Minerals and Energy Minister Phumzile Mlambo-Ngcuka’s cancellation of a corrupt oil contract has been vindicated in a London out-of-court settlement. But her husband, National Director of Public Prosecutions Bulelani Ngcuka, still has to come to the party by prosecuting the men who allegedly paid and took bribes to facilitate the deal.
The Mail & Guardian was the first, in November 2000, to report the sleaze surrounding the extraordinary R1,5-billion deal in which the Strategic Fuel Fund Association (SFF), the state body that maintains South Africa’s strategic crude oil reserves, signed over a large part of its duties to a Bahamas-registered company, High Beam Trading International. High Beam was a joint venture between international oil trading firm Trafigura and local interests led by businessmen Moses Moloele, Dominic Sewela and Vincent Msibi.
In terms of the deal High Beam had to help SFF sell off the strategic stock of crude held in a disused mine at Ogies, near Johannesburg, and replace it with a better grade of crude at the SFF’s more accessible Saldanha tank farm. But there were glaring problems with the transaction, including that the SFF had ignored Mlambo-Ngcuka’s directive to do it in-house; that there had been no open tender; and that High Beam had allegedly stood to make profits way above the norm.
The final straw was when Mlambo-Ngcuka and her department learned that wads of cash had changed hands after the deal was signed. The minister repudiated the contract in December 2000 and axed the entire SFF board as well the chairperson of the SFF’s holding company, the Central Energy Fund (CEF).
High Beam and Trafigura refused to accept Mlambo-Ngcuka’s decision to cancel, challenging it in a London arbitration court. Trafigura suggested at the time that the bribery claims had been manufactured to justify the minister’s action.
“We can only assume that these allegations are part of a smokescreen designed to damage our reputation in South Africa,” the company said.
Now, however, the news is out: late last year in London, Trafigura/High Beam folded on their most important demands, including that the contract be regarded as valid and that more fees were due. Instead, in an out-of-court settlement that vindicates Mlambo-Ngcuka’s position, they agreed to repay $2,9-million. That is the entire fee the SFF had paid to High Beam by the time the minister repudiated the contract.
Secrecy clauses prevented the earlier release of the news, but Energy Compass, an international trade publication, confirmed some details last month. It quoted a joint statement by the parties: “The set of circumstances that led to the cancellation of the contract are regrettable, but a sufficiently close relationship was built to the extent that participation by Trafigura in future contracts involving the SFF or its sister companies will not be affected.”
From the context it is clear that Trafigura/High Beam backed down among other reasons because of convincing evidence of the illicit payments. Often, companies proven to be guilty of bribery are barred from further state contracts, but relenting on that seems to be the price Mlambo-Ngcuka’s representatives paid to secure the settlement.
But if the evidence was convincing enough to force settlement in a civil dispute, where are the prosecutions? Sipho Ngwema, spokesperson for Bulelani Ngcuka’s National Prosecuting Authority, in the second week of March said a criminal investigation “is done with … save for one or two things that need to be tied up”. A decision on whether to prosecute would follow, he said.
The prosecuting authority has, for some two years already, been in possession of affidavits from two of those involved, both of whom admitted receiving cash.
One affidavit is from top businessman and Armscor board member Seth Phalatse. As the then chairperson of the SFF board, he had signed the deal with High Beam. His statement alleges that Keith Kunene, then CEF chairperson and an icon of black business, had divided $60 000 between the two of them and Dukes Zondi, then SFF procurement head.
Kunene allegedly told them the money had come from the SFF’s “new partners … as an initial token of appreciation of the awarding of the contract to [High Beam]. Kunene placed a white envelope of cash on my lap. Kunene further mentioned that there was an additional R12-million to be shared between the three of us that would be deposited in a foreign bank account … which we could access once the dust had settled.”
Phalatse eventually returned the money and helped blow the whistle. In the beginning of March he said: “I still stand by what I said in that statement.”
Zondi has also made an affidavit confirming the payments. But High Beam’s Moloele, who allegedly facilitated the payments, denies it. He said: “My position has never changed; that I know nothing about the allegations.”
With Phalatsi and Zondi almost certain to act as state witnesses, Kunene, who is understood also to dispute the allegations, and Moloele are the likely targets of a prosecution — if Bulelani Ngcuka follows the lead of his wife.