South Africa is set to have a new state owned enterprise (SOE) on the offing, with cabinet having approved the rationalisation of three major oil and gas firms to conglomerate as the National Petroleum Company.
Cabinet last week gave the green light for the merger, following a virtual meeting for PetroSA, the Strategic Fuel Fund (SFF) and iGas to be merged into one single National Petroleum Company.
The move follows a pledge by South Africa’s President Cyril Ramaphosa in his State of the Nation address in February, where he said that consolidation of some of South Africa’s 740 SOEs should become a priority of the 2020 mandate.
“We must examine the institutional design that should continue to support SOEs and their developmental mandates and there should be greater and more effective attention of operational efficiency, integrity and functionality of our SOEs, and ensuring that people who are fit for purpose are appointed to various positions,” said Ramaphosa in his State of the Nation address.
This consolidation of three of the country’s largest – and among the most troubled – SOEs is set to assist with the production of fuel and encourage foreign investment into the sector.
“This gives effect to the announcement made by President Ramaphosa in his State of the Nation Address on 13 February 2020, to repurpose and rationalise a number of State-owned enterprises to support growth and development,” the Cabinet statement read.
There have been lingering complications with two of the companies set to merge, with PetroSA experiencing a variety of financial issues and the SFF engaged in a nasty court battle where they are seeking to invalidate its controversial 2015 sale of SA’s strategic oil stocks.
PetroSA’s financial troubles have led analysts to suggest that the company faces the risk of not being able to continue operating in future.
The SFF have become the subject of controversy after 10 million barrels of reserves were irregularly sold off for below-market prices in 2015.
The matter was the subject of a forensic investigation and, in April 2020, the SFF announced it would launch a court challenge to invalidate the sale.