Agency accused of wasteful expenditure

Senior executives of South Africa's oil and gas regulator bought designer furniture and office equipment without issuing tenders, just before complaining to parliament that they were running out of money.

Details of sole-supplier contracts and other alleged irregularities within the Petroleum Agency South Africa (Pasa) have emerged in a hefty whistleblower report compiled by former staff members in 2010.

The report was submitted to the agency's board, but has been kept under wraps.

Pasa regulates and promotes the country's oil and gas industry and is a key player in the government-appointed task team investigating fracking, which may be used to search for shale gas in the Karoo.

Pasa's top brass, in their annual report presented to parliament's mining portfolio committee in March last year, complained of serious "funding challenges" and said their financial reserves would run out in two years.

But the whistleblower report paints a picture of alleged wasteful and irregular expenditure. Claims that were raised in the report include:

• A sole-supplier contract of R450 000 for interior design at Pasa's new head office, including glass coffee tables and wicker leatherette couches;
• A R500 000 telephone system that never worked;
• A R200 000 trip to London for an HR manager and business-class tickets to Brazil for 10 staff and interns at the height of the recession; and
• A rebranding contract that was cancelled at a penalty cost of R700 000.

Pasa chief executive Mthozami Xiphu denied any wrongdoing when asked for comment this week, and dismissed the whistleblower report as the work of disaffected former employees.

He said: "The board appointed Pricewaterhouse-Coopers to investigate the report, and appropriate action was taken by the board where they felt it necessary to do so."

He would not specify what action was taken or respond to queries about specific tenders.

"The agency does follow competitive bidding when procuring services. The procurement policy does allow for sole-supplier purchases. In the event that a sole procurement is deemed necessary, the necessary motivation must be made and approved in terms of policy," he said, adding the agency received an unqualified audit report from the auditor-general. Hedenied Pasa was in financial trouble.

According to minutes of last year's portfolio committee presentation, Pasa chief financial officer Olivia Mans reported that agency revenue would drop to R6-million in the next financial year, compared with R57.9-million for 2009/10 and R78.5-million for 2008/09.

Although the agency claims to own about $9-billion worth of data, such as geological surveys, it no longer earns revenue from licensing, resulting in its current revenue challenge.