A crude deal for the public

But there’s no need to panic — we can always buy that oil back at twice the price

It was one of the more bizarre decisions taken by Tina JoematPettersson’s Fawlty Towers energy department. Last week, it emerged that she and a few colleagues had sat around a table last year — let’s hope it was late at night over a bottle of Talisker — and decided to flog SA’s emergency stash of oil reserves in the Strategic Fuel Fund (SFF).

The SFF, which has kept 10m barrels of crude oil in its depot at Saldanha, is meant to ensure “security of energy supply in case of a crisis” — like a global shortage.

Well, scratch that. JoematPettersson’s department decided, apparently without cabinet consultation, to get rid of all but 300,000 barrels (SA uses 450,000 a day) when the oil price was at a low of US$28/barrel.

The Central Energy Fund (CEF), which oversees the SFF, says this was just part of “stock rotation”. “The integrity of the strategic stocks is secured,” said the CEF’s Tseliso Maqubela, as the fund has the “right” to buy back the oil. This is masterful spin: the truth is, whereas the fund used to own that oil, now it only has the right to buy it back.

And here’s the difference: selling 10m barrels of oil at $28/barrel netted R4.4bn; buying it back with crude at $49/barrel today would cost R7.9bn.

So if the public are the losers, who were the winners?

Here, it gets interesting. The buyers of this oil, who stand to make a killing, appear to have been Vesquin, Nigeria’s Taleveras and Glencore.

Dig deeper, and you’ll see that Vesquin is a joint venture between Swiss-based energy giant Vitol and a company called Elderberry, owned by 45-yearold Simphiwe Mehlomakulu.

Mehlomakulu, a chemical engineer with an MBA, has an impressive CV dating back to 1993 when he worked as a process engineer for Sasol’s chemical industries division. In 2000, he worked as a manager for Old Mutual, before joining PetroSA as an executive in 2002.

But here it gets interesting: Mehlomakulu was the man who signed off the R15m “advance” paid by PetroSA to Sandi Majali’s Imvume Management in 2003.

Of that R15m, Majali notoriously diverted R11m to the African National Congress — a scandal uncovered by the Mail & Guardian which became known as Oilgate.

At the time, Mehlomakulu was PetroSA’s GM for trading, supply and logistics, but he’d been acting CEO while Sipho Mkhize was on leave.

In the end, public protector Lawrence Mushwana investigated Oilgate and found the payment to Imvume was “lawful” and “properly considered”. But Mushwana’s probe was subsequently rubbished by Judge Robert Nugent, who said there was no evidence he displayed “an open and inquiring mind”.

Now, more than a decade later, Mehlomakulu seems set to score big time through yet another ill-conceived state deal.

When contacted, he referred questions to Vitol’s representative, Harvey Foster. Foster, however, was skittish and evasive.

He refused to reveal any details of the oil deal as “we do not comment on our client relationships” and are “bound by client confidentiality”.

Foster denied his company stood to make a huge profit, saying this was “based on a lack of understanding of our business”.

Of course, he refused to explain how it worked — consistent with the secrecy that has characterised this entire process.

Joemat-Pettersson hasn’t helped clarify anything either. For a start, she argued that the money was “immediately used to buy the new stock” — contradicting the CEF’s view that SA only has the right to buy it back.

This is just one of many disturbing elements to this story. Why, for example, wasn’t this decision run past cabinet? Especially Pravin Gordhan’s treasury, which is legally meant to sign off these sorts of big deals?

And how was it that the former PetroSA executive who signed off the Oilgate payment to the ruling party now seems set to become an instant multimillionaire thanks to this secretive decision?