 to finance and refurbish PetroSA’s offshore gas infrastructure, at a potential cost of R21.6-billion.

A joint venture between Equator and another company, Theza Oil and Gas, was also appointed to develop PetroSA’s offshore gas wells.

The two deals meant Mulaudzi was poised to become one of the most significant players in the gas industry, with control over offshore gas wells and the infrastructure to bring the gas onshore.

In our original investigation, we pointed out that Equator had been eliminated from the Gazprombank tender – scoring 0 out of 100 – because the “[a]uthenticity of entity could not be established”, making the decision to hand it two other deals highly suspect.

• Read: PetroSA taps notorious political operator for massive offshore gas deal

In January this year, Mulaudzi told us: “We are … pleased as a company to enter into this partnership with PetroSA which will provide security of gas supply and unlock infrastructure bottlenecks in the energy space for South African economy… We have every intention to deliver, and we will!”

What was not apparent at the time was that PetroSA had just awarded two multi-billion rand gas infrastructure deals to a soccer club that now plays in the third division Motsepe League.

No assets worth mentioning

In terms of the Gas Financing and Infrastructure agreement, signed with PetroSA in December, Mulaudzi’s Equator Holdings would have until 8 June 2024 to show that it could secure a funding commitment for the refurbishment project, estimated by PetroSA to require R21.6-billion.

Unbeknownst to PetroSA, however, Equator Holdings could not even come up with R725 000 to pay Jampies.

“If you can’t properly run a football club that’s worth about a few million how are you going to juggle R21.6-billion?” the former Bafana Bafana player told us in a recent interview.

Back in 2020, TTM had bought the Premier League status of Bidvest Wits for a rumoured fee of R35-million, but two years later, the club was struggling.

“The first month came, our monies were short. Obviously, me as the club captain I stand as the mouthpiece between the management and the players,” Jampies told us. “When we go and ask, ‘Hey, what do we tell the boys?’ Because we are the senior players, they come to us to help them financially… so we needed answers and we never got that. We were brushed off many times, we were told, ‘just hang on’.”

Meanwhile, Mulaudzi, the club’s owner and chairman, continued spending lavishly. Jampies recalled how a member of the club’s management team came in one morning “reeking of alcohol and he has the audacity to tell us, the chairman was at a funeral [this] weekend and spent R200 000 on alcohol”.

In October 2022, TTM stopped paying Jampies altogether.

“Every piece of furniture I’ve accumulated over the past 14 years, I had to sell one by one because I didn’t have an income… I was being ignored, I was being lied to … the chairman wasn’t taking my calls, he just rubs it off,” he told us.

He added: “I lost my cars, I lost my furniture, I lost my bed, I lost my TV, my microwave, every fork, spoon and knife I had to sell.”

In January 2023, just as Mulaudzi was gearing up to bid for PetroSA’s multi-billion rand gas deals, Jampies filed a case with the Dispute Resolution Chamber of the National Soccer League, which governs all the leagues in the country.

“The reason I pursued this is because football is all I know,” he told us. “I cry, I bleed, I talk football, that is my life… And I cannot sit back and allow some incompetent people that doesn’t have any remorse… to just take it from me in the space of four months. I cannot do that.”

In June 2023, the National Soccer League ordered TTM to pay Jampies his outstanding salary plus damages.

The ruling, authored by Adv Fana Nalane SC, is damning. Amongst other things, he raised doubts about the authenticity of a mutual separation agreement that TTM produced as evidence. Jampies had previously refused to sign such an agreement and denied that it was his signature on the document.

The panel agreed, ruling that TTM had “failed … to prove the authenticity” of the document and instructed the team to pay Jampies R725 000.

When TTM failed to pay, Jampies’ lawyers asked the National Soccer League for a copy of the club’s legal membership form, which showed that the club was registered to Equator Holdings trading as Tshakhuma Tsha Madzivhandila Football Club.

With this in hand, they asked the Johannesburg high court to liquidate Equator Holdings.

In his affidavit, Jampies told the court: “[Equator’s] non-payment of the amount due to me provides confirmation of [Equator’s] distressed financial position … I hold no security for my claim and its apparent that [Equator] does not possess any assets worth mentioning.”

The Johannesburg High Court agreed, and ordered that Equator be wound up by a liquidator. Ewan Simmonds, one of the lawyers now representing the liquidated company, told us: “In terms of the liquidation process, the order is not provisional, but is final and no one has filed any appeal against it. To date we have not received a response from the director, Mr Lawrence Mulaudzi.”

AmaBhungane also had no luck reaching Equator. Calls, emails and WhatsApps to Mulaudzi and one of the other directors went unanswered.

Clueless

Embarrassingly, it appears that PetroSA was in the dark about Equator’s liquidation.

In terms of the agreement, Equator had 180 days – until June this year – to “deliver satisfactory evidence to PetroSA that it has secured the financing for the refurbishment project”.

“In line with our internal policies, satisfactory evidence includes proof that funds have been secured and are immediately available, without any conditions, from a reputable financier/bank or partner,” PetroSA told Mulaudzi.

Despite Equator’s liquidation, Mulaudzi appears to have written to PetroSA confirming that Equator had secured R1-billion in funding from Black Mountain Investment Management, a little-known asset management company.

However, in a letter dated 19 June 2024 – a copy of which we have seen – PetroSA told Mulaudzi that this was not good enough and noted that “the letter appears to be a mere expression of interest to provide funds, which falls short of the evidence required under the Agreement. There is no evidence of the financial capacity of [Black Mountain] from a reputable bank or financier or a credit-approved/binding term sheet.”

Although the original tender documents estimated that $1.2-billion USD would be needed for the refurbishment project, it appears that PetroSA was willing to settle for R1.2-billion plus contingencies. Black Mountain’s unconfirmed offer of R1-billion “falls short of the amount required”, PetroSA said.

PetroSA also raised concerns about the technical partner Equator had secured: Khewija Engineering & Construction, based in Fourways.

Until 2016, Khewija operated under the name Kellogg Brown & Root South Africa. Kellogg Brown & Root is a controversial US defense and construction firm; its employees have been implicated in everything from sexual assault to human trafficking, while the firm has been accused of exposing US soldiers to asbestos-contaminated “burn pits” in Iraq and Afghanistan.

In 2015, the local division of Kellogg Brown & Root was bought out and the company changed its name to Khewija. In its 19 June letter, PetroSA asked Equator to provide “CVs of the key personnel” as well as “evidence of Khewija’s track record of project execution in similar environment from 2015 (since management buyout) to date”.

According to PetroSA’s letter, Equator signed an agreement with Khewija to execute PetroSA’s offshore gas infrastructure project. Despite this, online company records show that Khewija was placed in final liquidation three weeks later. Phone calls to its office went unanswered and emails bounced back.

Last week, we asked PetroSA if the deal with Equator Holdings was still going ahead.

If the deal had been cancelled, we asked, when was it cancelled and why. And if the deal was still on, had Equator been able to come up with the money.

In a formal letter, PetroSA responded to our questions by saying “No comment”, “No comment” and “No comment”.

In follow-up questions we asked about the 19 June letter and pointed out that it appeared that PetroSA had awarded a critical gas infrastructure deal, potentially worth R21.6-billion, to a soccer team.

The response: “PetroSA cannot comment on [this] enquiry”.

Developing the offshore gas industry is key to minister Gwede Mantashe’s plan to make the Eastern Cape the “gas capital” of the country.

The plan is not going well: TotalEnergies has hinted at plans to walk away from its long-held interest in the offshore gas block 11B/12B, and Gazprombank is yet to make good on its promise to provide the funding necessary to restart PetroSA’s gas-to-liquids refinery.

Last week Mantashe turned to the well-worn trope of blaming civil society for the gas industry’s woes, telling Parliament that it was imperative to “challenge the foreign-funded NGOs that oppose every initiative to explore oil and gas,” which he said “deject investments in this sector”.

The post Own goal! PetroSA’s multi-billion rand offshore gas deal thwarted by unpaid soccer player appeared first on AmaBhungane Centre for Investigative Journalism.