Cabinet endorses PetroSA deal with Russia's Gazprombank to restart Mossel Bay refinery
The cabinet has endorsed PetroSA's partnership with Russia’s Gazprombank, through its local subsidiary Gazprombank Africa, to reinstate the gas-to-liquids refinery in Mossel Bay.
PetroSA has been looking for a partner to provide technical and financial support in bringing the refinery back to full operation. Investigative unit AmaBhungane previously reported the deal to be worth R3.7bn.
Minister in the Presidency Khumbudzo Ntshavheni told journalists on Monday the cabinet endorsed PetroSA’s recommendation to select Gazprombank Africa as the investment partner to restart the plant and production.
The selection was 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, she said.
Gazprombank is one of the Russian financial institutions under US sanctions in response to Russia’s invasion of Ukraine.
Ntshavheni defended the cabinet's decision to do business with the bank, saying it will yield results for this country and lead to lowering the price of fuel.
“Whether we have considered the possibility of secondary sanctions, of course they would have done a risk assessment and what are the risks — and we need to explain to South Africans that SA is not the first country to be having ties with the Gazprombank or with a Russian company,” she said.
“There have been exemptions that are considered in terms of the sanctions of the US. What cabinet considered as fundamental is the investment that will yield results for this country but also that will be beneficial to lowering the price of fuel in the country with our ability to bring back the Mossel Bay GTL refinery.”
When PetroSA went out to tender, it considered a state-to-state partnership and Gazprombank Africa is owned by the Russian Federation, she said.
The cabinet was not involved in the process and was only briefed about the matter at its special meeting last Friday
The cabinet was not involved in the process and was only briefed about the matter at its special meeting last Friday.
She was confident the company did its due diligence in selecting the Russian bank.
“In terms of the submission that cabinet was furnished with when the update was provided, we are certain that they have followed what is due diligence to make sure that it withstands scrutiny.
“As cabinet we were not part of the procurement process; we were considering a recommendation of a partner. That’s what we considered and we supported their recommendation, having weighed all the others.”
South Africa’s relationship with the Russian Federation is driven by its partnership in Brics, she said, “and that’s not going to change tomorrow — SA is not going to withdraw from the Brics partnership. We are aware that there are countries who are not happy with our participation in Brics, but as part of the Brics nations we have committed to increase trade and investment relations as part of strengthening our relationship.”
There would be no point being in Brics if South Africa did not partner with Brics countries in trade and investment, she said. “It’s part of making sure that we build a resilient economy that is not susceptible to only one side of the global balance of powers, but that can be insulated from the risk ...
“Our relationship with our Brics partners does not negate our relationship with other countries who are not within the Brics.”
The reinstatement of the refinery has the 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, added Ntshavheni.
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