Public life ends, by definition, where public officials go ostrich. When the people we elect to manage our nation’s affairs refuse to account to us they break the pact of the ballot box. So it has been with the oil scandal.
A month ago the Mail & Guardian told how for the last four years a lucrative crude oil contract allocated by Nigeria to South Africa — described as a government-to-government deal — has benefited none but a private company registered in the Cayman Islands. Answers are due, but the silence has been proverbially deafening.
What, some have asked, is wrong here? It may help to recap.
Crude oil is Nigeria’s national asset and dominant export. There is intense competition among international oil companies for contracts to buy crude from the Nigerian National Petroleum Corporation (NNPC), the state oil company.
In 1999 President Thabo Mbeki lobbied directly with his Nigerian counterpart, Olusegun Obasanjo, for such a contract. The NNPC complied, allocating a substantial 55 000 barrels a day to “the Republic of South Africa”. And after reported further lobbying the following year by a senior Department of Minerals and Energy official, the contract size was more than doubled to 120 000 barrels a day.
What should South Africa, or rather the public officials we elected to manage our nation’s affairs, have done with the allocation? Simply, they should have used it in a way that benefited South Africa.
Most naturally they could have assigned it to the Central Energy Fund (CEF), which holds South Africa’s state oil assets. The Strategic Fuel Fund Association (SFF), a company within the CEF group, could have dipped into it to augment our country’s crude reserves stored at Saldanha Bay. (In November 2001 SFF bought 2-million barrels of Nigerian crude on the international market to replenish reserves. SFF may have obtained it more cheaply had it had access to the Nigerian allocation.)
What was left of the allocation the CEF group could have traded, or on-sold to a private company, for profit. That would have strengthened the CEF bottom line. As CEF is a national asset, the public good would have been served.
An alternative option might have been to assign the allocation not to CEF, but to a private, South African company (preferably an empowerment company) after a transparent selection process. Publicly desirable objectives such as empowerment and an increase in the country’s revenue base would have been achieved.
None of this happened. What did?
Enter Camac, the United States-headquartered oil services group owned by Nigerian-American Kase Lawal and family. Camac created two companies by the same name — South African Oil Company (SAOC) — the one registered in South Africa and the other in the Cayman Islands, an offshore haven where secrecy laws facilitate corporate anonymity and tax avoidance.
Some time after the NNPC offered the allocation to “the Republic of South Africa” on August 16 1999, the Cayman-registered version of SAOC stepped in to sign.
But that may not have been the original intention. Two days after the August 16 offer, the local version of SAOC (at the time urgently trying to have that name formally approved by the registrar of companies in Pretoria) had written to the NNPC to thank it for the allocation. The letter also referred to “our application submitted through the office of the President of the Republic of South Africa”.
So it seems that Mbeki, or at least his office, knew that SAOC and not the South African state would benefit. The Presidency might not have known of the subsequent switch to the Cayman-registered company, but either scenario is deeply problematic.
If the Presidency thought the contract was going to the South African version of SAOC, it might have justified it on the grounds that a local company with empowerment credentials was to benefit.
Indeed, Lawal had brought empowerment partners into the company: shares were earmarked for Provincial and Local Government Minister Sydney Mufamadi’s wife, Nomusa; Eastern Cape Premier Makhenkesi Stofile’s brother-in-law, Hintsa Siwisa; a charity headed by Stofile’s wife, Nambita; a company co-owned by Stofile’s sister-in-law, Nosipho Damasane; a company in which Limpopo Premier Ngoako Ramatlhodi’s wife, Mathuding, had a stake; and finally Women’s Development Bank Investment Holdings, its beneficiary trust chaired by First Lady Zanele Mbeki.
This is problematic for conflict-of-interest reasons, for how does one justify the expense of state effort, not least the president’s personal efforts, to benefit a select group that reads like a who’s who of interests close to the ruling party?
The alternative, that the Presidency knew the Cayman version of SAOC would sign the contract, is equally problematic. Why secure a contract for South Africa only to have it taken up by a company that, in spite of its name, pays not a cent of taxes in South Africa?
But let’s hear the other side: Camac and South Africa’s Government Communication Information System have suggested that the allocation was never intended for South Africa; and that SAOC had won it fair and square from the NNPC. Besides, they maintained, what’s wrong with a little political lobbying in the interests of bilateral trade?
They’re right, and wrong. They are right in the sense that yes, public officials do lobby abroad for the commercial interests of local companies. This is premised on the understanding that the local economy or bilateral trade relations are strengthened; a public good. But this argument becomes rickety when the outcome is considered: SAOC Cayman, which signed the contract, was not South African; the oil and the revenue stayed offshore; the local economy did not benefit; bilateral trade was unaffected.
But where they are dead wrong is the suggestion that this was an ordinary commercial deal. It was not. Neither the two SAOCs nor their parent company, the US-headquartered Camac, would have won the contract on commercial terms.
The NNPC had earmarked most of its allocations to go to large-volume international traders and refining companies, neither of which described Camac, SAOC Cayman or SAOC South Africa. But the NNPC did make a handful of allocations to governments. Recently the NNPC confirmed that it regarded the South African contract as “government- to-government”.
The only conclusion on the available facts is that the South African government reassigned, or allowed to be reassigned, South Africa’s right to Nigerian oil to SAOC. Something that was of value to the South African state and public has benefited neither.
Why? Before the M&G first published the story a month ago, Mbeki’s office said the president would respond once he had investigated the facts. Neither Mbeki, nor the line-function Ministry of Minerals and Energy, has offered any explanation since.
In the absence of official response, gossip flourishes. Scenarios from the rumour-mill include that the ANC treasury or an individual politician gets a cut. There are some markers pointing in this general direction.
Miles Nzama, an ANC fund-raiser, is listed as a director of SAOC South Africa. Nzama’s principal, ANC treasurer-general Mendi Msimang, has refused to say whether his party benefits.
And then there is the mystery quarter-share. SAOC South Africa is 75% owned by the Camac group and its local empowerment partners. SAOC in the Caymans is 75% owned by the Camac group. In both countries 25% is not declared. On a conservative estimate the deal has generated a profit of R48-million over the last four years: R12-million for the mystery shareholder.
If the gossip is accurate and the ANC or an individual politician benefits, part of an asset allocated South Africa has gone to a partisan or personal interest. There is only one word for that: kickback.
The public officials we elected to manage our nation’s affairs owe an explanation lest the gossip stands.