The Strate­gic Fuel Fund has told buy­ers they will not get their oil as the sale con­tracts were il­le­gal

CityPress - - News - SIPHO MASONDO and ABRAM MASHEGO sipho.masondo@city­ abram.mashego@city­

Ale­gal show­down looms be­tween the Strate­gic Fuel Fund (SFF) and oil traders over the con­tro­ver­sial sale of 10.3 mil­lion bar­rels of South Africa’s strate­gic fuel re­serve for $300 mil­lion (R4.3 bil­lion). This comes as a for­mer se­nior SFF ex­ec­u­tive is un­der­stood to have turned state wit­ness and is co­op­er­at­ing with the Hawks un­der sec­tion 204 of the Crim­i­nal Pro­ce­dure Act.

Two Cen­tral En­ergy Fund (CEF) se­nior em­ploy­ees and the depart­ment of en­ergy told City Press this week that the for­mer SFF em­ployee met the Hawks twice in re­cent months, and made a state­ment claim­ing that SFF of­fi­cials re­ceived in­struc­tions from se­nior ANC politi­cians to sell the oil re­serves.

The scan­dalous sale of the re­serves, for way be­low mar­ket value in De­cem­ber 2015 and Jan­uary 2016 – at a price of $28 a bar­rel in­stead of $36 – sparked a public out­cry.

A Hawks of­fi­cial told City Press yes­ter­day that a for­mer se­nior staff was one of the key sus­pects in the case. Hawks spokesper­son Bri­gadier Hang­wani Mu­laudzi said the case is be­ing han­dled by the Hawks’ se­ri­ous eco­nomic of­fences unit in Gaut­eng and Western Cape.

The CEF com­mis­sioned KPMG to con­duct a fi­nan­cial anal­y­sis of the sale. This was fi­nalised in July and the find­ings in­clude:

. Most of the sale con­tracts signed with the fuel pur­chasers were il­le­gal and did not com­ply with the Public Fi­nance Man­age­ment Act and the Com­pa­nies Act;

. The 10.3 mil­lion bar­rels of crude oil sold in­cluded

1.2 mil­lion bar­rels which can­not be re­moved from the stor­age tanks;

. The dis­posal of the stock was a sale. For­mer en­ergy min­is­ter Tina Joe­mat-Pet­ters­son claimed that it was “stock ro­ta­tion”;

. The SFF could rem­edy the sit­u­a­tion through resti­tu­tion or by re­plac­ing the stock;

. Resti­tu­tion would mean re­im­burs­ing the buy­ers with the $300 mil­lion they paid for it, in­clud­ing ex­ten­sive fees re­lat­ing to in­sur­ance, break­age, loss of rev­enue and le­gal fees;

. Re­plac­ing the strate­gic stock would cost up to

$486 mil­lion (R7 bil­lion); and

. Given the un­cer­tain­ties and costs re­lat­ing to resti­tu­tion, re­plac­ing the stock would be a bet­ter op­tion.

Doc­u­ments ob­tained by City Press this week re­veal that oil traders Venus Rays Trade, Vesquin Trad­ing and Glen­core En­ergy UK Lim­ited have de­manded that the SFF re­lease the fuel to them. Although they bought the oil, it is still be­ing kept in the SFF’s stor­age fa­cil­i­ties in Sal­danha Bay. The com­pa­nies are leas­ing the stor­age space from the SFF.

Strongly worded let­ters from the buy­ers indi­cate that the SFF re­fused to re­lease the oil, claim­ing it will bring a le­gal re­view to have the con­tracts of sale de­clared un­law­ful.

In a let­ter to Glen­core En­ergy dated two weeks ago, SFF act­ing chief ex­ec­u­tive Tha­bani Zulu says the paras­tatal is not will­ing to re­lease the fuel. This was in re­sponse to the Bri­tish com­pany’s de­mand to “com­ply with your obli­ga­tions ... and re­lease the rel­e­vant oil”.

Zulu wrote: “We note the con­tent of your let­ter and re­serve our rights to re­spond to the bal­ance of your let­ter in court pa­pers (which will be served on your clients).

“As men­tioned in our let­ter dated 26 Septem­ber 2017, the min­is­ter of en­ergy in­structed our di­rect share­holder, the CEF to com­mis­sion a le­gal re­view of the cir­cum­stances sur­round­ing the sale of the strate­gic fuel stock.

“The le­gal re­view re­ferred to above has been con­cluded and it has found that the agree­ments are in­valid and un­en­force­able in law due to non-com­pli­ance with le­gal re­quire­ments.”

Zulu said the SFF was prepar­ing pa­pers “to com­mence such re­views at the high court. We re­it­er­ate that pend­ing the court process men­tioned above, your client many not re­move the strate­gic fuel stock from the Sal­danha Bay stor­age ter­mi­nal.”

To Vesquin Trad­ing, Zulu wrote: “In your let­ter you give no­tice that among oth­ers, you do not ac­cept that we have the right to refuse Vesquin ac­cess to the 3 mil­lion bar­rels of crude oil, presently stored in tank two of the Sal­danha Bay stor­age ter­mi­nal, and that you in­tend to with­draw the strate­gic fuel dur­ing Novem­ber in three parcels.”

Zulu told the com­pany it may not re­move the fuel from stor­age pend­ing the le­gal re­view.

Other com­pa­nies to which the SFF sold the re­serve stock in­clude Con­tango Trad­ing SA and Taleveras Petroleum Trad­ing.

The let­ters re­veal that on Fri­day, the SFF started a se­ries of meet­ings with them to try and re­solve the im­passe.

CEF chair­per­son Luvo Makasi told City Press this week that the SFF would not re­lease the fuel be­cause the CEF be­lieved the sale was il­le­gal and was go­ing to court to have the con­tracts re­viewed and set aside.

“But also, imag­ine if we re­leased the stock and some­thing hap­pened? The coun­try would run out of fuel and there would be chaos. It would be ex­tremely ir­re­spon­si­ble of us to al­low that to hap­pen,” he said.

Makasi said the CEF board was finalising the terms of ref­er­ence for a full in­ves­ti­ga­tion into the sale.

TALK TO US Who do you think should be held re­spon­si­ble for the cri­sis caused by the sale of SA’s strate­gic fuel re­serve? Will there be any con­se­quences?

SMS us on 35697 us­ing the key­word FUEL and tell us what you think. Please in­clude your name and prov­ince. SMSes cost R1.50

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