A year and R100-million later, plans to sell Mossgas are back to square one, writes Mungo Soggot
THE government’s failure to sell Mossgas — and the bungled announcement of the fiasco — has highlighted the political power struggle over the fate of the synthetic fuel producer. The struggle may have cost the taxpayer over R100-million the past year.
Superficially, the botched announcement of the failed sale was about a lack of communication among the plethora of state officials monitoring the sale — or a “funny farm”, as one senior state oil official put it.
But the botch was in fact the latest of a string of examples of competing factions in government using Mossgas as an expensive political football.
A senior official in the mineral and energy affairs department, two members of the Ministerial Task Team (MTT) and two members of the Central Energy Fund (CEF) agreed the announcement had been botched and that it should not have come from the CEF — it should have come from Mineral and Energy Affairs Minister Penuell Maduna.
Recent events have bolstered the view that the Mossgas sale process was to a large extent a sham – — that many of those involved never intended to sell it, but instead used the chance of a sale to justify a call to Cabinet to spend R850-million on a life-lengthening expansion.
Some of the anti-sale team have suggested that when the government gave the green light to a sale in December last year, it in fact had only given authorisation to “test the market” and a sale was not on the table. Such comments make it unsurprising that, as a senior state oil official says, there were no companies “waiting with big fat cheques”.
Mossgas’s history is studded with long delays by politicians over crucial decisions about the plant’s future. Former mineral and energy affairs minister Pik Botha and other politicians involved with the industry made clear their fear of choosing whether to sell, scrap or expand the plant.
It is estimated the delays over expanding the plant have cost Mossgas R40-million in operating profit and added R60-million to the R850-million it will now cost to expand it.
This procrastination has been accompanied by a hefty outlay on consultants. The Mossgas monitoring panel — advisers hired to investigate the feasibility of expanding the project — alone cost R6,5-million.
The army monitoring the Mossgas sale included the MTT — four civil servants and advisers from the mineral and energy affairs, trade and industry and finance departments — the CEF, the monitoring panel, a merchant bank and an international energy specialist. Somewhere on the fringe lurked Botha.
The press release announcing the failure was not regretful, but contained more than a hint of relief that the hi-tech fuel from gas operation could remain in state hands.
However, it was not a case of the CEF hijacking the process. For although there have been suggestions that the CEF is keen to hold on to Mossgas to preserve its empire, it appears the struggle is not between the old-guard sanctions-buster and the new government. Instead, it seems to be between a faction in the new government that is not keen on relinquishing control of Mossgas and one that is.
The head of the anti-sale faction and part of the MTT is Paul Jourdan, special adviser to the trade and industry department. He has grand plans for a substantial state role in the South African fuel and petrochemical sectors.
It appears the MTT was unanimous that none of the bids passed muster. However, senior officials involved in the sale believe the apparent fight in the government over whether or not to sell Mossgas discouraged buyers — in particular the troika of South African chemical companies, Sentrachem, Sasol and AECI.
And it has been argued that the criteria used to judge the bids made a sale virtually impossible, backing the argument that the process was a sham.
Little has been said about how the bids were judged. The press release declared the bids did not satisfy the “objectives in regard to value, balance of payments and continued employment, or provide for a more effective utilisation of Mossgas assets”.
It appears many of the Mossgas sellers were bent on the impossible task of selling it to a company that would continue to keep it running as a synfuel plant, resorting to the Sasol argument that synthetic fuel saves South Africa foreign exchange. Hence the inclusion of a “balance of payments” criteria for the sale. There are, however, few companies outside South Africa with synfuel expertise, suggesting again that there were some involved in the sale who did not expect to see it go through.
If there were such strong arguments against selling it, why hire merchant banks and other advisers at huge cost — unless it was the only way of persuading Cabinet to authorise more capital expenditure. Mossgas’s gas reserves are expected to be completely depleted next year. The expansion will give it five more years, but the longer the wait the more expensive it becomes.
Some analysts argue it might even have been worth giving Mossgas away just to free up the hundreds-of- millions in subsidies poured into it every year.
The botched press release was an appropriate finale. It came from the CEF, and not from government which took until Tuesday to say anything. The MTT asked the CEF to make the statement. An unapproved rough draft went out on Friday, July 5. It was retracted, checked by the MTT, and sent out again on Monday.
There is a chance that the CEF will consider joint ventures and strategic alliances arising from the bids — arguably not enough to make up for the fact that Mossgas is exactly where it was two years ago.
Many industry officials and commentators believe the affair has shown that a decade after former state president PW Botha made one of the National Party’s most incompetent economic decisions by authorising the R11-billion splurge on the Mossel Bay white elephant, little has been learnt.