Central Energy Fund (CEF) CEO Renosi Mokate has been suspended because she is responsible for oil trading and signs off on each deal, the Mail & Guardian has learned.
Mokate’s suspension by the CEF board, made public on Monday, took place while she was in Brazil. The suspension flows from losses of R77-million uncovered by the fund’s internal auditors and referred to the Office of the Auditor General for further investigation.
CEF chairperson Coen Kruger said the step had been taken as a “precautionary measure” as Mokate was the accounting officer in terms of the Public Finance Management Act. He said the board would announce the findings of its investigation into the losses “as soon as possible”.
Mokate is reportedly angry over her suspension, but it is understood that the losses relate to breaches of risk management policy laid down by the CEF, for which she may be held accountable.
The bulk of the losses flow from a failure by the Strategic Fuel Fund (SFF) — the CEF’s oil trading and storage arm — to hedge oil transactions against price fluctuations in certain cases. In at least three deals this resulted in a serious deficit. Although the deals were apparently done by a relatively junior trader, the trading department reports directly to the CEO and Mokate exercises overall responsibility for it.
The CEF’s risk management policy apparently provides that the SFF may not speculate and that hedging — insuring against a price drop — should take place if there is a time lag between buying and selling.
“Oil trading without hedging is gambling,” one industry insider said.
It is understood the other losses relate to bad debts incurred in deals with a number of empowerment companies that went sour. The questions likely to be raised with the CEO here refer to whether the terms of the contracts adequately protected the CEF and whether a proper due diligence was done to ensure the companies were able to pay.
Sources close to the investigation say the trades involved were routine, “not big fancy deals”.
Other sources told the M&G that reports linking the investigation to a controversial oil purchase from Iraq were incorrect.
Mokate was criticised earlier this year when it was revealed that the CEF had awarded a R1-billion tender to refresh South African strategic fuel reserves with Iraqi oil. The deal went to a previously unknown empowerment company, Imvume Resources, in partnership with international commodities company Glencore.
Attempts by opposition MP Ian Davidson and other industry players to get the CEF to reveal details of the transaction — especially the price paid to Imvume — have been unsuccessful.
When one company attempted to use the Access to Information Act to force the CEF to disclose details of the contract, attorneys acting for the CEF wrote to other bidders suggesting they oppose the application.
Mokate also promoted another controversial empowerment deal in 2000 for an empowerment company to market oil produced at the small state-controlled Oribi and Oryx oil fields off the South African east coast.
The contract was awarded to a company called Metalcor, but never went ahead — for as yet unexplained reasons.
The latest controversy to hit the CEF comes on top of the outstanding saga around former CEF chairperson Keith Kunene, who is still facing charges relating to a R1,5-billion deal in April 2000 to “outsource” trading in the fund’s strategic oil reserves to an empowerment company, Highbeam, in partnership with an international trader, Trafigura.
The CEF revealed in its annual report this week that legal costs relating to the dispute over the cancellation of that deal — being fought in the London courts — had risen to R3,6-million and could go up by a further R80-million.
Meanwhile, Suspended Department of Public Enterprises chief director Andile Nkuhlu should know his fate soon.
The Public Service Commission has completed its investigation into allegations that Nkuhlu received money from Zama Resources, the company bidding for a lucrative deal to privatise the state-owned Komatiland forestry assets.
Commission chairperson Professor Stan Sangweni said the report, with recommendations, was handed to the department on Tuesday.
He declined to give details, but the report is believed to confirm allegations published in the Sunday Times this year that R60 000 was paid by Zama into Nkuhlu’s account. At the time Nkuhlu was chairperson of the bid adjudication committee.
A spokesperson for the department said the report and recommendations would be studied carefully before any decision was taken on Nkuhlu’s future.
Marianne Merten reports that in Parliament’s 2002 Register of Members’ Interests released on Thursday former African National Congress chief whip Tony Yengeni finally declared the five million shares he holds in Zama Resources and admitted that the company’s suspended CEO Mcebisi Mlonzi paid R317 000 for an advert to deny wrongdoing in the heavily discounted purchase of his Mercedes 4×4, while continuing to pick up the tab for Yengeni’s legal costs arising out of a trial for his role in the arms deal.