Dr Ishmael Poolo, the CEF group chief executive.
Through its subsidiaries, the CEF has been a key player for over 60 years in ensuring South Africa’s energy security supply
Energy is the key source of a country’s economic development and this is because many production and consumption activities involve energy as a basic input. Therefore, energy is essential for the functioning of any modern economy and the Central Energy Fund (CEF) does the important job of maintaining adequate energy supply in South Africa.
Through strategic partnerships, the CEF has managed to ensure security of energy supply for the country in the midst of an energy crisis, most notably manifesting in the form of successive rounds of load-shedding.
The CEF is a state-owned enterprise that reports to the Department of Mineral Resources and Energy (DMRE). Its mandate, which is derived from the Central Energy Fund Act (previously State Oil Fund Act), is to contribute to the security of energy supply of South Africa and the region through exploration, acquisition, development, marketing and strategic partnerships.
As a diversified energy company, it seeks to grow its footprint in the energy sector and to be the catalyst for economic growth and energy poverty alleviation through security of supply, and access to acceptable and affordable energy in Southern Africa.
To effectively do this, the CEF has embarked on a repositioning strategy so it can play a strategic trilateral role on behalf of the country. This is because the CEF has recognised the urgency to make swift and informed decisions to help the group proactively adapt and be innovative in its quest to ensure energy security and contribute to economic growth.
Tasked with driving economic growth, CEF group has embarked on an aggressive acquisition drive focusing on enabling energy infrastructure geared to position the group as a credible energy investment company that will continue to invest in profitable growth opportunities across the energy value chain in Southern Africa to fulfil its mandate.
The first of CEF’s three core areas of being will be that of a corporate parent providing strategic steering, integrated leadership and driving synergies to ensure commercial sustainability of existing business. Secondly, CEF seeks to be a strategic investor and commercially focused entity, driving growth to maintain a balanced portfolio of energy investments and finally, the energy company aims to be a developmental agency supporting achievement of the government’s developmental agenda in line with its investor role and driving tough leadership and innovation.
The CEF owns entities in the energy sector with commercial, strategic, regulatory and developmental roles, housed in operating subsidiaries. These subsidiaries are the South African Gas Development Company (iGas), the Petroleum Oil and Gas Corporation of South Africa (PetroSA), the Strategic Fuel Fund Association (SFF), the Petroleum Agency of South Africa (PASA) and the African Exploration Mining and Finance Corporation (AEMFC).
iGAS
These subsidiaries play a significant role in securing energy for all. The hydrocarbon gas company, iGAS, for example has recently partnered with Companhia Mocambiçana de Gasoduto (CMG), a subsidiary of the Empresa Nacional de Hidrocarbonetos (ENH) in acquiring a 30% equity stake in the Republic of Mozambique Pipeline Company (ROMPCO) pipeline from Sasol, pursuant to the exercise of their respective pre-emptive rights. The successful conclusion of the 30% equity stake means that iGAS and CMG are now the majority shareholders, as their equity shares will increase from 25% each to 40%, respectively, with Sasol holding a 20% minority shareholding.
Strategic Fuel Fund (SFF)
The company that acquires, maintains, monitors and manages South Africa’s strategic energy feedstocks and carriers in order to ensure the security of supply is the Strategic Fuel Fund (SFF), which has partnered with the South Sudan Ministry of Petroleum to secure exploration and production rights in Block B2 in South Sudan.
SFF has commenced exploration activities and a service provider was appointed at the end of June 2022 to commence with the acquisition of Gravity Magnetic Data in Block B2 in South Sudan. The project is forecast to finalise its exploration activities by drilling wells in 2026.
PetroSA
PetroSA’s key turnaround initiatives are starting to yield positive results. PetroSA is fast-tracking its “Gas to Power” initiative to provide an early power generation solution that will leverage the commercialisation of its tail gas for power generation for Eskom or an alternative off-taker.
Through this project, PetroSA will plug approximately 180 megawatts of power into the national grid as a long-term solution to address challenges relating to loadshedding.
PetroSA has been making significant losses over the past five years due to depleting gas reserves, reducing cash balances and operational inefficiency, however, for the first time since a recorded net loss of R14 billion in 2015, PetroSA is projecting a net profit of R2.4 billion for the period ending March 2024.
PASA
The group’s efforts to secure energy for all extend to all its subsidiaries including Petroleum Agency SA (PASA). Its mandate is to promote and expedite the exploration and production of oil and gas in South Africa. While South Africa imports all its crude oil and natural gas requirements and is not yet an oil and gas producing country, it actively promotes itself as a desirable investment destination for the upstream oil and gas sector, as the country is well-endowed with these resources.
PASA has a partnership with the Council for GeoScience (CGS) to evaluate the shale gas potential in the Karoo region. This partnership is crucial in determining the amount of shale gas resources available in the country and directing investors towards viable opportunities. By evaluating and promoting its petroleum resources, South Africa can accelerate investments in the production of its own oil and gas.
AEMFC
The African Exploration Mining and Finance Corporation (AEMFC) was established to secure South Africa’s energy supply, primarily through the mining and supply of coal for the generation of electricity.
Operating its first mine since 2001, located near Ogies in Mpumalanga, AEMFC focuses on the exploration and extraction of coal, which is essential for the production of electricity in South Africa. The company is also responsible for mining operations in the Vlakfontein Coal Mine in Mpumalanga, which provides coal to the national power utility, Eskom.
AEMFC plays an imperative role in ensuring energy security in South Africa. This is through exploring and extracting minerals for energy production, developing alternative energy sources, as well as investing in education and training initiatives to support the future of the mining industry.
SANPC
In June 2020, cabinet approved the request by the Department of Mineral Resources and Energy (DMRE), under the stewardship of Minister Gwede Mantashe, to merge three subsidiaries of CEF, iGas, SFF and PetroSA to establish the South African National Petroleum Company (SANPC).
Subsequently, during his budget vote held on the 16th May 2023, Minister Mantashe announced that following the tabling of the Upstream Petroleum Resources Development Bill in Parliament, the cabinet approved the merger to form SANPC.
A detailed baseline assessment identified up to R1.5 billion in cost synergy potential (roughly 8% of total cost today) typically achievable in three to five years because of the merger. Selectively leveraging the asset base of the entities will position SANPC for significant growth, with up to R95 billion in market opportunity identified.
The important role the CEF Group plays in the South African energy sector is not to be overlooked as it contributes greatly to economic growth and development but perhaps equally important is the CEF’s role in the region and globally. As at 31 March 2018, the CEF’s business operations, investments and strategic partnerships spanned two continents and four countries. These activities are in oil and gas, technology and gas infrastructure, mining and renewables. The CEF’s footprint is in South Africa, Mozambique, Ghana and the Netherlands.