R15bn Gas Tender Sparks Concern After Award to Deregistered Chinese Firm

A multibillion-rand gas project in the North West province has come under scrutiny after it emerged that the R15 billion tender was awarded to a Chinese company reportedly deregistered with South Africa’s Companies and Intellectual Property Commission (CIPC).

The project, linked to the Matlosana gas feasibility initiative, aims to introduce alternative energy solutions into South Africa’s fragile energy grid. But concerns are growing over whether the municipality involved followed due process in awarding the contract.

“I don’t think we should necessarily question the credibility of this company,” said Craig Morkel, chair of the gas economy leadership team at the South African Oil & Gas Alliance (SAOGA), in a recent interview. “But what’s clear is that the procurement process has potentially not followed the correct procedures.”

The situation has raised questions about the enforcement of the Public Finance Management Act (PFMA) and Municipal Finance Management Act (MFMA), both of which guide how state organs should conduct tenders.

The Case for Gas in SA’s Energy Mix

Gas continues to be seen as a critical component in South Africa’s broader energy strategy. With load shedding still a national risk and Sasol’s pipeline from Mozambique recently shut down, municipalities are increasingly seeking alternative energy sources to reduce their dependence on Eskom.

“Gas can play a vital role in maintaining security of supply and lowering environmental impacts,” Morkel noted. “It is especially useful for the 68% of our energy consumption that isn’t electrical.”

Gas-to-power projects typically have a development timeline of about four years and are not reliant on weather conditions, making them attractive to local governments. But the effectiveness of such projects relies heavily on the legal and financial compliance of all involved stakeholders.

A Procurement Process Gone Wrong?

Morkel pointed out that the awarding of the tender followed the disposal of a piece of municipal land, possibly without adhering to legal procurement frameworks. This could compromise the entire project, as National Treasury approval is often required for large-scale infrastructure developments involving foreign investors.

“If the project is not bankable, National Treasury will not sign off on it,” said Morkel. “Foreign partners should seek local legal guidance. But it’s also the responsibility of government departments and municipalities to guide new entrants properly.”

Although the credibility of the Chinese company is not being questioned solely based on its foreign origin, its deregistration casts doubt over its eligibility to undertake such a project.

Should National-Interest Projects Have Different Rules?

This controversy also raises a broader debate: Should strategic infrastructure projects be subjected to stricter or differentiated procurement guidelines to safeguard national interests?

“There’s a role for municipalities, but all this must be aligned with national master plans like the Integrated Resource Plan (IRP),” Morkel added. “You can’t have disjointed energy planning if you want long-term sustainability.”

The last officially adopted IRP was in 2019, and a new draft is currently under review. Without a coherent strategy and clear procurement accountability, South Africa risks losing investor confidence in its energy infrastructure development pipeline.

As South Africa battles a complex energy crisis, projects like the R15 billion Matlosana gas initiative represent both opportunity and risk. The need for alternative power sources is undeniable, but the methods through which these projects are awarded must be above reproach.

This incident serves as a reminder: robust procurement oversight is just as critical as the technology being deployed.

{Source: MoneyWeb}

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