Fuel fund oil sale to be challenged in court
The Central Energy Fund (CEF) has asked the Western Cape High Court to set aside the decisions to conclude the agreements and the contracts that led to the sale of the country’s strategic fuel reserves at a huge discount.
The court papers, filed on March 12, lay responsibility for the controversial sale at the feet of the former acting chief executive of the Strategic Fuel Fund (SFF), Sibusiso Gamede, and the minister of energy at the time, Tina Joemat-Pettersson.
In 2015, in a deal that is at the centre of the court application, the SFF sold 10.3-million barrels of the country’s oil reserves for less than the going market rate. By law, the SFF must hold sufficient oil reserves to last the country for up to 21 days, equivalent to what was sold.
The deal has been under scrutiny since it was brought to light in 2016. Joemat-Pettersson told Parliament that it was not a sale but a rotation.
She was fired as energy minister in 2017 and replaced by Mmamoloko Kubayi, who said it was an illegal sale because proper procurement processes were not followed, nor was treasury approval sought. The CEF and its subsidiary, the SFF, said their application was late because they had first tried to reach an agreement with the representatives of the companies the oil was sold to. “It has now become clear that such an agreement will not be reached,” the papers read.
The founding affidavit by the chairperson of the CEF board, Luvo Makasi, states that Gamede did not inform the SFF board, the CEF board, nor the department of energy — under which both entities fall — that he was disposing of the country’s oil. Instead, Makasi claims that Gamede withheld the critical information from the board and even from Joemat-Pettersson, while he was busy hatching deals.
“It is clear that, when the SFF exco met on December 3 2015, its members were not aware of the extent to which Mr Gamede and minister Joemat-Pettersson had already given effect to the transactions,” he said. “It is also clear that neither Mr Gamede nor minister Joemat-Pettersson had any intention of disposing of the oil reserves through the mechanisms, processes and policies that the SFF exco was engaged in formulating.”
Makasi said, in September 2015, the SFF board was working with Joemat-Pettersson on the new strategic stock rotation policy. By October 2015, even though the SFF board had had numerous meetings on the policies, Gamede had not expressed any intention to sell the oil.
According to Makasi, by October 13 2015, Gamede had seemingly already decided that the reserves should be disposed of by a sale and subsequent repurchase process.
“He had also manifestly decided the process should be concluded through a closed procurement procedure. Gamede did not consult, or obtain approvals from, any other SFF employee, the SFF board, the CEF or the national treasury in making these decisions,” reads the affidavit.
According to the papers, Gamede sent letters to a handful of companies to provide proposals for the rotation of the stock. Gamede claimed that he undertook his own investigation into international best practices for stock rotation.
On November 11 2015, Gamede wrote to Joemat-Pettersson about a “request for selling of strategic stocks in Saldanha”. The minister approved it the very next day.
“It appears that Mr Gamede evaluated the bids sometime between November 26 and 30 2015,” said Makasi.
“I do not know the basis upon which Mr Gamede evaluated the various bids or the specification criteria he utilised. The SFF, CEF and the department of energy have no documentary record of Mr Gamede’s evaluation and adjudication process and no documentary record of any due diligence conducted in relation to the bidders or their bids.”
On November 30 2015, Gamede wrote to Joemat-Pettersson, requesting her approval for the sale of the oil reserves to Venus Rays Trade, Vitol, Taleveras and GNI.
He did not provide her with details of the number of barrels of oil that would be sold or the terms of their sale, nor the price or any security that would be provided.
He also allegedly falsely claimed that the “SFF has assessed the proposals”, creating the false impression that the SFF board had evaluated them. According to the affidavit, there is no record of the minister asking for clarity on the sale or proof of due process. Instead, she signed off on it.
“Minister Joemat-Pettersson was content simply to accept Mr Gamede’s evaluation. Indeed, there is no indication whatsoever that the minister was even in possession of the bids,” reads the affidavit.
The M&G could not reach Gamede and Joemat-Pettersson did not respond to requests for comment.