In April this year Xolile Sizani was brought in to save PetroSA, but after just six months as chief executive he was suspended by the board.
The struggling state-owned entity refused to discuss the allegations against their CEO, even when Members of Parliament – from the DA, EFF and ANC – demanded answers.
Now, amaBhungane has obtained access to the letter suspending Sizani, as well as his response. These documents suggest that PetroSA rustled up a flimsy case against its own CEO after he threatened to sink what appears to have been a politically tainted gas deal.
On 14 June, Sizani terminated an offshore gas deal that amaBhungane had exposed as problematic because it involved cutting in notorious political operator Lawrence Mulaudzi.
Sizani noted the failure to achieve certain conditions precedent of the contract signed with EquaTheza Oil and Gas – the joint venture between Mulaudzi’s Equator Holdings and Theza Oil and Gas, owned by businessman Barend Hendricks and two Russian partners.
By this point, however, Mulaudzi had quietly exited the company and been replaced by another political heavyweight, former National Director of Public Prosecutions Bulelani Ngcuka.
The suspicion that Sizani’s suspension is linked to his failure to support controversial contracts is strengthened by another leg of the complaint against him.
The 8 October suspension letter also cited Sizani’s removal of PetroSA’s former chief operating officer, who signed two other scandal-plagued gas deals: another with Mulaudzi’s Equator and one with Gazprombank, a division of the Russian oil giant Gazprom, which is subject to international sanctions.
“When you put the CEO on suspension … it sends a very strong message, and [raises] very serious concerns about the stability at the level of the leadership, more so that the CEO has been in office for only, what, [six] months?” the ANC’s Tshiamo Tshotetsi said during the Central Energy Fund’s 18 October appearance in Parliament.
“It is indeed concerning,” PetroSA board chair Unati Figlan agreed. “However, when there is an alleged act of misconduct that is raised to us as a board we have to act, we have to investigate.”
The leaked correspondence – provided to amaBhungane by a PetroSA insider – shows that PetroSA placed Sizani on a precautionary suspension based not on formal charges, but on three allegations that are yet to be investigated.
“I have reached the conclusion that the allegations against you are serious in nature and therefore, given your seniority, your continued presence in the workplace will have corrosive effects on the investigations,” Figlan wrote on 16 October.
Yet a closer look at the allegations – and Sizani’s response to them – suggests that other motives may be at play.
Allegation #1: The other Russian deal
When Sizani was appointed on 1 April 2024, PetroSA had just embarked on a series of multi-billion rand deals to develop South Africa’s offshore gas industry:
A R3.7-billion deal awarded to Russia’s Gazprombank to refurbish the gas-to-liquids refinery in Mossel Bay;
A multi-billion-rand deal awarded to EquaTheza Oil and Gas to develop and restart offshore oil and gas wells; and
A R22-billion deal awarded to Equator Holdings to finance the offshore gas wells project and to build gas infrastructure, both on and offshore.
The Gazprombank deal and the Equator deal have received the most scrutiny, the former because partnering with a sanctioned Russian entity placed PetroSA’s entire business at risk and the latter because Equator’s front man, Mulaudzi, is notorious for not paying his debts and for leveraging his political connections.
According to the leaked letters, however, it was Sizani’s decision to cancel the EquaTheza deal that potentially cost him his position.
This deal was for a project was to restart offshore oil and gas wells that PetroSA had abandoned, and to develop new wells that PetroSA had identified but never tapped.
Originally, the deal had been awarded to a company called Theza Oil and Gas, owned by businessman Barend Hendricks and two Russian partners.
After Theza was selected as a preferred bidder, however, Hendricks was allegedly strong-armed into giving 10% of the deal to Mulaudzi’s Equator Holdings. “They were foisted on us … They don’t add any value to us as Theza,” a source in the company told us last year.
Hence, when the contract was signed in October 2023, there was a new company name on the paperwork: EquaTheza Oil and Gas Exploration.
The deal had been a long-time coming: in 2017, Russia’s state-owned exploration firm Rosgeo offered to spend $400-million (R7.3-billion) to explore and develop blocks 9 and 11a, which are owned by PetroSA and sit alongside Total’s former discovery in blocks 11b/12b. When the deal collapsed, some of Rosgeo’s technical experts formed Theza.
The partnership between Theza and Mulaudzi’s Equator Holdings would not last. By the end of January this year, Mulaudzi and his brother had resigned as directors and sold their 10% stake back to the company.
A month later, Theza had a new partner: Vuwa Capital Partners, owned by a group of prominent black businessmen. Among this group is former NPA boss Bulelani Ngcuka, who is also Vuwa’s chair.
In February, Vuwa “was made aware of an opportunity to invest in Equatheza; having conducted its due diligence, Vuwa took a decision to invest,” CEO Lungisa Dyosi told us over email.
“The shares acquired in EquaTheza were paid for in cash, to fund EquaTheza’s operations … and were not bought from any existing shareholder of EquaTheza. To amplify this point, by the time [Vuwa] acquired the EquaTheza shares, Mr Lawrence Mulaudzi was neither a shareholder nor a director at EquaTheza.”
On the surface, however, it was still a risky investment, because by the time Vuwa bought in, EquaTheza’s offshore deal was already in jeopardy.
In breach
In terms of the Profit-Sharing Agreement, signed in October last year, EquaTheza had 60 days to pay PetroSA $12-million (R217-million) as its contribution towards the upkeep of the”FA platform”. This floating structure connects offshore gas wells to pipes that bring the gas onshore and would be a critical piece of equipment for EquaTheza’s project.
When EquaTheza failed to pay over the amount, PetroSA declared a breach of the agreement. EquaTheza was also required to deliver a Technical Work Programme, which had likewise not materialised within the 60 days.
In letters provided by another insider, EquaTheza told PetroSA that it was not in breach because one, no FA Platform agreement had been signed and two, PetroSA had been late in delivering the technical data.
PetroSA remained unmoved. It granted EquaTheza a 30-day extension, then another, but stuck to its position that EquaTheza was in breach and was at risk of having the entire agreement cancelled.
In March, Hendricks, the EquaTheza CEO, wrote to PetroSA confirming that “the issue around the [conditions precedent] is a critical risk … this is extremely serious as it puts the whole deal at risk if we cannot resolve this.”
Two weeks later, the Central Energy Fund (CEF) – PetroSA’s parent company – told Parliament that “work presented to date by EquaTheza is not inspiring confidence that they can deliver … By end of March PetroSA will seek way forward regarding dealing with EquaTheza due to their failure to deliver satisfactory technical work programme and funding solution.”
Enter Xolile Sizani
This was the situation that Sizani walked into when he joined PetroSA on 1 April this year.
On 18 April, after EquaTheza’s second extension lapsed, Hendricks sent a letter to Sizani imploring the new CEO to “regularise our relationship under the [Agreement],” which included signing an addendum that would extend the deadlines and take EquaTheza out of breach.
Hendricks told him that PetroSA officials had initially agreed to this, but that”unfortunately, we were subsequently informed that the addendum would not be signed and were given no reasons for this change of viewpoint,” he wrote.
EquaTheza had by this point delivered an initial work programme, and had estimated that there were 284 million barrels of oil and 10 years’ worth of gas in PetroSA’s offshore wells. Using their “conservative recovery rate of 25%”, this put the potential deal value at $5-billion (R95-billion) – just for the oil.
However, turning EquaTheza’s estimate into a bankable figure would require a lot more work, and PetroSA was unconvinced.
When the second cut-off date rolled around in June 2024, Sizani presented the Board with a resolution to pull the plug on the deal.
“I obviously was aware through media reports, that PetroSA was criticised from various quarters regarding its performance,” he told PetroSA in a 15 October letter in response to the allegations against him.
“While there are other matters relating to this particular contract, the prominent problem about it was the failure on the part of EquaTheza to meet ‘Conditions Precedent’… the details were deliberated in a Board meeting held on 13th June … Significantly, the Board agreed that the profit-sharing agreement with EquaTheza was not beneficial to PetroSA. Instead, its continued existence was detrimental.”
The next day – 14 June – PetroSA sent a formal letter to EquaTheza terminating the deal. The reason given was EquaTheza’s failure to meet the deadlines for the conditions precedent.
Enter Bulelani Ngcuka
Although EquaTheza had known the deal was in jeopardy for months, they were furious with Sizani’s decision and went over his head.
On 25 June, Sizani was summoned to a meeting with CEF and EquaTheza – now represented not by Hendricks (the CEO) but by Ngcuka, the chair of Vuwa Capital, EquaTheza’s minority shareholder, as well as Dyosi, the CEO.
“The [Agreement] makes provision for a mediated process should any dispute arise,” Dyosi told us. “In line with this, and in the spirit of the [Agreement], representatives of EquaTheza, who happened to be members of [Vuwa] … approached the CEO of the CEF as the shareholder of PetroSA to mediate a discussion.”
Vuwa had bought a 5% stake in EquaTheza in February, when Mulaudzi had pulled out. It’s unclear how much they paid – Dyosi declined to say – but the PetroSA deal was seemingly EquaTheza’s only asset, meaning that their investment, which was risky to begin with, was about to be written down to zero.
At the meeting, however, Sizani told Ngcuka and Dyosi he would not change his decision to cancel the deal. “No promise was made to EquaTheza to alter, amend or modify the contract,” he later recounted.
Still not satisfied, EquaTheza’s lawyer wrote to Sizani the following day. Amongst other things, the four page letter argues that Sizani was not entitled to cancel their agreement, adding that PetroSA had “impermissibly approbated and reprobated”, “generally frustrated” and “deliberately prevented” the fulfilment of the conditions precedent.
“Should it become apparent that PetroSA intends to persist in its contrived termination of the [agreement], our instruction are … to institute review proceedings to set aside the unlawful decision taken by PetroSA,” the lawyer wrote.
The letter ended by demanding that PetroSA confirm, by 5 July, that it would back down and honour the contract: “Failing receipt of such unconditional undertakings, we are instructed to approach the High Court for an order in the appropriate terms against you, coupled to a claim for costs.”
“EquaTheza (and [Vuwa] as a shareholder) maintain that the cancelation is illegal and invalid. Our lawyer’s letters in your possession are clear on this,” Dyosi added.
Instead, on 3 July, Sizani sent back a one paragraph letter: “We take note of your assertion that the [Agreement] between PetroSA and Equatheza is still active. PetroSA hereby informs you that our position … remains unchanged, i.e. the [Agreement] is terminated.”
Empty threats
When Sizani was suspended three months later, the PetroSA board threw the EquaTheza deal back in his face: “You have withheld information from the Board in relation to the EquaTheza contract by failing to inform the Board of a dispute that was lodged,” Figlan wrote in her 8 October suspension letter.
Sizani denies this. “It is my humble view that this allegation is clearly a mistake or a misunderstanding because surely I was not aware … of what was in the mind of EquaTheza. The decision to terminate the contract was taken on June 13th and the dispute was declared on the 26th June 2024, clearly when that decision was taken on the 13th June no dispute existed at that stage, I deny that I withheld information from anyone including the … Board,” he wrote on 15 October.
It is also unclear why the PetroSA board took the dispute so seriously.
On 10 July, EquaTheza’s lawyer had told Sizani: “We are in the process of preparing … legal proceedings … which will be issued and served on you in due course”.
To date, however, EquaTheza has not made good on its threat to go to court.
Instead, it appears that EquaTheza – led by Ngcuka, the incoming chair of EquaTheza – kept trying to pull strings behind the scenes, including writing to Figlan, the PetroSA board chair, a week later “requesting her intervention”.
As Dyosi put it: “having realized that … in taking the decision to cancel, the PetroSA Board had not been appraised of all the information … attempts to find a mediated solution to the impasse continued.”
Figlan eventually told EquaTheza in September that “the matter would be further investigated”.
“We are still awaiting the outcome of that investigation,” Dyosi told us. “EquaTheza believes that it has a strong case … and has no intention of abandoning it legal challenge against this erroneous decision, but is giving the mediation process a fair chance.”
Importantly, Sizani’s letter reveals that by October, PetroSA had obtained a draft legal opinion from law firm Fairbridges, a recommendation from the transaction advisors Mazars and a draft internal audit report, all of which appear to have concluded that “the EquaTheza contract should be cancelled for not meeting the condition precedents”.
A week later, the PetroSA board suspended him. And with Sizani gone, the EquaTheza deal appears to be back on the table.
“Equatheza is looking forward to continu[ing] with the project,” Hendricks told us last week. “The dispute between Mr. Sizani and PetroSA is a matter between PetroSA and Mr. Sizani. We are looking forward to a very constructive relationship with PetroSA as this project is very important for the country and contributing to the economy significantly.”
Allegation #2: The difficult COO
The EquaTheza deal, the Gazprombank deal and the Equator deal had all been signed by PetroSA’s acting chief operating officer Sesakho Magadla, who had been seconded to PetroSA by its parent company CEF.
Before Sizani was appointed, Magadla had stepped into the PetroSA CEO role for two months. However, handing back the reins did not go smoothly: “I found her to be a very difficult person to work with and, unfortunately, extremely insubordinate and condescending,” Sizani wrote in his 15 October letter to the board.
“I made several attempts to talk to her by way of trying to instil corrective measures to her conduct but I failed because she ignored me and did so disrespectfully with condescending gestures and comments.”
On 20 May, Sizani terminated Magadla’s secondment and sent her back to CEF – a routine decision that nevertheless prompted two urgent meetings with Minerals and Petroleum Minister Gwede Mantashe.
On 26 May, Sizani and the group CEO Ishmael Poolo met with Mantashe “to discuss the … termination of Ms. Magadla,” Sizani wrote. “The outcome of that meeting led to a proposal on the working model between [myself] and Ms. Magadla.”
We asked Mantashe why he felt it was appropriate to intervene in an HR issue: “When the CEO fights a COO, in an entity that reports to me, I’m an interested person I must intervene and try to stop the fight. That’s what I should do,” he told us last week.
“If a new CEO … has a fight … it reflects on the character of the CEO, and I have a responsibility to guide the CEO, [to say] ‘listen man, listen first, don’t walk in there and try to kick everybody on the backside.’ Sometimes CEOs listen, sometimes they don’t.”
On 31 May, they met again with the minister, this time with Magadla present. “[T]he minister reprimanded Ms. Magadla about her unprofessional behaviour,” Sizani wrote.
Sizani seemingly believed that this was the end of the matter: “the matter of removal of Ms. Magadla never arose again. I am, therefore, not aware of any legal backlash or negative consequences to PetroSA resulting from my decision to remove her until today hence this allegation comes as a surprise to me.”
The allegation, contained in Figlan’s 8 October suspension letter, is that by terminating Magadla’s secondment, Sizani has inadvertently restructured the organisation: “This termination has the effect of restructuring the organisational structure … something that you were not authorised to do.”
“Futhermore, such termination was not done in consultation with the … Board,” Figlan added.
Much like the EquaTheza allegation, Sizani argues this is nonsensical. “The COO position still exists even in the new proposed structure and Ms. Magadla was replaced with another Executive who is performing the same functions in the same office,” he told Figlan in response to the allegations.
Sizani conceded that while he did not consult the board before firing Magadla, he met with the board two days later and presented reasons for his decision, which he claims the board never questioned.
Enter Gwede Mantashe
PetroSA’s decision to suspend its CEO, which so alarmed Members of Parliament, does not seem to have provoked any response from the Minister.
“The suspension of the CEO is handled at board level. I’ll wait for the report. I’ve not received it. And I must not go and fetch it because the board must do its work,” Mantashe told us last week.
Yet Mantashe could not explain why he had rushed to intervene not once, but twice, when the COO’s secondment was ended, yet took a hands-off approach when the CEO was suspended.
“[W]hen Sizani was suspended I asked CEF ‘what is happening there?’ I did ask … I’m waiting for them to come back to me to say, these are the findings of the investigation. Then I will determine at that point, what is the course of action to be followed.”
Asked what he thought of Sizani’s response to the allegations, Mantashe said: “If you have seen them you are lucky, I’ve not seen them.”
Allegation #3: The turnaround plan
In a sense, the fallout between PetroSA and its CEO was inevitable. Sizani joined PetroSA with the mandate to rescue it, while its parent company, CEF, is in the process of lowering the coffin into the grave.
Although PetroSA had a turnover of R24.5-billion last year, the company is technically insolvent. The solution proposed to the crisis at PetroSA is to strip the company of its productive assets – the diesel trading business and its investment in Ghana – and move these into a new entity: the South African National Petroleum Company (SANPC).
This would leave the problematic “legacy” assets – like the shuttered gas-to-liquids refinery in Mossel Bay – for PetroSA to manage.
“Your appointment as PetroSA Group CEO came at a time wherein a number of CEF subsidiaries … were in the process of merging into a single national petroleum company (SANPC) as directed and approved by Cabinet and directed by the Minister of Mineral Resources and Energy [Gwede Mantashe],” Figlan wrote.
“It should be noted that in implementing Your Turn Around Strategy for the organisation … differs with the already existing and approved organisational structure by the Board,” Figlan added.
The PetroSA CEO, Figlan alleges, was trying to run two parallel and contradictory process under the Labour Relations Act: a section 189 retrenchment process while a section 197 transfer was already underway.
Sizani disputes this. “I deny that I have embarked on the alleged process. In fact no steps have been taken in pursuance of retrenchments at all,” he wrote. “I was requested … to put together a turnaround plan for PetroSA … One of the propositions we considered … was the ‘right sizing of PetroSA’ … to assist in turning around the misfortunes of PetroSA,” he wrote.
But since the right-sizing project was not approved by the board, no retrenchments were ever made, he argues, adding that “my employment is threatened for only making a proposal”.
Keeping Parliament in the dark
When Figlan and the other CEF executives appeared in Parliament in October, they refused to discuss the allegations against Sizani, telling MPs that “we cannot divulge on what is happening because this is a Labour Relations Act [issue], which requires us to be confidential about it. Even worse, the employee involved his lawyers so we cannot divulge such information.”
Mikateko Mahlaule, the chair of the Minerals and Petroleum Portfolio Committee, was unimpressed. “The chair of PetroSA says ‘it’s a labour relations matter, I don’t think we must divulge the information.’ If we want it, we’ll get it. There’s no such thing that you can’t divulge this information, not here in Parliament. Not here.”
So far, however, Parliament hasn’t pushed for answers.
When we approached Sizani about the reasons for his suspension, he referred us to his lawyer Tukela Ningiza, who declined to provide said reasons but told us: “We are aware that the matter is that of public interest and in this regard, we have (on our client’s instructions) consented that the allegations and information related thereto can be disclosed to the parliamentary committee”.
PetroSA did not want to provide us with the information either.
“PetroSA reserves the right not to make public the reasons for the suspension of Mr. Xolile Sizani as the Group Chief Executive Officer (GCEO) … The provision of a response indicating the reasons of the suspension of Mr. Sizani would result in PetroSA transgressing the basic obligations of employee and employer confidentiality,” Figlan told us in a letter last week.
“PetroSA as a State-Owned Company and responsible corporate citizen acknowledges the requirement of transparency and public interest. It is through this understanding, that we have been open with the process of the suspension of Mr. Sizani from the onset.”
“Furthermore, it is noteworthy that an investigation is currently underway, therefore, it is key to ensure that this process unfolds and subsequent to which further communication will be provided in this regard. This is to afford the process the integrity of processing without any form of interference or possible prejudice.”
We wrote back to Figlan telling her that our insiders had, in the interim, delivered. We asked if she wanted to offer any further comment on the allegations, specifically our conclusion that PetroSA had suspended its CEO on spurious grounds and with ulterior motives.
PetroSA said it would not offer any further comment.
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