PetroSA’s R3.5bn ‘raid’ on student funding

• As universities open their doors, one in three young South Africans will be left behind at home – 34% (age 15 to 24) are not in employment, education or training, according to Stats SA. 
• Yet ANC chair Gwede Mantashe has suggested that these unemployed young people have only themselves to blame.

“The ANC has given you a fishing rod – must it now catch fish for you?” Mantashe, who is also minister of minerals and petroleum, said during a recent SABC interview.

“I’m now over 70, I’ve never had government looking for a job for me, never. The difference is that today, because we have a progressive government, people expect government to go and give them jobs…”

Yet an amaBhungane investigation has uncovered how PetroSA – a state-owned entity in Mantashe’s portfolio – attempted to divert R1.2-billion from a fund earmarked to provide training to unemployed youth.

The National Skills Fund (NSF), which is financed by a 1% tax on every employer’s salary bill, is meant to fund training for unemployed youth, provide bursaries to students and build technical and vocational education and training (TVET) colleges to train artisans.

The R3.5-billion grant that PetroSA requested from NSF in May 2024 would have paid for an opaque scheme to train 5,500 artisans who would supposedly become the future workforce for the oil and gas industry. But documents show that R1.2-billion would have been used to fix PetroSA’s ailing offshore oil rig.

The scheme was the brainchild of political operator and soccer club owner Lawrence Mulaudzi, whose company, Equator Holdings, had been awarded a contract to secure funding to pay for PetroSA’s offshore infrastructure revamp.

The project was ultimately never funded after both PetroSA and the NSF pulled out of the deal.

But what it illustrates – and why we’ve taken the time to write about a deal that failed – is how it is possible for the well-connected to extract billions of rands from the NSF, while desperate students and unemployed South Africans are left out in the cold.

Mantashe dodged the question of whether he had been aware of the PetroSA and Equator proposal: “Whether I’m aware or not, it doesn’t matter. I am not an operator, I’m doing political oversight,” he told us.

Asked whether he thought it was appropriate to use R1.2-billion, intended for training, to repair a piece of infrastructure that would primarily benefit the oil and gas industry, he said: “The amount is an operational matter. But if they are training artisans, I would support them.”

Equator was desperate

PetroSA is not officially bankrupt, but it is effectively insolvent, with its debts exceeding its assets and creditors going unpaid. The depth of its crisis was laid bare in December, when SARS moved to attach its Mossel Bay refinery over unpaid tax bills.

With the company’s assets largely idle, its only hope of being resuscitated is to breathe life back into its offshore oil and gas wells and, in turn, the Mossel Bay refinery.

In 2023, PetroSA signed a series of deals to do just that. The biggest had appointed an obscure company, Equator Holdings, to secure up to R22-billion in funding to refurbish PetroSA’s deep-sea platform and build new oil and gas infrastructure.

The controversial agreement acknowledged that Equator had neither the expertise nor the money for a project this weighty, but PetroSA gave the company six months – until June 2024 – to come up with the goods.

By May 2024, Equator was desperate. A long line of suitors had been presented to PetroSA, but none had stuck around.

The first had been the Industrial Development Corporation (R1-billion), then Corban Energy ($200-million), followed by Hong Kong’s Hilong Petroleum Engineering Company, but none were willing to actually commit.

If Equator couldn’t secure funding by 10 June 2024, it would lose the entire offshore gas deal. What it needed was someone with a large pot of money who was equally desperate.

Enter the National Skills Fund

The National Skills Fund is one of 26 entities that report to the Minister of Higher Education. While NSFAS – which provides student bursaries – is often in the news, the NSF mostly flies below the radar.

But with 58% of the country’s youth unemployed, there is pressure on the fund to do more.

Over the next five years, the fund plans to spend R34-billion on training. Counterintuitively, the problem isn’t finding the money for this ambitious target – SARS collected R24-billion from the skills development levy last year – it’s finding worthwhile projects to fund.

Last year, the fund had a budget of R5.8-billion, but managed to spend only R4.6-billion because, among other reasons, projects that were approved couldn’t meet milestones to justify releasing more money.

“This resulted in under expenditure of R1.2-billion,” Director-General of the Department Nkosinathi Sishi wrote in the annual report. “This shortfall remains a serious concern, as it represents missed opportunities to deliver impact at the scale envisaged…”

The pattern is familiar: in 2023/24 the fund underspent its budget by R3.7-billion. This, Tebogo Letsie, the chair of Parliament’s portfolio committee on higher education noted, was contributing to “growing despair among young people about their future prospects”.

In response, acting CEO Melissa Erra said that the fund was struggling to approve proposals, some dating back to 2023. The fund was short-staffed, she admitted, and the due diligences had become complex, which only made it harder to get money out the door.

To deal with the bottleneck – and achieve government’s goal of training 30,000 artisans a year by 2030 – the fund has adopted a “massification” strategy to scale up successful projects and approve “fewer but larger programmes”.

So, when Equator placed a phone call in May 2024, offering to take a few billion rand off the fund’s hands, officials were seemingly delighted.

A catalogue of fraud

The fund’s desperation to give away billions had already made it a target for fraud. Years of forensic investigations, audit warnings and unanswered questions have exposed a pattern of corruption, mismanagement and missing money.

In 2021, the department commissioned Nexus Forensics Services to investigate 10 projects after the Auditor-General discovered that R2.5-billion couldn’t be accounted for over the preceding two financial years.

Author: Susan Comrie and Buyeleni Sibanyoni for amaBhungane