Sanity prevails: Treasury blocks PetroSA’s bid to buy Engen
Here's evidence that sanity may be starting to return to the ANC Government's management of the South African economy. The disastrous "Development State" philosophy has proved an abject failure with foreign investment having dried up and local companies taking their fresh investments offshore. It may be too early to call a turning of the tide, but there's no doubt Development State have proponents taken an awful smack with the blocking of State-owned PetroSA's bid to acquire the country's biggest petrol retailer, Malaysian-owned Engen. Industry insiders were perplexed at the move, saying there was no economic rationale for the proposal. They interpreted the proposal as a blunt intervention to benefit the already puffed-up political elite who, in the name of BEE, would get to acquire petrol stations from Engen's existing franchisees. As this Bloomberg article reveals, South Africa's National Treasury pulled the plug on the plan. A national dawn may at last be breaking. – AH
By Rene Vollgraaff and Paul Burkhardt
(Bloomberg) — South Africa's National Treasury said it denied a request from state-owned oil company PetroSA to borrow internationally to buy Petroliam Nasional Bhd's stake in the nation's biggest fuel retailer.
PetroSA "submitted requests for a foreign borrowing limit" to acquire Petronas's 80 percent stake in Cape Town- based Engen Petroleum Ltd., Jabulani Sikhakhane, a spokesman for the Treasury, said in an e-mailed response to questions. Permission "was not given," he said, declining to give reasons.
Johannesburg-based Business Day reported yesterday that Petronas, as the Malaysian state oil company is known, pulled out of the 18 billion-rand ($1.6 billion) deal because of a lack of funding. The Treasury was concerned that PetroSA's balance sheet won't be able to carry the debt, the newspaper said, without saying where it got the information.
PetroSA has received a letter from Petronas, Zama Radebe- Luthuli, vice president of corporate affairs for PetroSA, said by phone, declining to disclose the content of the letter and comment on the possible sale.
The purchase would have given PetroSA, which operates a 45,000 barrel-a-day refinery at Mossel Bay on the southern coast, the ability to sell directly to consumers. Engen has a 135,000-barrel-a-day refinery in Durban on the east coast, according to the company's website.
Government Guarantees
State-owned companies are required by law to obtain permission from the government on major transactions and in some cases need the Treasury's approval to raise funding. While permission to borrow internationally was rejected, a separate request from PetroSA for a government guarantee was approved in April, Sikhakhane said.
Several state entities, including Eskom Holdings SOC Ltd. and South African Airways, are facing funding crunches and have turned to the government for bailouts. Those requests have been rejected as a slowing economy puts pressure on revenue collection.
Petronas took control of Engen in 1998 by buying shares and then offering $465 million for the stock it didn't already own. The Malaysian company later sold a stake in the retailer to a precursor of Pembani, a private-equity firm based in Johannesburg.
Petronas's communication department wasn't immediately able to respond. – BLOOMBERG