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- The Central Energy Fund (CEF) is seeking to overturn the sale of 10.3 million barrels of the country’s strategic crude oil reserves in 2015.
- The sale occurred during the tenure of former mineral resources minister, Tina Joemat-Pettersson, who said it was sold as part of “stock rotation”.
- News24 look’s at what led to the sale and on what grounds the CEF wants it to be overturned.
South Africa’s Central Energy Fund (CEF) has headed to the Western Cape High Court, asking it to overturn a Strategic Fuel Fund (SFF) decision to sell 10.3 million barrels of the country’s strategic crude oil reserves in 2015.
This as the SFF, a wholly-owned subsidiary of the CEF, reached an agreement with Glencore, one of the eight oil companies the reserves were sold to, to have the sale of three million of the 10.3 million barrels set aside.
The sale of the country’s strategic oil reserves occurred during the tenure of former mineral resources minister, Tina Joemat-Pettersson, and was signed off by former SFF acting CEO, Sibusiso Gamede.
Fin24 reported that the barrels were sold, with no evident tender process, for less than R5 billion, considered well below the market value they were worth. The stock is estimated to cost R7 billion to replace.
The CEF’s argument is that the sale was illegal because it was not signed off by the boards of the SFF, the CEF, the Department of Mineral Resources or National Treasury.
News24 looked at what led to the sale and on what grounds the CEF is seeking to reverse it.
What led to the SFF selling South Africa’s strategic oil reserves?
In 2016, it was first reported that the SFF sold 10.3 million barrels of the country’s strategic oil reserves for R5 billion in 2015 and 2016.
The oil, which was supposedly sold as part of “stock rotation”, was sold for $28 (roughly R469) a barrel while the market rate at the time was around $38 (roughly R636).
By law, the SFF is mandated to hold sufficient oil reserves to last the country up to 90 days, the CEF told News24.
- Vitol Energy SA;
- Vitol SA;
- Venus Rays Trade;
- Taleveras Oil SA;
- Glencore Energy UK;
- Contango Trading;
- Natixis SA; and
- Vesquin Trading.
At the time, an under-fire Joemat-Pettersson told Parliament that it was not a sale, but “a rotation”.
However, a year later, her successor, Mmamoloko Kubayi-Ngubane, admitted that the controversial “rotation” of South Africa’s oil reserves in 2016 was, in fact, a sale.
In recent court papers, it was furthermore revealed that SFF CEO, Gamede, received mysterious payments into his personal accounts for facilitating the sale, the Mail & Guardian reported.
On what grounds is the CEF seeking to overturn the sale?
CEF spokesperson Jacky Mashapu told News24 that the group initiated legal action in March 2018 to have the sale of strategic oil reserves reversed.
“We believe that the sale was irregular because it was not done with the approval of the boards of the SFF, CEF, Department of Mineral Resources and Department of Treasury,” Mashapu said.
Daily Maverick reported that the CEF’s argument is that a fair solution to the sale contracts would be to set them aside and for the court to determine what the companies loss was in terms of the sale and be compensated accordingly.
During court proceedings last week, it was revealed that the SFF and global resources giant Glencore reached an “in-principle” agreement to reverse the sale.
“Glencore, which bought three-million barrels of oil, agreed that the sale was invalid. As part of this agreement, SFF would refund Glencore the money paid to SFF,” the CEF said in a press release.
“The SFF is committed to taking the necessary actions to ensure that the ownership of the reserves and the development of the energy sector remains in the hands of the country for the benefit of South Africans.”
South Africa’s Directorate for Priority Crime Investigation, known as the Hawks, has also launched a criminal investigation into the sale.