Top South African company faces serious accusations

Forvis Mazars, a global professional services firm operating in South Africa, has denied accusations that its services to PetroSA played a part in scandal-plagued dealings at the company.

This comes after the AmaBhungane Centre for Investigative Journalism published an exposé on Sunday, 9 February, detailing Mazars’ involvement in three controversy-laden deals related to PetroSA.

PetroSA engaged the accounting firm Mazars to conduct due diligence on three proposed deals involving Gazprombank, Equator, and EquaTheza.

Mazars was hired to assess the viability and credibility of these deals. However, an internal audit later found that the firm’s report allegedly failed to highlight critical risks that later led to the deals falling apart.

Firstly, Mazars analysed two offshore gas deals between PetroSA and businessman Lawrence Mulaudzi – a R21.6 billion deal with Equator Holdings (100% owned by Mulaudzi) and a R5.2 billion deal with EquaTheza (30% owned by Equator).

AmaBhunagne reported that these deals were made because Mazars’ due diligence labelled Mulaudzi as “low risk” despite red flags, including past corruption allegations and financial instability. 

It said internal audits later revealed that key checks were inadequate, some work was outsourced to unqualified personnel, and PetroSA relied heavily on Mazars’ assessments to approve the deals.

Mazars’ report allegedly painted Equator as a strong partner, but PetroSA’s internal audit later found no proof that Equator had the financial backing to fund the deal.

The internal audit suggested that Mazars had relied too heavily on Equator’s own claims rather than conducting independent verification.

Equator was later liquidated, and EquaTheza failed to pay the promised funds.

Another issue came up regarding Centurion Law Group (CLG). PetroSA’s internal audit found that, based on the CVs submitted by Mazars, 70% of the work the firm was hired for was subcontracted to other companies. 

Out of the 17 staff members proposed by Mazars, only five were Mazars employees.

Instead, the law firm CLG – formerly Centurion Law Group – allegedly carried out a large proportion of the work Mazars was hired for.

The publication reported that CLG was involved in drafting contracts for PetroSA but was also listed as a partner in Equator’s bid.

The internal auditors initially flagged this as a conflict of interest, with CLG acting as both transaction advisors to PetroSA and as a partner to Equator, a bidder in the deal. 

While CLG denied any relationship with Equator, early drafts of the audit report flagged a potential conflict of interest, which was later removed. 

AmaBhungane said the audit suggested that Mazars should have identified this issue during due diligence.

The third deal was worth R3.7 billion and involved Gazprombank, a Russia-based private banking company.

The internal audit raised concerns that Mazars did not fully evaluate the sanctions risks associated with Gazprombank.

Mazars defended itself, saying its scope was limited and it did not have the authority to approve or reject the deal.

Now, PetroSA is seeking to recover funds and is considering blacklisting Mazars for substandard work. 

Following the cancellation of the deals, PetroSA demanded a R1.08 million refund from Mazars, citing incorrect billing rates as some consultants allegedly charged higher rates than they were entitled to.

“One example flagged by the internal audit team was that PetroSA was billed for 223 hours of work by a senior legal consultant on CLG’s team, a role that required at least six years’ experience,” the publication claimed.

Mazars disputed the claim, and negotiations are ongoing. If PetroSA remains unconvinced, Mazars could be reported for fruitless and wasteful expenditure.

This could lead to severe consequences, including being blacklisted by the National Treasury – a severe sanction that would bar it from government contracts for 10 years.

However, Mazars has maintained that it followed proper processes and was not responsible for appointing partners or approving the deals.

In a media statement released on Monday, 10 February, Mazars said AmaBhungane’s article “neither fairly nor accurately represented” Mazars’ involvement in PetroSA’s deals. 

“We remain confident in the process we followed and the advice we provided to PetroSA,” the firm said.

“The article contains multiple misrepresentations of our role and scope of work, and we want to ensure you have a clear understanding of the facts.”

The firm explained that the article falsely implies that Mazars was involved in approving PetroSA’s selected partners. 

“Forvis Mazars had no role in PetroSA’s partner selection process.  At the time of our appointment, PetroSA had already chosen and appointed its partners, and our role was strictly advisory,” it said.

It explained that the scope of its initial due diligence report was limited to legal status, B-BBEE compliance, and security clearance. 

“We utilised verified external sources that were available at the time of engagement,” it said.

“The scope of the initial due diligence did not include a financial due diligence, nor were we required to assess the financial viability of PetroSA’s partners.”  

“This was to be performed only after the feasibility study had concluded and the conditions precedent in the profit sharing agreement met.” 

“As the conditions precedent in the profit sharing agreement were not met, we did not perform the planned in-depth due diligence.”

The firm also pushed back against claims that it gave PetroSA the green light for these deals. 

“In fact, it was our work on the structuring of the agreements, which included conditions precedent, that had clear timelines and remedies, including termination clauses, that resulted in PetroSA terminating the transaction with the selected partners,” it said.

Mazars added that the allegations related to billing concerns are being addressed directly with PetroSA, and all invoices were reviewed and approved as per industry-standard billing practices. 

“PetroSA has not deducted any fees, nor has Forvis Mazars agreed or undertaken to repay any fees,” it said.

“We are not aware of any steps taken by PetroSA to blacklist Forvis Mazars, and discussions with PetroSA remain constructive.”

“Forvis Mazars stands by the quality of our work and remains committed to transparency, professional excellence, and ethical business practices.”