Mazars Faces Potential Blacklisting After Faulty PetroSA Deals

Mazars, now operating as Forvis Mazars, is entangled in controversy after its consultancy role in multiple flawed deals involving the Petroleum Oil and Gas Corporation of South Africa (PetroSA) and businessman Lawrence Mulaudzi, leading to substantial financial and reputational risks for both PetroSA and Mazars.

In October 2023, Mazars completed due diligence, approving deals with Mulaudzi's entities, Equator Holdings and EquaTheza, despite Mulaudzi’s suspicious financial activities and connections. This due diligence report facilitated PetroSA’s signing of a R21.6 billion deal with Equator Holdings and a R5.2 billion deal with EquaTheza. Within months, Equator was liquidated, triggering a financial debacle for PetroSA.

The fallout from these transactions has led PetroSA to consider severe measures against Mazars, including potential blacklisting from future government projects. Mazars was the sole respondent to PetroSA's request for advisory on the deals, driven by significant incentives but overshadowed by questionable associations, notably with the sanctioned Russian entities involved in the deals.

Critics argue that Mazars’ due diligence was superficial, focusing on legal compliance while overlooking operational and financial risks associated with Mulaudzi and his companies. The internal audits at PetroSA have since painted a stark picture of oversights and managerial failures, notably in missing critical information about project feasibility and partner reliability.

Moreover, the internal audits revealed potential overbilling and underqualification among Mazars’ subcontractors, raising questions about the integrity and thoroughness of their processes. Some of this work, handled by Mazars, included significant subcontracting to other firms, such as the law firm CLG, which was coincidentally listed as a partner by one of Mulaudzi's firms in its bid.

As the scandal unfolds, Mazars stands firm, arguing that its consultancies adhered to professional standards and disputing claims that it mishandled its responsibilities. However, the persistent issues highlighted by PetroSA’s internal audits suggest a pattern of inadequate evaluation and possible financial discrepancies.

PetroSA's harsh critique and the real possibility of Mazars being blacklisted by the government underscore the gravity of the allegations against the firm’s practices in handling high-stakes corporate and public finance advisories. This controversy not only threatens the financial stability of PetroSA but also casts a long shadow over Mazars’ operations in South Africa, potentially affecting its market position and future government collaboration.