/ 5 May 2017

Editorial: Time for Tina’s oily residue to be mopped up

Agriculture Minister Tina Joemat-Pettersson.
Agriculture Minister Tina Joemat-Pettersson.

Mmamoloko Kubayi, the new energy minister, said in Parliament this week that an odd oil deal sanctioned by her predecessor would be investigated.

She further committed to taking legal action if the deal was found to have violated regulations.

The attorney general has already said the deal — which involved the sale of nearly all South Africa’s strategic oil reserves — will be investigated in the course of his 2015-2016 audit.

This 2016 deal can conveniently be dubbed Oilgate II (or is it III?), after the early 2000s shenanigans, revealed in this newspaper, that saw funds from the parties involved in a Nigerian oil deal transferred into the ANC’s election coffers.

As observers of this newest deal now wonder why and how it took place, in circumstances far from beneficial for South Africa, they are also asking whether any of these earnings may have found their way into the ANC’s coffers ahead of the 2016 local government elections.

We have no way to tell right now, but the first Oilgate forces some scrutiny here. After all, why were our oil reserves sold?

In May 2016, Business Day’s Carol Paton broke the story of the secret sale of South Africa’s strategic crude oil reserves, about 10‑million barrels’ worth, at a rock-bottom price.

At a time when the Brent crude price was in the range of $37 to $45 a barrel, the Strategic Fuel Fund sold the 10‑million barrels in a “closed tender” to energy traders Taleveras, Glencore and Vitol at $28 a barrel.

The then minister of energy, Tina Joemat-Pettersson, and the chief executive of the Central Energy Fund, of which the Strategic Fuel Fund is a part, claimed it was all just a matter of “stock rotation” and that the energy fund would be able to buy back the oil at any time.

This all smelled very fishy at the time.

First of all, the Central Energy Fund is not a shop, so why does it need to “rotate” its stock? And, even if it did (because, say, the oil was degenerating in storage), why sell almost all of it all at once? The sale left South Africa with less than a day’s worth of oil reserves — about 300 000 barrels for a country that uses up about 450 000 barrels’ worth every day.

The international standard of what is deemed prudent is 20 days.

Second, it should be clear that if, because of some kind of emergency, the Central Energy Fund suddenly had to buy back a few million barrels of oil from the company it had just sold it to, it would be doing so at a price higher than $28 a barrel, probably considerably more — which would simply enrich the original buyer and cost South Africa a few extra billion rands.

Naturally, the buyer was going to make billions anyway, even if it sold the oil a day later, because of the ridiculously low price at which it was acquired.

Third, if you’re rotating the oil, surely you immediately buy new stock? That didn’t happen.

So, when Strategic Fuel Fund chairperson Riaz Jawoodeen said in May last year that “it is a simple rotation at market prices”, it was a lie.

It wasn’t rotation; it wasn’t at market prices.

It may also have been a lie, this time by Joemat-Pettersson, when she said the deal was done with all due diligence by the Strategic Fuel Fund.

Further, she claimed she had “provided all the details and documents to the treasury and the auditor general to review all the transactions to see if there had been lapses or irregular actions”, and went on to “implore” those with information about malfeasance to “come forward” and report it.

She also dismissed as “gossip” any allegations about individuals who might have benefited from this huge windfall.

Then again, she also said the oil was safe at Saldanha, and there were claims it would not be sold out of the country — pretty much at the moment Bloomberg reported that Vitol was offering for sale four-million barrels then housed at Saldanha.

So it’s pretty obvious that we should take anything Joemat-Pettersson says with a pinch of salt (and that goes for the nuclear deal, too).

She has hardly shown herself to be an honest servant of the people.

We should be asking serious questions about everything Joemat-Pettersson did while in office and we should certainly be probing the oil sale, whether it’s individuals or the ruling party.

At least we can sigh with relief that Joemat-Pettersson is now out of office, so we will no longer have to bear her evasions and obfuscations or, for that matter, her tortuous poetic similes about fire-licking cows.

And the new minister is to be commended for taking the first steps towards meaningful action in dealing with this highly suspicious business.