/ 7 September 2018

No end to PetroSA’s woes

The state-owned petrochemical company has posted losses over the past four years.
The state-owned petrochemical company has posted losses over the past four years. (Gallo Images)

Members of PetroSA’s interim board are at loggerheads with their chairperson, Nhlanhla Gumede, and have passed a motion of no confidence in him and sent it to its governing body, the Central Energy Fund (CEF).

This information comes to light after a three-member board panel, chaired by Gumede, appointed a new company secretary — who allegedly started at the beginning of this week — despite a freeze on appointments by the minister.

The state-owned petrochemical company has posted losses over the past four years, including one of R14.6-billion in 2014-2015, the biggest loss ever by a state-owned entity.

The company’s senior management is in disarray. Last week the Mail & Guardian reported that the acting chief executive would be moving from the position, the chief financial officer had asked to cancel her contract early, and the chief risk and compliance officer had already left.

In March, Gumede wrote to the minister of energy, Jeff Radebe, stating that the entity should appoint an acting chief executive from its ranks or the department. Gumede’s letter, which the M&G has seen, states that the board’s efforts to fill positions have been frustrated by internal personnel trying to fill the posts with their preferred internal candidates and friends.

“PetroSA is facing two primary challenges, each feeding off each other, namely the lack of a properly functioning plan and lack of effective leadership. Over the past few years, there has been a mass exodus of experienced people in leadership positions from PetroSA,” the letter states.

But in a train of emails, board members disagreed with the chairperson. One member wrote that the letter sent by Gumede to Radebe was shocking, alarming and grossly overstated the position of the entity. “PetroSA is NOT the ‘basket case’ described in this letter,” the email reads.

Another wrote: “To send subsequent correspondence advising the minister that we wish to retract the letter after he has seen it would be an indication of serious disorganisation within the board of this state-owned company. This would be even worse if there has been no consultation on this matter with the chairperson of [the] CEF as the representative shareholder of the minister.”

Radebe’s director general responded a few days later to say the entity should not make any appointments.

“The minister, as the shareholder, is concerned with getting a suitable return on investments, ensuring the financial viability of the entity, as well as effective corporate governance … it is against this background that the minister has directed that the decision/s pertaining to the appointment of the COO [chief operating officer] or any other pending appointments should be put on hold,” the letter states.

In June, a panel headed by Gumede embarked on a process to remove the company secretary and hire a new one, a decision that is being challenged by the former secretary.

One highly placed source said the only panel who pushed through an appointment was the one headed by Gumede and that the other panels, who had also interviewed candidates for other positions, had not appointed anyone on the instruction of the minister.

Another source confirmed the appointment by Gumede’s panel but said it was above board.

On behalf of PetroSA and Gumede, spokesperson Sherryn Schooling said the entity “is not in a position to respond to issues on behalf of the minister of energy”. She added that “a turnaround strategy is currently being developed by PetroSA for submission to the CEF, who will make an announcement on the revised plan and its implementation in due course”.

PetroSA did not reply to questions asking why the board, specifically the chairperson, had defied the minister’s instructions, and how this would assist in stabilising the struggling entity.

In April, the board wrote to the CEF to declare that they had lost confidence in the chairperson.

“The purpose of this submission is to relay to the chairman and board of [the] CEF that the board of PetroSA no longer enjoys a relationship of trust with its chairman, Nhlanhla Gumede. The decision to approach the shareholder was unanimously taken by the directors after a number of incidents relating to the conduct of the chairperson,” the letter reads.

The board complained about how Gumede posted on Facebook last year that “there is nothing as frustrating as being a captain of a sinking ship full of individuals who, although they have never piloted a ship before and some have never ridden in one before, but stand there criticising and passing judgment”.

The board has requested that he be removed.

Gumede, the department of energy and the CEF did not respond to questions.