Ailing state-owned oil company PetroSA has appointed its acting CEO as the chief operating officer, a position that previously did not exist, with a big salary hike and a once-off compensation of R4.6m.
The company has posted huge losses over the past four years and had a projected loss of R2.2bn for the year to March 2017. This followed its record R14.6bn net operating loss in the 2014-15 financial year, the biggest by a state-owned entity.
While there was an improvement from the previous year, its draft annual financial statement for the year ending March 2018 shows the group having reported a loss of R201m.
Despite this, PetroSA is still spending huge amounts of money on salaries for its executive management and interim board, which was meant to be replaced by a permanent board in April.
There is currently no stability in the top echelons of the company with the entire executive management — and the board — sitting in acting positions.
Acting CEO Kholly Zono was appointed chief operating officer in January 2018.
A letter, penned by board chairman Nhlanhla Gumede at the time, described this as part of the new executive structure aligned with the new strategic direction of the company.
Zono would continue to act in the position of CEO.
According to the draft financial statement, Zono’s total cost to company went from R2.6m in the 2017 financial year to R7.8m in the year ending in March 2018. The R7.8m included the R4.6m once-off payment.
Business Day understands there is some unhappiness with this appointment amid allegations that proper processes were not followed.
It was also alleged that Zono, who was a permanent employee, did not qualify for the R4.6m bonus, because he was still a full-time employee. He would only qualify for the compensation if his contract was converted to one with a fixed term.
In response to questions, PetroSA said Zono’s appointment was made in terms of a board resolution, which was in line with the company’s memorandum of incorporation. The company said it did not advertise the position of chief operating officer, nor did it have to.
On the R4.6m payment to Zono, PetroSA said this was compensation for conversion of a permanent contract to a five-year fixed-term contract. "The compensation paid to newly appointed executives is based on their annual salaries. The same applies to the [chief operating officer] compensation."
The majority union at PetroSA, the National Union of Metalworkers (Numsa), has also raised concern over the appointment. In a letter to the company, seen by Business Day, Numsa claimed that PetroSA had no business plan and the company structure did not include the position of chief operating officer.
Gumede said the position was reinstated because the position of group CEO had been vacant for an extended period and "created an urgency to fill the [chief operating officer] position to bring some stability into the top structure".
Another issue facing the parastatal was the appointment of a permanent board.
In July 2017, the Central Energy Fund (CEF), which oversees PetroSA, removed the remaining board members, replacing them with an interim board. This board was meant to be replaced by a permanent board in April, but this still has not happened.
The interim board has been accused of doing nothing but holding numerous board meetings, for which members get a fee, yet making no progress in stabilising the company.
PetroSA said the board held a total of 11 meetings. "The meetings were not held for any other reasons but to address … issues and challenges faced by PetroSA that required board deliberations and decisions at the time."
The CEF on Thursday said it had not started the process of appointing a new board because the current board had yet to finalise work by year end.