South Africa’s state-owned petroleum company PetroSA finds itself in unprecedented financial distress, with the South African Revenue Service (SARS) pursuing the recovery of a staggering R4.5 billion debt that the entity admits it cannot pay. The crisis has reached such severity that SARS officials have reportedly travelled to Mossel Bay, where PetroSA’s flagship Mossgas plant is located, to assess assets for potential attachment.
The extent of PetroSA’s financial woes became apparent during recent testimony to the Portfolio Committee on Mineral and Petroleum Resources. Senior management revealed that while the company holds approximately R13 billion in assets, its liabilities have ballooned to around R20 billion – a deficit that continues to widen as the entity posts annual losses.
The company’s trading operations have become unsustainable, hampered by a poor credit record that prevents it from competing effectively with other oil traders in the market. This financial deterioration has effectively crippled what was once envisioned as a key player in South Africa’s energy security strategy.
Central to PetroSA’s potential recovery is the restart of its gas-to-liquids plant at Mossel Bay – the company’s primary revenue-generating asset. However, the facility remains non-operational, and efforts to secure private sector partnerships necessary for its revival have been repeatedly thwarted by what critics describe as political interference and poor governance.
The Democratic Alliance (DA) has been particularly vocal in its criticism, with James Lorimer, the party’s Spokesperson on Mineral and Petroleum Resources, arguing that PetroSA’s continued operation represents reckless trading that would result in director prosecutions if it were a private company.
The DA highlighted that during the past two years there have been a series of high-profile partnership failures that have further undermined confidence in PetroSA’s viability:
• The Gazprombank debacle: In 2023, PetroSA selected Gazprombank Africa, a unit of Russia’s state-owned bank, as its preferred partner to restart the Mossel Bay GTL refinery in a deal valued at approximately R3.7 billion. However, Gazprombank failed to honour even its initial commitments to fund feasibility studies, leading to the partnership’s eventual collapse after months of non-performance.
• The Equator scandal: Perhaps even more concerning was the awarding of a contract to restore offshore gas assets to a company called Equator – an entity that had been disqualified during the tender process because “the authenticity of the entity could not be established.” The situation became farcical when Equator was subsequently liquidated during a relatively minor court dispute.
• Total Energies withdrawal: A potentially transformative deal with Total Energies to exploit the Brulpadda and Luiperd gas fields off Mossel Bay was mishandled to such an extent that the international energy giant walked away from the partnership.
The DA has responded to this crisis with calls for drastic action. Lorimer argues that the time has come to “staunch the bleeding and get government out of a business where it does not belong and where it has a track record of nothing but failure.”
The DA’s position is unequivocal: “PetroSA should be shut down entirely, with its infrastructure sold to private sector entities that could refurbish and operate the facilities more effectively,” said Lorimer.
“If PetroSA was a private company it would be considered to be trading recklessly and its directors would be liable to prosecution,” Lorimer stated, highlighting the protected status the entity enjoys as a subsidiary of the Central Energy Fund.
Adding another layer of complexity to the situation is the ANC government’s reported plan to establish the South African National Petroleum Company. Critics suggest this move is designed to extract profitable operations from existing entities while liquidating failed assets and writing off accumulated debts – a strategy the DA views as politically motivated rather than commercially sound.
