PetroSA’s diesel debacle: R933m gamble with obscure firm exposes governance chaos and massive losses

Key topics: R933m diesel deal with Nako made without contract.Demurrage fees skyrocketed as fuel tankers idled offshore.PetroSA profits from Eskom but suffers growing operating losses..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Kerry Lanaghan.According to a report from amaBhungane, state-owned oil company PetroSA has incurred massive financial losses and exposed itself to serious governance failures through its diesel trading operations, most notably a near-billion-rand deal with an obscure private firm, Nako Energy. In June 2024, PetroSA sold R933 million worth of diesel to Nako without securing payment guarantees or a formal contract. A year later, Nako still owed R825 million.This flawed transaction indicates a broader dysfunction within PetroSA’s fuel trading strategy, which has relied on speculative, supply-led imports without confirmed buyers or storage capacity. The result has seen oil tankers queuing off Mossel Bay, accruing staggering demurrage fees of R389 million in 2024, an elevenfold increase from the previous year. Despite growing revenue driven by Eskom’s reliance on diesel to mitigate loadshedding, PetroSA's losses have widened, with operating losses increasing from R1.5 billion to R1.7 billion.The roots of these failures lie in PetroSA’s shift from refining to trading after the closure of its Mossel Bay refinery in 2020. Without its production capabilities, PetroSA became heavily reliant on diesel imports, mainly financed through sales to Eskom. Denied a fuel wholesale licence by the Department of Minerals and Petroleum, Eskom has been forced to buy diesel from PetroSA at a markup, indirectly subsidising the troubled entity.While Eskom insists PetroSA offered the best available discount, internal memos show the state oil company made significant profits on Eskom sales compared to break-even margins in the open market. This monopoly arrangement, however, has not protected PetroSA from self-inflicted harm. Its speculative diesel purchases, disconnected from demand and infrastructure realities, have led to excessive storage costs and impaired financial performance.The Nako Energy deal crystallises these dysfunctions. PetroSA selected Nako - a virtually unknown, black-owned trader with minimal industry footprint - to urgently offload diesel, despite its lack of creditworthiness. Claims that guarantees would be provided by two boutique asset managers, Taquanta and Khumo Capital, fell under scrutiny: Taquanta quickly withdrew its provisional offer due to the absence of a contract, and Khumo denied any involvement whatsoever.Even after these assurances collapsed, PetroSA continued the transaction, granting Nako further price concessions and assuming responsibility for import duties and penalties amounting to over R330 million. Ultimately, PetroSA accepted a R1.90/litre discount, incurring a R19-million loss on the Jag Pushpa cargo alone. Nako's CEO, Nqobani Mkhwanazi, claimed the intervention helped PetroSA avoid deeper losses due to falling fuel prices and storage limitations, arguments echoed in PetroSA’s internal justification memos.Despite being a state entity, PetroSA has refused to release its annual reports or disclose trading partners, citing commercial confidentiality. The opacity has shielded it from accountability, even as questions swirl about whether insiders have benefited improperly from the tanker-based trading strategy. While no evidence of kickbacks has been proven, the speculative purchases, which are often made without apparent demand or logistics in place, have sparked suspicion and led to senior management changes.New CEO Xolile Sizani, appointed in April 2024, pledged to rein in demurrage costs and implement more rational procurement. However, key decisions, including the Nako deal, had already been executed. As Nako failed to meet tax and payment obligations, PetroSA held worthless guarantees and R933 million in fuel sitting in private tanks, unpaid and effectively unsecured.PetroSA’s chaotic trading practices have not only cost the public hundreds of millions but also highlighted systemic weaknesses in oversight, procurement controls, and transparency. The full fallout - and who will be held accountable - remains to be seen.

PetroSA’s diesel debacle: R933m gamble with obscure firm exposes governance chaos and massive losses

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