‘There have been exemptions on sanctions’ – Ntshavheni on PetroSA’s R3.7bn deal with Russia’s Gazprombank

Minister in the Presidency Khumbudzo Ntshavheni has suggested there is no risk of sanctions by the West while South Africa maintains its business ties with Russia amid the ongoing conflict in Ukraine.

Ntshavheni was speaking during a post-Cabinet media briefing on Monday.

Final investment decision

The minister confirmed that Cabinet received an update on progress with the process to reinstate the Mossel Bay Gas to Liquids (GTL) refinery managed by state-owned entity (SOE), the Petroleum Oil and Gas Corporation of South Africa (PetroSA).

“Cabinet was updated about the process followed by CEF [Central Energy Fund] to source partners with requisite technical and financial resources to support PetroSA in bringing the refinery back to full operation. The preferred partner would share in the risk and rewards of reinstatement of the refinery,” she said on Monday.

The project was one of the “critical components” of PetroSA’s turnaround strategy, according to Ntshavheni, as the refinery’s revival could create jobs on site.

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“The refinery reinstatement has a potential to retain at least 2 000 direct site jobs, with an additional potential fixed-term employment opportunities for 4 000 jobs during the construction phase,” the minister explained.

Ntshavheni confirmed Cabinet approved Gazprombank Africa as an investment partner for the project, subject to processes.

The private-owned Russian bank, which is under sanctions imposed by the United States (US) in response to Ukraine’s invasion, was recommended by PetroSA and will reportedly invest $200 million (R3.7 billion).

“Cabinet noted that this selection of Gazprombank is still dependent on the final investment decision that will be informed by a joint bankable business case, as well as all the terms and conditions which are anticipated to be finalised in April 2024.”

Sanctions for SA?

On the possibility of secondary sanctions, Ntshavheni highlighted that South Africa would not be the first country to do business with Gazprombank.

“Of course they would have done a risk assessment and what the risks are. We need to explain to South Africans that South Africa is not the first country that will have ties with Gazprombank or the Russian company in terms of oil.

READ MORE: US issues first sanctions over Russia oil price cap

“India has ties with Russia. They procure oil from Russia. EU [European Union] countries have ties with Russia. Even the US has ties with Russia. There have been exemptions that are considered in terms of the sanctions of the US that are done.

“But what Cabinet has considered as fundamental is the investment that will yield results for this country. But also, that will be beneficial in lowering the price of fuel in the country with our ability to bring back the Mossel Bay GTL refinery,” the minister explained.

Cabinet not part of procurement process

Ntshavheni also commented on reports that 19 out of 20 companies were disqualified during the tender process.

According to amaBhungane, leaked documents revealed that a bid evaluation committee and board advised PetroSA to consider other bidders rather than Gazprombank.

PetroSA instead sought two legal opinions, one of which advised the SOE to cancel and restart the tender process, while the other stated that the risk of South Africa facing sanctions over its relationship with Russia was low.

However, Ntshavheni said on Monday that PetroSA went out on a tender to get the best deal for the country, with state-to-state relations being considered in the process.

“That’s not the reports that we have, but you can go to PetroSA for those details. We, as Cabinet, were not party to the procurement process. We were considering a recommendation of a partner and we supported their recommendation having weighed all the others,” she continued.

Watch the briefing below:

The minister also highlighted that government wants to strengthen relations with Brazil, Russia, India, China, and South Africa (Brics) members.

“If you recall, the South African relationship with the Russian Federation is driven by our partnership in Brics, and that is not going to change tomorrow. South Africa is not going to withdraw from the Brics partnership.

“We are aware there are countries who are not happy with our partnership or our participation in Brics. But as part of the Brics nations, we have committed to increasing trade and investment relations as part of strengthening that partnership. There is no point of South Africa being in Brics and then do not want to partner with Brics countries.”

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