Strate­gic re­serve fire sale ‘must be re­versed’

Mail & Guardian - - News -

At the end of 2015, the Strate­gic Fuel Fund (SFF) agreed to sell three com­pa­nies 10-mil­lion bar­rels of the coun­try’s oil re­serves at a bar­gain price.

The much-awaited Allen & Overy re­port states that, be­cause of the fail­ures to com­ply with reg­u­la­tory ap­provals from the SFF board, the Cen­tral En­ergy Fund (CEF) and trea­sury, the par­ties must be re­stored to the “po­si­tions they were in be­fore the pur­ported en­try into such con­tracts”.

The three lucky com­pa­nies in­clude Taleveras, which bought four mil­lion bar­rels, and Vi­tol and Glen­core, which bought three mil­lion each.

At the time news of the sale broke, the min­istry and the SFF de­nied it was a sale but said it was rather a ro­ta­tion of stock. It was also said the oil would not leave the coun­try and the SFF had the op­tion to buy it back.

But, ac­cord­ing to the Allen & Overy re­port, the “stock ro­ta­tion” amounted to “dis­posal”.

“None of the con­tracts con­tains any re­stric­tion on the re­moval of the crude oil from South Africa.”

In essence, the com­pa­nies could move the oil when­ever they felt it ap­pro­pri­ate.

Allen & Overy also de­bunk the myth that the SFF has a gen­uine right of first re­fusal.

“To the ex­tent that this right of first re­fusal was in­cluded in the con­tracts as a cri­sis mech­a­nism to com­pel the sale of prod­ucts sold by SFF to third par­ties back to SFF when there are fuel sup­ply short­ages, it is in­ef­fec­tive and does not achieve its in­tended com­mer­cial pur­pose.”

Each of the con­tracts in­volv­ing the three com­pa­nies went through a closed bid­ding process. Ac­cord­ing to the re­port, the pro­cesses were never autho­rised by the SFF board, as is re­quired, and the con­tracts are ren­dered in­valid by the fail­ure to com­ply with reg­u­la­tory ap­provals.

En­ergy Min­is­ter Mmamoloko Kubayi an­nounced in Par­lia­ment that a full-scale in­ves­ti­ga­tion would be con­ducted into the multi­bil­lion-rand as­set dis­posal.

But four months down the line, Kubayi is still await­ing the rec­om­men­da­tions, based on nu­mer­ous re­ports, from the CEF.

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