South Africa forms new state-owned petrol company

A policy statement by President Cyril Ramaphosa on Wednesday has heralded the formation of a new state-owned petroleum company.

The South African National Petroleum Company (SANPC) has been formed following the merger of the Central Energy Fund (CEF) subsidiaries, iGas, PetroSA and the Strategic Fuel Fund.

Company to coordinate SA’s petrol resources

Government said the SANPC is poised to become a leading player in the country’s energy sector ensuring energy security, driving new technologies, developing and enabling essential infrastructure, fostering strategic partnerships and propelling social and economic development.

“It is also expected to oversee strategic planning, coordination and governance of the country’s petroleum resources, contributing to the country’s development and economic growth.”

The company has been granted approval to start operating in terms of the s51(g) (h) of the Public Finance Management Act of 1999.

The formation of the state-owned company follows President Ramaphosa’s February 2020 State of the Nation Address where he announced government’s intention to repurpose and “rationalise” state-owned enterprises to support growth and development in South Africa.

Under this national directive, on 10 June 2020, Cabinet approved the Department of Mineral Resources and Energy’s (DMRE) request to merge the three subsidiaries of the Central Energy Fund (CEF) mentioned earlier.

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Making the decision financially viable

“The rationalisation of these subsidiaries into one single SA National Petroleum Company is on the basis that each company be efficiently structured so as not to transfer operational inefficiencies and going concern issues into the new entity,” the new petroleum company said in its own statement.

“Out of the three merging entities, only iGas and SFF are financially viable to be merged into the new entity subject to key legal requirements.

“However, following a rigorous assessment of the PetroSA business, the only financially viable division to be merged into the new company is Trading and the Ghana asset,”

It added that the remainder of the business that does not form part of the SANPC will form part of legacy assets requiring further work to be done before they could be transferred into the SANPC.

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Company to be incorporated as CEF subsidiary for now

“In the interim, the SANPC will be incorporated as a subsidiary of [the] CEF Group of Companies until the National Petroleum Bill is promulgated into law.

“For the SANPC to kick start its operations, it would use the Lease and Assign model wherein certain assets of the merging entities will be leased to the new company, the SANPC.”

The company said that a lease and assignment transaction is deemed necessary and the most effective approach for the merger.

“With the combined strengths of the three subsidiaries, a solid financial position, and robust stakeholder support, the SANPC is well-positioned to leverage these benefits and seize the R95 billion market opportunity,” the petrol company continued.

“The SANPC would be poised to become a leading player in South Africa’s energy sector, ensuring energy security, driving new technologies, developing, and enabling essential infrastructure, fostering strategic partnerships, and propelling social and economic development.”

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