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06 Feb 1998 00:00
Mossgas, the state-owned synthetic fuel producer which is one of South Africa’s most expensive white elephants, has asked the government for another R1, 8-billion. The latest call for cash by the plant which is controlled by the embattled Central Energy Fund (CEF) - has been presented in writing to the Minister of Minerals and Energy, Penuell Maduna, after being approved by the CEF board in December.
If Maduna agrees to pump the money into the fuel-from-gas operation, he will bring the Mossgas bill to almost R14-billion since the project was set up by former president PW Botha in 1988.
Mossgas chief Dave Day said this week the money is needed for a three-year expansion project to link the synthetic fuel operation to new gas fields.
A Ministry of Minerals and Energy representative confirmed Maduna had received the proposal but declined to indicate when he will make a decision. The money Mossgas wants would come from its own cash flow which currently goes back to the CEF, and in turn to tl1e state’s coffers. The state-of-the-art plant has recently started turning a profit - last year it made R730-million -but only after guzzling billions of rands of state funds over the past decades.
Two years ago, Maduna’s predecessor, Pik Botha, approved a R910-million project to extend the plant’s life to 2001 during a confused and unsuccessful privatisation drive described as an attempt to “test the market”. The decision on whether to authorise that expansion project was delayed for several months, which increased the final cost. Maduna now faces the san1e dilemma as Botha: sell the plant’s equipment, or continue pumping state funds into it in the hope that it will eventually become viable.
Asked whether he had had any indications of the minister’s thinking on the matter, Day said that Maduna had been “fully briefed. All the information has been put at his disposal.” But Day warned that Mossgas would have to start work on its new post-2001 expansion project immediately to ensure the plant’s survival. Day said the R1, 8-billion project could lay the basis for a lifespan of up to 31 years.
Maduna’s office has been presented with proposals by companies keen to exploit the gas near Mossel Bay. One of these is United States exploration company Sante Fe, which wants to pipe the gas to the Western Cape. Such a plan would mean winding down Mossgas - and it is understood to have been opposed by senior officials in the CEF, including chair Don Mkhwanazi.
Mkhwanazi and Maduna have at tin1es expressed enthusiasm for a state oil company - which could include Mossgas - to compete with the foreign oil companies operating in South Africa. Since giving the green light to the R1, 8-billion plan, Mkhwanazi and his board have been accused of violating key principles of corporate governance by a panel appointed by Maduna.
The panel was charged with investigating Mkhwanazi’s appointment of Liberian politician Emanuel Shaw II as an adviser to the fund at a cost of at least R3-million a year. The panel recommended that Shaw’s contract be rescinded and that the board be replaced in April. It is believed Shaw was also interested in exploring the idea of a state oil company.
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