Eskom gave PetroSA special request

Last week, Eskom chairperson Jabu Mabuza revealed that the utility had spent R4.5-billion in six months on diesel. Its budget for diesel in the current financial year is R666-million. (John McCann/M&G)

Last week, Eskom chairperson Jabu Mabuza revealed that the utility had spent R4.5-billion in six months on diesel. Its budget for diesel in the current financial year is R666-million. (John McCann/M&G)

In Eskom’s bid to keep the lights on late last year, it instructed the country’s oil company, PetroSA, to buy diesel from two companies without following proper procurement processes.

But, significantly, the two companies from which PetroSA bought more than 32-million litres of diesel, European oil giant Vitol and its local empowerment partner, Vesquin, are at the centre of the controversial sale of South Africa’s crude oil emergency reserves.

That 2016 sale, which has left the country without strategic oil reserves for emergencies, is the subject of a Hawks investigation after it was discovered that the Strategic Fuel Fund’s then acting chief executive, Sibusiso Gamede, flouted procurement processes in the sale.

Part of the investigation involves an unexplained R20-million that was deposited in attorney Gamede’s dormant trust account at the time the deal was being negotiated and concluded.

Forensic investigations into the sale of the 10-million barrels of crude at rock-bottom prices to three entities — Vitol/Vesquin, Venus Trade/Glencore and Taleveras — uncovered that Gamede was in direct talks, even negotiating prices, with the buyers on his own during the evaluation and adjudication stages of the deal.

The Central Energy Fund, the mother body of PetroSA and the Strategic Fuel Fund, is in court trying to reverse the sale and stands to lose billions of rands if it has to replenish the emergency stocks at current oil prices.

Vitol spokesperson Andrea Schlaepfer said the company had followed the appropriate processes when purchasing the crude oil from the fund.

PetroSA spokesperson Tumoetsile Mogamisi this week defended the diesel transaction, saying the court action did not stop it from doing business with Vitol, and the transaction was in line with its emergency procurement rules.

But internal PetroSA memos about the transaction, seen by the Mail & Guardian, suggest there were internal fears that the company was being compromised by Eskom’s very specific request.

In this latest deal, Vesquin received close to R80-million for the diesel.

In a memo dated December 12, written by Themba Joseph, PetroSA’s vice-president of trading, supply and logistics, he said the company informed Eskom that its request to purchase the diesel based on an emergency meant that they would be flouting its procurement processes and not following tender process.

“Eskom is not able to trade directly with Vesquin. This deal therefore did not follow the normal PetroSA purchasing processes of tendering,” he said.

Last week, Eskom chairperson Jabu Mabuza revealed that the utility had spent R4.5-billion in six months on diesel. Its budget for diesel in the current financial year is R666-million.

The M&G understands that this is not the first time Eskom approached PetroSA with an emergency request for diesel. This has put added strain on PetroSA’s ability to provide diesel for the utility.

Lorna Tlhako, a trading manager at PetroSA, said in a memo which the M&G has seen: “As it stands, Eskom has not indicated what their January requirement is, even though PetroSA has been requesting for the same. PetroSA and Eskom need to engage such that Eskom can be assisted to manage their diesel delivery costs.”

Tlhako said the entity had already purchased diesel for Cape Town but “indicated that additional volume purchased for Cape Town must be utilised in Mossel Bay as that is where Eskom will be utilising higher diesel volumes to meet electricity demand”.

Eskom told PetroSA it had sourced diesel from Vesquin, to be delivered between December 12 to 16 last year. PetroSA had to close the deal with Vesquin on the utility’s behalf.

Mogamisi said PetroSA bought diesel to augment its stock, which was negatively affected by the prolonged shutdown and Eskom’s emergency demand at the time.

He added that PetroSA’s trading policy, which also caters for emergency procurement, was followed and they chose Vesquin from their database.

When Eskom was asked why they had directed PetroSA to buy from a specific supplier, spokesperson Khulu Phasiwe said: “Eskom has a contract with PetroSA; we do not have information on suppliers of PetroSA.”

But when pressed for further comment, Phasiwe confirmed that Eskom “requested PetroSA to make an arrangement with Vesquin to secure 11-million litres of diesel because PetroSA did not have sufficient diesel”.

An insider with knowledge of the deal with the power utility said PetroSA had to secure the diesel otherwise there would have been load-shedding at the time.

“PetroSA was contracted to supply diesel to Eskom. It was its responsibility to secure diesel for Eskom from any supplier. PetroSA cannot blame Eskom for not following its internal processes. Eskom was going to load-shed without diesel,” said the insider.

Regarding the PetroSA/Eskom deal, Schlaepfer said she was not aware of any restrictions that prevented it from trading with Eskom and added: “It would be inappropriate for Vitol to comment on the detail of its commercial relationships.”

This article was edited to reflect that comments made by Lorna Maseko were done so in a memo.

Athandiwe Saba

Athandiwe Saba

Athandiwe Saba is a multi award-winning journalist who is passionate about data, human interest issues, governance and everything that isn’t on social media. She is an author, an avid reader and trying to find the answer to the perfect balance between investigative journalism, online audiences and the decline in newspaper sales. It’s a rough world and a rewarding profession.
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