Energy minister puts oil stock deal under scrutiny
• Kubayi takes severe approach to transaction, holding up delivery until legality is established
The companies that bought SA’s strategic oil stocks have been refused permission by the Central Energy Fund to lift their product pending an investigation as to whether the sale can be contested in court.
The sale of the 10-million barrels of oil by the Strategic Fuel Fund for $280.8m in a closed bidding process took place from December 2015 to January 2016.
The buyers were Taleveras Trading, Vesquin Trading/Vitol and Venus Ray Trading.
The transactions were not authorised by the board of the Central Energy Fund, the Strategic Fuel Fund’s parent company, nor by the Treasury as required and were concluded when oil prices were low.
Energy Minister Mmamoloko Kubayi told members of Parliament’s energy committee on Tuesday that the legality of the contracts had to be evaluated and in the meantime, the oil was still being kept in the Strategic Fuel Fund storage tanks.
It had to be decided whether to approach the court to have the contracts declared invalid. Proceeds of the sale should have been transferred to the Equalisation Fund, but were retained pending a decision on how to proceed with the contracts.
The minister said she could not say too much as she was constrained by the confidentiality clauses of the contracts and did not want to compromise the legal proceedings.
Charges against the former Strategic Fuel Fund executives involved were being investigated, she said.
Kubayi appeared before the committee with Central Energy Fund chairman Luvo Makasi and acting group CEO Godfrey Moagi. Makasi told MPs that accounting firm Deloitte would look at the methodology used to calculate the cost of the strategic oil reserves and would quantify the size of the loss.
The minister said the Department of Energy would institute a forensic investigation to trace the flow of money arising from the transaction.
The Central Energy Fund board became aware of the transaction only in May 2016 when it discovered the $280.8m sitting in the Strategic Fuel Fund’s bank accounts.
Kubayi told MPs that former CEO Sibusiso Gamede and the legal adviser of the Strategic Fuel Fund were the same person, so there were no checks and balances objectively to evaluate the deal.
She said the report on the sale — making it clear that it was a sale of strategic oil stocks and not a stock rotation as claimed by former energy minister Tina Joemat-Pettersson — could not be given to MPs as this could contaminate the legal case.
Kubayi said she wanted to give Joemat-Pettersson the benefit of the doubt that she firmly believed the sale was a rotation of stock, which was the basis on which she approved the deal.