South African Cabinet Approves State Owned Oil and Gas Firms Merger

South Africa’s cabinet has recently approved the decision to merge PetroSA, iGas and the Strategic Fuel Fund to form a single national oil company.

The approval follows a briefing on continuing efforts to streamline the state-owned Central Energy Fund’s (CEF) oil and gas subsidiaries. The Minister of Mineral Resources and Energy, H.E. Gwede Mantashe, told lawmakers the CEF companies would be restructured as part of broader government efforts to stabilize troubled state-owned enterprises (SOE).

South Africa has more than 740 SOEs, which the government has been looking at either consolidating or rationalizing. “This gives effect to the announcement made by President Cyril Ramaphosa in his State of the Nation Address on 13 February 2020, to repurpose and rationalize a number of State-owned enterprises to support growth and development,” the cabinet said in a statement.

The rationalization plan will be achieved in three phases, phase one will focus on improving efficiencies, which will result in enhanced cost reductions, integrated common systems, processes and improved shared service models to maintain strategic relevance and sustain a competitive edge in a rapidly changing oil and gas industry.

The second phase will work on improving scale and market share, the implementation of the rationalization process would, among other interventions, enable the CEF to effectively leverage on the combined financial resources and operating assets of the three entities to bring stability and certainty to ensure that the country is ready to achieve a just and fair energy transition.

The third and last phase will operationalize a commercially viable national petroleum company, which is expected to be a game-changer not only for South Africa but for the continent as a whole.

The new entity will play a vital role in endorsing wider policy efforts by the government, as well as fostering national cooperation on oil and gas issues.