South Africa Moves Firms to Mines Ministry for Accountability

JOHANNESBURG (Capital Markets in Africa) – South Africa will transfer the state-owned mining company and petroleum exploration-promotion agency, which report to a unit of the Energy Ministry, to the Department of Mineral Resources to improve accountability.

Petroleum Agency of South Africa and African Exploration Mining & Finance Corp. will be moved to the department within the financial year ending Feb. 28, Energy Minister Mmamoloko Kubayi told lawmakers in Cape Town Friday. They will be transferred from her department’s CEF SOC Ltd., a utility that focuses on oil, gas, coal and renewable options and comprises four companies, including the two that will be shifted.

Some CEF companies have been mired in mismanagement, with PetroSA, the state-owned oil company, reporting years of losses while paying bonuses to executives. Kubayi found “glaring governance problems” related to a 2015 sale of the country’s crude oil reserves by the CEF’s Strategic Fuel Fund for $280 million, when crude prices were at an eight-year low. Both S&P Global Ratings and Fitch Ratings Ltd. cited governance problems at state firms among reasons for cutting the nation’s debt to junk this year.

Thabane Zulu, a director-general in Kubayi’s department will be seconded to oversee the Strategic Fuel Fund as chief executive officer, she said. Tseliso Maqubela will act in Zulu’s place, she said.

The country’s IPP Office, which manages the program to get power from independent producers, will be moved to the CEF Group, Kubayi said. The office was set up by her department, the National Treasury and Development Bank of Southern Africa. It has drawn 194 billion rand ($14.5 billion) of investment, and 2,200 megawatts have been connected to the national grid from 44 projects.

South Africa also needs to increase its crude-refining capacity to curb a surge in fuel imports, according to Kubayi. Project Mthombo, a plan devised at least a decade ago to build a plant with capacity for as many as 300,000 barrels daily at an Eastern Cape province port, hasn’t advanced from planning stages. A new facility must be majority-owned by the country, preferably with a crude oil-producing partner, she said.

If built, the Mthombo plant would be sub-Saharan Africa’s biggest refining facility and would raise the country’s processing capacity by about 50 percent.