Sizani noted the failure to achieve certain conditions precedent of the contract signed with EquaTheza Oil and Gas \u2013 the joint venture between Mulaudzi\u2019s Equator Holdings and Theza Oil and Gas, owned by businessman Barend Hendricks and two Russian partners.<\/p>\n\n\n\n
By this point, however, Mulaudzi had quietly exited the company and been replaced by another political heavyweight, former National Director of Public Prosecutions Bulelani Ngcuka.<\/p>\n\n\n\n
The suspicion that Sizani\u2019s suspension is linked to his failure to support controversial contracts is strengthened by another leg of the complaint against him.<\/p>\n\n\n\n
The 8 October suspension letter also cited Sizani\u2019s removal of PetroSA\u2019s former chief operating officer, who signed two other scandal-plagued gas deals: another with Mulaudzi\u2019s Equator and one with Gazprombank, a division of the Russian oil giant Gazprom, which is subject to international sanctions.<\/p>\n\n\n\n
\u201cWhen you put the CEO on suspension \u2026 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?\u201d the ANC\u2019s Tshiamo Tshotetsi said during the Central Energy Fund\u2019s 18 October appearance in Parliament.<\/p>\n\n\n\n
\u201cIt is indeed concerning,\u201d PetroSA board chair Unati Figlan agreed. \u201cHowever, when there is an alleged act of misconduct that is raised to us as a board we have to act, we have to investigate.\u201d<\/p>\n\n\n\n
The leaked correspondence \u2013 provided to amaBhungane by a PetroSA insider \u2013 shows that PetroSA placed Sizani on a precautionary suspension based not on formal charges, but on three allegations that are yet to be investigated.<\/p>\n\n\n\n
\u201cI 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,\u201d Figlan wrote on 16 October.<\/p>\n\n\n\n
Yet a closer look at the allegations \u2013 and Sizani\u2019s response to them \u2013 suggests that other motives may be at play.<\/p>\n\n\n\n
Allegation #1: The other Russian deal<\/strong><\/p>\n\n\n\n When Sizani was appointed on 1 April 2024, PetroSA had just embarked on a series of multi-billion rand deals to develop South Africa\u2019s offshore gas industry:<\/p>\n\n\n\n The Gazprombank deal and the Equator deal have received the most scrutiny, the former because partnering with a sanctioned Russian entity placed PetroSA\u2019s entire business at risk and the latter because Equator\u2019s front man, Mulaudzi, is notorious for not paying his debts and for leveraging his political connections.<\/p>\n\n\n\n According to the leaked letters, however, it was Sizani\u2019s decision to cancel the EquaTheza deal that potentially cost him his position.<\/p>\n\n\n\n This deal was for a project to restart offshore oil and gas wells that PetroSA had abandoned, and to develop new wells that PetroSA had identified but never tapped.<\/p>\n\n\n\n Originally, the deal had been awarded to a company called Theza Oil and Gas, owned by businessman Barend Hendricks and two Russian partners.<\/p>\n\n\n\n After Theza was selected as a preferred bidder, however, Hendricks was allegedly strong-armed into giving 10% of the deal to Mulaudzi\u2019s Equator Holdings. \u201cThey were foisted on us \u2026 They don\u2019t add any value to us as Theza,\u201d a source in the company told us last year.<\/p>\n\n\n\n Hence, when the contract was signed in October 2023, there was a new company name on the paperwork: EquaTheza Oil and Gas Exploration. <\/p>\n\n\n\n The deal had been a long-time coming: in 2017, Russia\u2019s 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\u2019s former discovery in blocks 11b\/12b. When the deal collapsed, some of Rosgeo\u2019s technical experts formed Theza.<\/p>\n\n\n\n The partnership between Theza and Mulaudzi\u2019s 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.<\/p>\n\n\n\n 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\u2019s chair.<\/p>\n\n\n\n In February, Vuwa \u201cwas made aware of an opportunity to invest in Equatheza; having conducted its due diligence, Vuwa took a decision to invest,\u201d CEO Lungisa Dyosi told us over email.<\/p>\n\n\n\n \u201cThe shares acquired in EquaTheza were paid for in cash, to fund EquaTheza\u2019s 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.\u201d<\/p>\n\n\n\n On the surface, however, it was still a risky investment, because by the time Vuwa bought in, EquaTheza\u2019s offshore deal was already in jeopardy.<\/p>\n\n\n\n In breach<\/strong><\/p>\n\n\n\n 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\u201dFA platform\u201d. This floating structure connects offshore gas wells to pipes that bring the gas onshore and would be a critical piece of equipment for EquaTheza\u2019s project.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n In March, Hendricks, the EquaTheza CEO, wrote to PetroSA confirming that \u201cthe issue around the [conditions precedent] is a critical risk \u2026 this is extremely serious as it puts the whole deal at risk if we cannot resolve this.\u201d<\/p>\n\n\n\n Two weeks later, the Central Energy Fund (CEF) \u2013 PetroSA\u2019s parent company \u2013 told Parliament that \u201cwork presented to date by EquaTheza is not inspiring confidence that they can deliver \u2026 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.\u201d<\/p>\n\n\n\n Enter Xolile Sizani<\/strong><\/p>\n\n\n\n This was the situation that Sizani walked into when he joined PetroSA on 1 April this year.<\/p>\n\n\n\n On 18 April, after EquaTheza\u2019s second extension lapsed, Hendricks sent a letter to Sizani imploring the new CEO to \u201cregularise our relationship under the [Agreement],\u201d which included signing an addendum that would extend the deadlines and take EquaTheza out of breach.<\/p>\n\n\n\n Hendricks told him that PetroSA officials had initially agreed to this, but that\u201dunfortunately, we were subsequently informed that the addendum would not be signed and were given no reasons for this change of viewpoint,\u201d he wrote.<\/p>\n\n\n\n EquaTheza had by this point delivered an initial work programme, and had estimated that there were 284 million barrels of oil and 10 years\u2019 worth of gas in PetroSA\u2019s offshore wells. Using their \u201cconservative recovery rate of 25%\u201d, this put the potential deal value at $5-billion (R95-billion) \u2013 just for the oil.<\/p>\n\n\n\n However, turning EquaTheza\u2019s estimate into a bankable figure would require a lot more work, and PetroSA was unconvinced.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n \u201cI obviously was aware through media reports, that PetroSA was criticised from various quarters regarding its performance,\u201d he told PetroSA in a 15 October letter in response to the allegations against him.<\/p>\n\n\n\n \u201cWhile there are other matters relating to this particular contract, the prominent problem about it was the failure on the part of EquaTheza to meet \u2018Conditions Precedent\u2019\u2026 the details were deliberated in a Board meeting held on 13th<\/sup> June \u2026 Significantly, the Board agreed that the profit-sharing agreement with EquaTheza was not beneficial to PetroSA. Instead, its continued existence was detrimental.\u201d<\/p>\n\n\n\n The next day \u2013 14 June \u2013 PetroSA sent a formal letter to EquaTheza terminating the deal. The reason given was EquaTheza\u2019s failure to meet the deadlines for the conditions precedent.<\/p>\n\n\n\n Enter Bulelani Ngcuka<\/strong><\/p>\n\n\n\n Although EquaTheza had known the deal was in jeopardy for months, they were furious with Sizani\u2019s decision and went over his head.<\/p>\n\n\n\n On 25 June, Sizani was summoned to a meeting with CEF and EquaTheza \u2013 now represented not by Hendricks (the CEO) but by Ngcuka, the chair of Vuwa Capital, EquaTheza\u2019s minority shareholder, as well as Dyosi, the CEO.<\/p>\n\n\n\n \u201cThe [Agreement] makes provision for a mediated process should any dispute arise,\u201d Dyosi told us. \u201cIn line with this, and in the spirit of the [Agreement], representatives of EquaTheza, who happened to be members of [Vuwa] \u2026 approached the CEO of the CEF as the shareholder of PetroSA to mediate a discussion.\u201d<\/p>\n\n\n\n Vuwa had bought a 5% stake in EquaTheza in February, when Mulaudzi had pulled out. It\u2019s unclear how much they paid \u2013 Dyosi declined to say \u2013 but the PetroSA deal was seemingly EquaTheza\u2019s only asset, meaning that their investment, which was risky to begin with, was about to be written down to zero.<\/p>\n\n\n\n At the meeting, however, Sizani told Ngcuka and Dyosi he would not change his decision to cancel the deal. \u201cNo promise was made to EquaTheza to alter, amend or modify the contract,\u201d he later recounted.<\/p>\n\n\n\n Still not satisfied, EquaTheza\u2019s 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 \u201cimpermissibly approbated and reprobated\u201d, \u201cgenerally frustrated\u201d and \u201cdeliberately prevented\u201d the fulfilment of the conditions precedent.<\/p>\n\n\n\n \u201cShould it become apparent that PetroSA intends to persist in its contrived termination of the [agreement], our instruction are \u2026 to institute review proceedings to set aside the unlawful decision taken by PetroSA,\u201d the lawyer wrote.<\/p>\n\n\n\n The letter ended by demanding that PetroSA confirm, by 5 July, that it would back down and honour the contract: \u201cFailing 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.\u201d<\/p>\n\n\n\n \u201cEquaTheza (and [Vuwa] as a shareholder) maintain that the cancelation is illegal and invalid. Our lawyer\u2019s letters in your possession are clear on this,\u201d Dyosi added.<\/p>\n\n\n\n Instead, on 3 July, Sizani sent back a one paragraph letter: \u201cWe take note of your assertion that the [Agreement] between PetroSA and Equatheza is still active. PetroSA hereby informs you that our position \u2026 remains unchanged, i.e. the [Agreement] is terminated.\u201d<\/p>\n\n\n\n Empty threats<\/strong><\/p>\n\n\n\n When Sizani was suspended three months later, the PetroSA board threw the EquaTheza deal back in his face: \u201cYou have withheld information from the Board in relation to the EquaTheza contract by failing to inform the Board of a dispute that was lodged,\u201d Figlan wrote in her 8 October suspension letter.<\/p>\n\n\n\n Sizani denies this. \u201cIt is my humble view that this allegation is clearly a mistake or a misunderstanding because surely I was not aware \u2026 of what was in the mind of EquaTheza. The decision to terminate the contract was taken on June 13th<\/sup> and the dispute was declared on the 26th<\/sup> June 2024, clearly when that decision was taken on the 13th<\/sup> June no dispute existed at that stage, I deny that I withheld information from anyone including the \u2026 Board,\u201d he wrote on 15 October.<\/p>\n\n\n\n It is also unclear why the PetroSA board took the dispute so seriously.<\/p>\n\n\n\n On 10 July, EquaTheza\u2019s lawyer had told Sizani: \u201cWe are in the process of preparing \u2026 legal proceedings \u2026 which will be issued and served on you in due course\u201d.<\/p>\n\n\n\n To date, however, EquaTheza has not made good on its threat to go to court.<\/p>\n\n\n\n Instead, it appears that EquaTheza \u2013 led by Ngcuka, the incoming chair of EquaTheza \u2013 kept trying to pull strings behind the scenes, including writing to Figlan, the PetroSA board chair, a week later \u201crequesting her intervention\u201d.<\/p>\n\n\n\n As Dyosi put it: \u201chaving realized that \u2026 in taking the decision to cancel, the PetroSA Board had not been appraised of all the information \u2026 attempts to find a mediated solution to the impasse continued.\u201d<\/p>\n\n\n\n Figlan eventually told EquaTheza in September that \u201cthe matter would be further investigated\u201d.<\/p>\n\n\n\n \u201cWe are still awaiting the outcome of that investigation,\u201d Dyosi told us. \u201cEquaTheza believes that it has a strong case \u2026 and has no intention of abandoning it legal challenge against this erroneous decision, but is giving the mediation process a fair chance.\u201d<\/p>\n\n\n\n Importantly, Sizani\u2019s 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 \u201cthe EquaTheza contract should be cancelled for not meeting the condition precedents\u201d.<\/p>\n\n\n\n A week later, the PetroSA board suspended him. And with Sizani gone, the EquaTheza deal appears to be back on the table.<\/p>\n\n\n\n \u201cEquatheza is looking forward to continu[ing] with the project,\u201d Hendricks told us last week. \u201cThe 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.\u201d<\/p>\n\n\n\n\n
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