In the wake of the disastrous Mossgas `market testing’ exercise, it has emerged that the government effectively turned down a R1-billion bid from the Saudis. Mungo Soggot reports
In the week that President Nelson Mandela led a top- level delegation to Europe on a “sell South Africa” mission, the government turned down an offer by the Saudi royal family to buy Mossgas.
Just days after the government officially aborted the controversial sale of the synfuel plant, a representative of the Saudi king faxed through a R1- billion bid after being assured by South African officials the offer would be seriously considered.
But the government did not invite Mossgas’s royal suitors to catch the first plane from Riyadh to Mossel Bay and examine the plant. Instead, Minerals and Energy Affairs Minister Penuell Maduna replied — after consulting with Mandela, who visited Saudi Arabia last year, and Deputy President Thabo Mbeki — that the “market testing” process was over and the government was reconsidering its policy on Mossgas.
This reaction implies an ambiguity on the government’s part towards foreign investment: although the Saudi offer came in after the bidding process had been wound up, officials were aware the Saudi proposal was on its way before deciding to kill the process.
The government team monitoring the sale — comprising officials from the departments of mineral and energy affairs, finance, and trade and industry — had also assured the Saudis the bid would be seriously considered. The team, which felt none of the other bids passed muster, decided the Saudi offer would not be affected by the termination of the sale process.
It is understood the Saudi offer was more generous than any of the others and motivated by the desire to have a strategic foothold in the South African market.
One industry source commented: “The repercussions of this will be felt for years in the international investment community. If this is how they [South Africa] treat the Saudi royal family, how are they going to treat lesser mortals?”
But Minerals and Energy Affairs director general Gert Venter said this week Maduna’s reply should not be seen as a snub. Venter said Maduna had indicated to the Saudis that as the deadline for bids had passed, he could not give the nod without Cabinet’s backing; that the government was reconsidering its position on Mossgas; that after consultation with Mbeki and Mandela, it had been decided the possibility of the Saudis acquiring Mossgas would have to be considered in the context of “broader investment relations” between the two countries. “There is a lot the two countries can offer each other.”
Venter told the Mail & Guardian the Saudis had asked that the bid remain confidential and that Maduna was disappointed it had found its way into the public domain.
The government’s fudged reply comes amid claims that its attempt to sell Mossgas — or “test the market” —were half-hearted and beset with divisive politicking between those government factions committed to a sale and those against.
There are some in the government who believe that – — at least for the moment — Mossgas should remain in state hands as a synthetic fuel producer. They argue Mossgas is an important foreign exchange earner — it produces the equivalent of 40 000 barrels of oil a day. They add there are many benefits owed to Mossgas from the regulatory system governing the petrochemical sector which Mossgas has been cheated of.
Their plans for the operation include the possibility of finding more gas for the plant to prolong its life beyond 2001.
Many think otherwise. The International Energy Agency, a branch of the Organisation for Economic Co-operation and Development, said in a detailed report on South Africa’s energy sector that the government should sell the plant.
Within the minefield of disinformation and squabbling among the officials involved with Mossgas lies the argument that former mineral and energy affairs minister Pik Botha and the Central Energy Fund, which owns Mossgas, hijacked the process by interpreting Cabinet’s authorisation to “test the market” as a signal to try to sell the plant.
Some officials adhering to this school of thought say Botha could have found far cheaper ways to test the market. One British consultancy, Chem Systems, is understood to have offered to do a market testing survey for R500 000. The merchant banks and advisers cost the taxpayer R1,2-million a month for seven months.
Others argue that it is impossible to conduct an effective market testing without hiring a merchant bank and without being ready to sell. “Only if you show a willingness to push it through are you going to get accurate reflections of what people are willing to pay.”
Apart from this, the problem with arguing that Botha hijacked the process is that both the trade and industry and finance ministries were intimately involved from the start. It is understood Botha consulted them at every stage. “[Trevor] Manuel and [Chris] Liebenberg had their hands on the rudder from the start. No matter what you think of Botha, he is a survivor. He is not the type to go it alone, especially when his party is a minority.”
Those keen on bringing the private sector to Mossgas say the problem with their opponents’ stance is it failed to take on board the government’s disastrous track record with Mossgas — which has bled the taxpayer R12-billion plus the R500-million odd a year in subsidies — and that this alone should have persuaded the government to jump at the Saudi offer.