Former acting PetroSA chief executive Yekani Tenza faces tough questions over his role in the allegedly irregular awarding of a R720-million contract for a gas drilling project off the south coast of South Africa.
After Tenza made a case against it, a bid by a company seen as close to former president Thabo Mbeki’s administration was sidelined.
Instead, PetroSA offered the contract to a pricier competitor, Technip, whose South African branch appears to be owned in part by ANC business front Chancellor House.
Technip ultimately turned down the offer for operational reasons. But the circumstances suggest political considerations may have influenced the state oil company’s procurement decisions.
The Mail & Guardian recently revealed a R1-billion scandal at PetroSA involving decisions made by Tenza while he was at PetroSA’s helm in 2011 and 2012.
The company is being investigated by the Hawks.
The offshore gas contract in question is part of PetroSA’s Project Ikhwezi, a plan to tap new gas reserves to extend the life of its gas-to-liquids refinery in Mossel Bay.
In 2011, PetroSA issued a handful of tenders to drill wells and install infrastructure to pipe the gas to an offshore platform.
Among these was the disputed tender, known as “Scope B”, for the installation of sub-sea structures.
In October 2011, internal documents detail, PetroSA’s procurement team recommended the Scope B contract should be given to a consortium of Netherlands-based offshore services company SBM and its local partner Cape Diving, at a cost of $90.6-million (then about R726-million).
However, a PetroSA steering committee on the project, chaired by Tenza, argued for this decision to be overridden and for the contract to go to French-based Technip for $104.7-million – R100-million more.
Tenza allegedly offered two reasons for this override, both of which seem questionable.
The first reason, contained in an internal communiqué he signed at the time, was that Technip’s black economic empowerment (BEE) shareholding at 24.5% was better than SBM-Cape Diving’s 2.6%.
But, in an affidavit handed to the Hawks early this year, Rain Zihlangu, a PetroSA director until December 2012, argued that SBM-Cape Diving was 24.5% black-owned, compared with 3% for Technip.
Cape Diving chairperson Fezekile Mahlati confirmed to the M&G that the percentages supplied by Zihlangu were correct. Tenza refused to answer questions, and PetroSA did not clarify the respective BEE shareholdings.
The second reason was recorded vaguely in the minutes of a 2012 board meeting: “As per in-committee discussions,” SBM-Cape Diving carried a “reputational risk” that was “pertinent to PetroSA”.
PetroSA failed to explain this to the M&G. Zihlangu said in his affidavit that at an October 2011 board meeting Tenza asked for an in-camera meeting with the board, excluding company executives.
According to Zihlangu, Tenza then explained that former PetroSA chief executive Sipho Mkhize “was either a director or shareholder or being paid by Cape Diving. Tenza said that appointing the SBM-Cape Diving consortium would be a reputational risk to PetroSA given the circumstances under which Mkhize left the company.”
Mkhize was fired from PetroSA in 2010 following corruption allegations. The reasons for his sacking remain unclear.
An internal PetroSA investigator previously claimed there were links between Mkhize and Cape Diving, but this week Mkhize and Mahlati denied any association.
Tenza’s claim might point to political considerations. Mahlati was regarded as close to former minerals and energy minister and former deputy president Phumzile Mlambo-Ngcuka, who was in turn a Mbeki protégée.
A businessperson close to Cape Diving said the company was regarded by some in PetroSA as being made up of “Thabo’s boys”.
Technip’s South African arm, on the other hand, has links with Chancellor House, a source close to the company confirmed this week.
Indeed, Chancellor House’s managing director, Mamatho Netsianda, is a director of Technip South Africa.
There is no evidence that PetroSA took steps to test Tenza’s claim that Cape Diving posed a “reputational risk”. PetroSA did not respond to an M&G request for evidence.
The oil company offered the Scope B contract to Technip in November 2011. By that time, however, the vessel Technip had earmarked for the sub-sea installation could no longer meet PetroSA’s time frame and the offer was turned down.
Board minutes suggest that PetroSA representatives then began negotiating with SBM and that the latter’s “offer submitted to PetroSA and the results of the negotiations in Aberdeen and in Cape Town remain unchanged”.
It appears that the thrust of these negotiations was that PetroSA could hire SBM, but only if it dropped Cape Diving from the consortium.
Writing to PetroSA in March 2012, an aggrieved Mahlati said SBM had told Cape Diving that “PetroSA would only consider the consortium’s tender if SBM terminates the consortium agreement with Cape Diving in order that an award could be made to SBM only”. By the time Mahlati wrote the letter, SBM and Cape Diving had indeed cancelled the consortium – on the “good faith” understanding that SBM would then subcontract the Ikhwezi work to the South Africans.
SBM was then awarded the PetroSA contract.
In his affidavit to the Hawks, Zihlangu argued that the award to SBM was “irregular” because SBM had been allowed to alter its bid – by removing Cape Diving following negotiations with PetroSA – after the tender deadline.
Mahlati blew the whistle in his March 2012 letter: “A tender awarded to an entity that did not tender in its own right can only mean that the termination of the consortium was contrived by either some in PetroSA and SBM or jointly in order to sideline Cape Diving. For what purpose … we are not sure.”
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