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[OPINION] SFF reserve sales: An act of grand corruption


There is a lot going on in South Africa right now. The ANC is tearing itself apart with factional battles and we are reminded of the deep wounds of our past and the inequality of the present almost daily. Stories of corruption and waste by those in power are sadly common-place. Yet, the sale of oil reserves and the many unanswered questions reveal a brazenness which is startling.

Recently, new Minister of Energy Mmamoloka Kubayi directly contradicted the statement former Energy Minister Tina Joemat-Pettersson had made to Parliament regarding the sale of South Africa’s strategic oil stock.

In May last year there were revelations that Joemat-Pettersson had sold off Strategic Fuel Fund (SFF) reserves without the go-ahead of former Finance Minister Pravin Gordhan. Joemat-Pettersson, whose questionable competency and ethics were already the subject of a Public Protector report, had a well-worn reputation for avoiding accountability. She was infamously reticent to discuss nuclear plans in Parliament or to address serious issues plaguing her department and highlighted by the Auditor-General.

There were key questions to which there were no answers then - or now, in fact. Why did the sale of crude oil stocks (10 million barrels to be precise) at $29 a barrel in December 2015 take place at a time when the market was in what is known as ‘contango’, that is, that the current price of a commodity, such as oil, is lower than prices for delivery in the future. In other words, it was no time to sell.

By the time the controversy hit, oil had reached $50 a barrel. So, whoever bought this oil locked in some pretty decent profits probably amounting to at least tens of millions of dollars on the futures market on the day of the sale. The problem was, of course, that Joemat-Pettersson denied that there was a sale, telling Parliament that it was simply a strategic rotation of unsuitable oil stock. Kubayi has now confirmed that this was not the case and oil reserves were sold off. Kubayi also confirmed to Parliament that the sale had been made without the approval of the Central Energy Fund (CEF) board. She has asked that action be taken against those who approved the sale, though some of them are no longer at the CEF.

The revelations are shocking not only because there was no sign off from the Finance Minister of the CEF Board but especially because the former minister had specifically told Parliament that no sale had taken place. How is it possible that she did not know about the sale, given that she specifically stated at the time that nothing such as this would happen without her knowledge? That leaves only one conclusion: that Joemat-Pettersson lied to Parliament and the people of South Africa in her reply. Will anyone pay the price for this act of grand corruption?

Answers are required. Who benefited from this action and why was Gordhan sidelined and the Public Finance Management Act (PFMA) breached? If one is charitable, it seems like an act of gross incompetence, or at worst, one smells a whiff of corruption, not unlike the arms deal perhaps? The PFMA stipulates that before a public entity concludes the “acquisition or disposal of a significant asset”, the accounting authority for the public entity must “promptly and in writing inform the relevant treasury of the transaction”. That did not happen and has left South Africa vulnerable.

But what happens now? Who is held to account and how? Of course, Joemat-Pettersson has resigned as an MP after Zuma reshuffled his Cabinet and she lost her job. Any parliamentary process would thus preclude her. Tembi Majola was Deputy Minister of Energy at the time of the sale and remains deputy minister. The Executive Members’ Ethics Act 82 of 1998 and its Code applies to ministers and their deputies. If Majola had repeated the untruth told by Joemat-Pettersson, then surely she has acted in a way which ‘compromises the credibility or integrity of government’. Such an alleged breach ought to then be investigated, upon receipt of a complaint, by the Public Protector.

In any event, notwithstanding the Code of Ethics for Members of the Executive, the Public Protector has the power to ‘investigate any conduct in state affairs, or in the public administration in any sphere of government, that is alleged or suspected to be improper or to result in any impropriety or prejudice…’ Clearly the sale of South Africa’s oil reserves would fall into the category of ‘prejudice’, if not ‘impropriety’. The Auditor-General ‘must audit and report on accounts’ of ‘any other institution or accounting entity required by national or provincial legislation…’, in terms of s188 (1) (c ) of the Constitution. The Auditor-General then submits these reports to Parliament and all reports ‘must be made public.’

The CEF falls squarely into this category given that it is a state-owned energy utility reporting to the Department of Energy. What oversight did its board have and who exactly took the decision to sell the oil reserves? The Auditor-General would not be able to deal with that however, but any decisions made by the CEF to sell oil reserves would have had to be in terms of the PFMA. In November last year the CEF board and management appeared before Parliament but seemed to shrug off the sale of oil reserves.

In terms of the PFMA, national assets may not be sold off without the approval of National Treasury. Minister Kubayi has committed herself to transparency and her first step ought to be to investigate how that decision was made and to institute an indepth investigation. If the president was curious enough he would have done so initially as clearly there has been a cover up of the facts. In addition, the CEF board needs to account both to Parliament and to Kubayi on what happened, given previous unsuccessful attempts. A breach of the PFMA of course attracts criminal sanction. In addition, the Prevention of Corrupt Activities Act 12 of 2004 creates the offence of corruption and attempts to prevent the illicit acquisition of wealth. Should it be found that the former minister or anyone else may have been involved in an act of corruption, it would attract a criminal sanction. Any investigation would have to get to the true facts in this matter.

If Parliament itself had any interest in good governance and ascertaining who approved what, it would form an ad hoc committee as a matter of urgency to look into this matter. Whether it has the appetite or independent-mindedness remains to be seen.

At present all we know is that the sale of oil reserves took place without National Treasury’s approval and that some individuals and companies benefited handsomely from this secret sale of national assets. Moreover, that it appears that the former minister then lied about what had happened and went out of her way to avoid the truth from emerging. If such possibly criminal conduct remains unexamined, it would yet again signal the Zuma’s administrations complete disregard for the law and its constraints on South Africa’s strategic and economic interests.

Judith February is based at the Institute for Security Studies. Follow her on Twitter: @judith_february

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