Parliament ‘misled’ on SA’s oil stockpile
• New minister admits strategic reserves were sold • About 10.3-million barrels discounted
The government has admitted for the first time that the secret disposal of 10.3-million barrels of SA’s strategic oil reserves by the Strategic Fuel Fund (SFF) in December 2015 had indeed been a sale and not a “rotation of stock”, as former energy minister Tina Joemat-Pettersson repeatedly had asserted to justify her approval of the deal.
Newly appointed Energy Minister Mmamoloko Kubayi apologised to MPs and Parliament on Tuesday for their having been misled about the nature of the transaction. This was after DA energy spokesman Gordon Mackay expressed concern that the energy portfolio committee had been misled.
The crude oil stockpile was sold at the bottom of the crude oil price cycle at a substantial discount to the prevailing spot price. It was sold to three invited buyers at an average price of $28 a barrel at a time when the Brent oil price ranged between $37.22 and $44.44 a barrel.
About six months later, the price had risen to $49 a barrel.
The auditor-general declared the sale illegal as it had not been authorised by Treasury.
In her first public engagement since her appointment in April, Kubayi told members of the parliamentary committee that the sale of the strategic stocks had been confirmed as a sale in a report that she received after an investigation. She undertook to give the committee a copy of the report.
A former chairman of Parliament’s telecommunications and postal services committee, Kubayi committed herself to accountability and transparency, public participation in the nuclear procurement programme and an open, intense engagement with the committee on her department’s work.
She said she had instructed the board of the Central Energy Fund (CEF) — the parent company of the SFF — to take action, if possible, against those responsible for the sale of the strategic oil stocks that was undertaken without the authorisation of the SFF board.
The CEF became aware of the sale only when it noticed the proceeds in its bank
account. The deal was clinched by former SFF acting CEO Sibusiso Gamede.
Kubayi said those responsible for the sale needed to be held to account, even though they were no longer employed by the SFF. The legal avenues to achieve this would be explored.
She instructed the CEF board to secure the country’s strategic oil reserves.
In 2016, Joemat-Pettersson instructed London-based law firm Allen Overy to review all SFF contracts since 2014, including the sale of the stockpile. Kubayi said the department would be looking into the weaknesses of the SFF’s governance model.
On the CEF’s “problem-child subsidiary”, PetroSA, the minister said she was “very concerned” about the loss it had incurred through Project Ikhwezi, which resulted in a R 14.4bn impairment in 2014-15.
She was also concerned that bonuses had been paid to executives despite their nonperformance and said she had picked up a trend of “wrongful doings” within PetroSA.
Also on the minister’s agenda was to capacitate the National Energy Regulator of SA (Nersa), so it could do its work. The founding legislation for the regulator would be re-examined to strengthen it. It was problematic that the Nersa CEO was also a regulator, Kubayi said.
The National Nuclear Regulator would also be strengthened, she said.
Kubayi committed her department to public participation and transparency around the nuclear procurement programme, saying she did not have any problems with last week’s Western Cape High Court judgment insofar as it stressed the need for public participation.
However, clarity was needed on judge Lee Bozalek’s ruling that the two nuclear-related determinations gazetted by the department were unlawful and unconstitutional because Nersa had failed to follow the legal prescripts with regard to public participation.
These determinations are the basis on which Eskom has proceeded with its request for information for the procurement of 9,600MW of nuclear energy.
Kubayi pointed out that the decision on the determinations affected other aspects of the department’s work, such as the independent power producer programme. She would meet with legal counsel on Wednesday to discuss the judgment and what to do about the determinations, she said. It might be necessary to seek a declaratory order or appeal.
The international agreements signed with Russia, US, China and South Korea — which the judge set aside as unconstitutional because they had not been approved by Parliament — were needed, the minister said, as they also covered continuing nuclear technology co-operation and could not be simply put aside.
The department would have to look at whether they could be submitted to Parliament for approval or whether new agreements would have to be signed before being submitted.