Probe into sale of oil reserves ‘shoddy’

The investigation into the sale of 10-million barrels of the country’s strategic fuel reserves by the Strategic Fuel Fund (SFF) conducted by an international legal firm was not satisfactory and a new one had to be instituted, Energy Minister David Mahlobo said on Tuesday.

He told members of Parliament’s portfolio committee on energy that he wanted the new investigation to be concluded as a matter of urgency though could not give a time frame for this. The new investigative team would evaluate whether the report by law firm Allen & Overy was useful.

The sale of the oil reserves in December 2015 and January 2016 was subsequently found to be illegal because Treasury approval was not obtained.

It has been estimated that a loss of R3.3bn would be suffered as a result of the sale, which took place when oil prices were very low.

Mahlobo said it was disappointing that the international legal firm had done a shoddy job

and had not interviewed all those allegedly involved in the sale. “I want people arrested if they have done something wrong,” he said.

“But how can you arrest them if someone produces a report and gives a disclaimer.”

The minister said the legal firm had issued a disclaimer that its report could not be used for other things. The report had been produced after a two-year delay, which Mahlobo said was “unacceptable”.

The minister also referred to a conflict of interest reported by Allen & Overy in December, which prevented it from proceeding further with the investigation. This was the reason why another process was required.

The way the firm had behaved was “unethical” and should be reported to the legal profession, Mahlobo said.

He said that the money spent on the investigation should be recovered and he wanted to know when the firm had discovered that it had a conflict of interest.

According to the minister, the conflict of interest related to the relationship the legal firm had with the international trader that bought the oil from the SFF.

Responding to the minister’s comments, Allen & Overy said: “The firm conducted the report fully within the terms of reference set by the then minister [Tina Joemat-Pettersson], which were to conduct a desktop contract review only and which neither instructed nor authorised the interviewing of SFF employees involved in the matter.

“There was no conflict of interest in the production of the report, which the firm stands by. However, the firm has declined to be involved in a separate and more recent matter due to a potential conflict of interest.”

Allen & Overy also corrected Mahlobo’s version that it had taken two years to produce the report, saying its appointment letter was dated October 26 2016 and its report was delivered on December 20 2016.

DA energy spokesman Gavin Davis referred to a statement by previous energy minister Mmamaloko Kubayi-Ngubane in May 2017 that the Allen & Overy report was on her desk and that criminal prosecution was being considered.

It was of concern that there now appeared to be problems with the report, Davis said.