The Central Energy Fund (CEF) is finally setting up the long-awaited team that will investigate how the Strategic Fuel Fund (SFF) sold almost every drop of the country’s strategic oil at a fraction of its value and with the approval of former energy minister Tina Joemat-Pettersson.
In December 2015, the SFF sold 10-million barrels at $28 a barrel in a closed tender without permission from the treasury. At the time the price per barrel on the market was about $52.
Mmamoloko Kubayi, who replaced Joemat-Pettersson in President Jacob Zuma’s March 2017 Cabinet reshuffle, revealed a few weeks after she took up office that her predecessor had misled Parliament.
“I hear the concern about the committee being misled and I take responsibility and apologise for that,” said Kubayi. “I apologise to members, I apologise to Parliament for that, I hope it was not intentional. I hope colleagues were given wrong information.
“The money is in the accounts of SFF of the sale. How SFF explains this is that that’s how they became aware that there was a transaction. They saw the money in their account and asked what’s the money for.”
This was Kubayi’s first appearance before the portfolio committee where she asserted that she would investigate the matter and hold accountable those liable for the sale.
Despite her promises that criminal charges would be pressed against those involved in the oil deal the investigation did not start. Seven months later, in October, Zuma again reshuffled the Cabinet. David Mahlobo was moved from the state security ministry and replaced Kubayi as energy minister.
This week the Mail & Guardian understands that the CEF has finally drafted the terms of reference that will guide a team of forensic investigators into instances of potentially corrupt and irregular activities identified by the fund.
The forensic probe could be completed in the next six months with a report out as early as July. The investigation will look into the circumstances surrounding the negotiations and consequent contracts concluded in respect of the sale of 10-million barrels of the strategic crude oil stock by SFF.
The terms of reference say the investigation team will:
- Interview any individual whether internal or external of SFF to seek clarification on any matter that will arise from the investigation;
- Assist in any civil litigation process, including expert audit reports, trial preparation and expert witnesses’ testimony;
- Assist in providing criminal case management from institution to finalisation in respect of any recovery that the investigation may recommend; and
- Identify any suspicious or nefarious activities and quantify any irregular or fruitless and wasteful or corrupt expenditure.
In December 2015, Joemat-Pettersson and the SFF chief executive at the time, Sibusiso Gamede, signed off on the sale of the country’s stock oil reserves.
For months Joemat-Pettersson claimed it was simply stock rotation.
Yet more than 10-million barrels of oil were sold to three companies, Taleveras, Vitol and Glencore, which were selected without following any procurement process or approaching treasury. Gamede claimed that because it was not a sale and only “stock rotation” there was no need to inform the treasury.
Joemat-Pettersson also spun the same line, saying that the companies would not move the oil and instead SFF would make handsome returns on the storage contracts it had struck with the three buyers.
The M&G understands that those who left the energy department after the sale will be called to answer questions and this will include Joemat-Pettersson and Gamede.
The investigation will also look into how the SFF lent Enviroshore Trade and Logistics 300 000 barrels of the country’s oil.
The small oil solutions company was contracted to recover fuel that had been stored by the apartheid government at the Ogies coal mine in Mpumalanga. The M&G understands that, as of December 2016, the oil had still not been returned and the SFF had simply disposed of that state asset.
In 2016, the CEF commissioned an investigation by law firm Allen & Overy, which reviewed several fuel trading and sale contracts that had been flagged for irregularities.
The report, which is the foundation of the forensic investigation, had been submitted to the energy department but, since December 2016, had been gathering dust on the ministers’ desk.
When the M&G asked about the investigation’s terms of reference and the establishment of the forensic team the CEF’s spokesperson, Jacky Mashapu, said the fund could not make any statement.
“The questions you have raised are subject of internal investigation and processes. For now, CEF will not make any public statement on the matter, until we have exhausted our internal process,” he said.
The M&G understands that the leaders of the investigation will be appointed this week and the probe is expected to be finalised by July: the terms of reference state that “recommendations to the minister of energy [must be made] periodically or as agreed and report within six months of appointment”.