The Strategic Fuel Fund (SFF) has successfully recovered $2,9-million paid to a company in terms of an ”irregular” contract for the sale of the SFF’s strategic stock, Minerals and Energy Minister Phumzile Mlambo-Ngcuka said on Monday.
Replying to a written question in the National Assembly by Ian Davidson (DA), she said the case in the High Court of Commerce, London, between the SFF and the company had been finalised in an out-of-court settlement.
The SFF’s legal costs in the case to defend itself against a bid to uphold a contract that involved the sale of its strategic oil stock in April 2000, totalled over R4,35-million, Mlambo-Ngcuka said.
Government believed the award of the contract to Highbeam Trading International and UK-based Trafigura was irregular, and therefore null and void, but the other parties insisted it was legally binding.
However, the SFF had already made a payment of R20,7-million in terms of the contract before the matter went to court. It was reported last year that the controversial deal, which a departmental investigation concluded had effectively privatised South Africa’s oil procurement function without government’s knowledge and without going to tender, was apparently brokered by former Central Energy Fund (CEF) chairman Keith Kunene and former SFF chairman Seth Phalatse.
The controversy forced the resignation of the SFF’s board of directors. On Friday, the Mail & Guardian newspaper reported that suspended SFF chief executive Renosi Mokate had been found guilty on most charges flowing from disciplinary steps brought against her in August last year.
Mokate was suspended after auditors of the SFF identified financial losses relating to oil-trading operations that fell under her authority. The CEF board said at the time it appeared that proper risk-management procedures had not been followed.
Mokate faced eight charges. These related to her management of certain oil-trading transactions, resulting in actual losses of R70-million, and potential losses of a further R71-million, the Mail & Guardian said.
The SFF undertakes oil trading on behalf of the CEF, and it was mandated to sell the crude oil reserves — stored at Ogies, Mpumalanga — of about 9,8-million barrels, valued at about R1,5-billion, and use the proceeds to buy better-quality crude to
be stored at the more accessible Saldanha Bay site.
On Monday, Davidson said he was ”astounded” at the SFF’s high legal costs to recover the money it had paid in the irregular deal. The whole debacle was a classic case of the minister taking affirmative action too far, and appointing people with questionable capabilities to handle a deal of this nature, he said. – Sapa