When President Thabo Mbeki wrote to his Nigerian counterpart in 1999 to support an application to buy crude oil from that country, the wording was ambiguous. When he responded last week to the apparently fraudulent diversion of the resulting contract, it only added to the confusion.
The Mail & Guardian first broke news of the scandal in late May, saying Mbeki had lobbied for the contract; that the deal had been portrayed publicly as a “government-to-government” arrangement between South Africa and Nigeria; that it had been diverted from the intended South African beneficiary company to an offshore company by the same name; and that neither oil nor revenue had reached the South African state or public.
The Government Communication Information System (GCIS) was quick to lambaste the M&G. In a statement it made no mention of Mbeki’s role, acknowledging instead that of Minister of Trade and Industry Alec Erwin (who the M&G had said had carried a letter from Mbeki to Nigerian President Olusegun Obasanjo).
The GCIS said: “Erwin did engage the Nigerian government after its return to democracy in discussions on oil supplies to South Africa. This was done as part of building bilateral economic relations … To try and create an impression that there was some specific deal that was being arranged and that the minister acted as some kind of ‘courier’ is both inaccurate and mischievous in the extreme.”
The M&G had been neither inaccurate nor mischievous, as subsequent developments show. Last week, in response to a Democratic Alliance application under the Promotion of Access to Information Act, the Presidency released the letter Mbeki had written to Obasanjo (couriered by Erwin) in July 1999.
Mbeki’s letter showed that a “specific” deal had been arranged: the South African Oil Company (SAOC), which, in spite of its official-sounding name is a private company, had applied for an allocation from the Nigerian state oil company (the NNPC) and Mbeki had written to Obasanjo to support the application.
Some aspects of the letter, as well as explanations offered by the Presidency, require interrogation:
The letter fudged whether it was an application by South Africa or by a private company. Apart from the fact that the company name — the South African Oil Company — had the ring of a national oil company, Mbeki associated the country and government with the bid.
He wrote that “the government of South Africa supports the SAOC application and believes if granted the request it will further enhance the already good trade relations between our two countries” and that “the approval of a long-term crude oil contract for the Republic of South Africa [italics added] will be historic, as the RSA has never applied for a crude oil contract from Nigeria before”.
The language could be interpreted either way: South Africa applies and a company (which may or may not be a state company) will perform the contract for the country; or the government merely believes that it will be good for the country and bilateral trade if this private company is awarded the contract.
Other correspondence published by the M&G states, and this has not been denied, that the SAOC’s actual application was also “submitted through the office of the President of South Africa”.
So who can blame the NNPC for its “mistake” when it made the tender awards a month later and sent a letter of confirmation not to SAOC but, as reported by the M&G, to the South African high commission in Lagos, and addressed not to SAOC but to “the Republic of South Africa”?
And who can blame the media, and even the likes of Minister of Minerals and Energy Phumzile Mlambo-Ngcuka, when they repeated the NNPC line that this was “South Africa’s” or a “government-to-government” contract?
Why should there have been an attempt to typify the deal as government-to-government? (A feasible explanation is that the SAOC would not have qualified for the allocation on its own steam.
The NNPC tender criteria had specified that recipients should be recognised large-volume international traders or refiners, neither of which described the SAOC or its United States-based parent company, Camac.)
When Mbeki endorsed the SAOC’s bid, the company did not exist in that form; it was called Camac International Trading SA, and only six weeks later, after the NNPC’s award, did it scramble to start a process (which took months to complete) to obtain the name SAOC from the companies registrar in Pretoria.
Despite the fact that it did not have legal title to the name, the SAOC used a letterhead reflecting the new name and directors who had not been formally registered. How did the presidency come to support a company that a rudimentary due diligence would have shown was not what it purported to be?
In his motivation to Obasanjo, Mbeki wrote that “South African refineries have a capacity of approximately 600 000 barrels of crude oil processed a day, all of which is currently imported from the Middle Eastern countries”.
In fact, Nigeria at the time was a major source of crude to South Africa, via other private concerns. In 1997, for example, it was the fourth-largest supplier to major South African refineries. Why was Mbeki’s appeal to Obasanjo not based on the truth?
In a parliamentary answer to the DA a month ago and again, through his Director General, Frank Chikane, last week, Mbeki said he had supported the bid of the SAOC as a “South African company”.
As reported by the M&G, the contract was signed not by the South African SAOC but by its namesake in the tax-haven Cayman Islands. The US-based Camac group, which majority-owns this entity, has formally stated that the Cayman version had been the applicant. Mbeki and Camac’s versions are in direct conflict. Why?
Mbeki, through Chikane last week, washed his hands of the fact that neither oil nor revenue reached South Africa, saying: “It was not for the president to follow the process of what happens after.”
Yet it was reported in Nigeria that when the contract was up for renewal after the first year a top Department of Minerals and Energy official, Thibedi Ramontja, had applied to the NNPC to increase “South Africa’s” allocation — which happened. Ramontja’s intervention has not been denied by the South African government.
After a year it should have been clear that South Africa was not benefiting from the deal. Who instructed Ramontja to plead the case of a Cayman company majority-owned by a US-based company when there was no benefit to South Africa, and why?
There has been speculation that the SAOC was favoured by the South African government because of a kickback to the African National Congress. Both Mbeki and the ANC have sidestepped the question (Mbeki saying that “the president does not involve his office in matters relating to benefits accruing to political parties” and the ANC referring the question to the SAOC). Why not answer an allegation that should be easy to deny if it is untrue?
The beneficiary company in the Caymans has a 25% shareholding which is undeclared — a secret beneficiary. This may be key to the affair, but Camac has stated that it is “irrelevant”. Why?
Until these questions are answered, the M&G can hardly be accused of being mischievous.