SPECIAL REPORT: How former fuel fund chief and global traders raided SA's oil reserves
Cape Town - The Strategic Fuel Fund (SFF), a subsidiary of the Central Energy Fund (SEF), reached an agreement this week for a draft out-of-court settlement with resources conglomerate Glencore in a matter that was heard before the Western Cape High Court’s Judge Owen Rogers on the last day of a three-day long virtual hearing where implicated parties were shown to have been involved in the improper handling of the nation's oil reserves.
The companies mentioned in the special report, in court, were shown to have been intricately involved in the oil reserve saga which took place between 2015 and 2016, where South Africa’s oil was sold illegally to several global oil traders at rates which were significantly below market value.
The sales were immediately halted in 2016 following the discovery of the illegal oil deals.
The oil reserves that were sold at low market prices were supposed to be kept as a safeguard for the country in times of an emergency and the sales went against government’s policies.
The state-owned SFF argued in documents that its former chief executive, Sibusiso Gamede, unlawfully concluded a series of agreements which resulted in the disposal of the country’s oil reserves and added that it was sold without proper mechanisms put in place for the rotation or for SFF to repurchase the oil reserves should a crisis occur in South Africa.
At the time, the market rate on oil was $38 a barrel but was being sold for $10 less to oil traders, seeing approximately 10.3 million barrels of the country’s strategic oil reserves being sold unlawfully and at a pittance.
Gamede, who did not inform the SFF board that the oil had been sold until a year later, also received deposits of more than R20 million into the trust account of his law firm Gamede Attorneys, at about the same time as the oil trades, the court heard.
According to further evidence in court papers, payments to his trust account included R300 000 from Skydeck and R2.6 million from Olica-score, among others. The Hawks are currently investigating the deposits made to Gamede, but not many details have been released to the public.
However, Rogers on Tuesday said that Gamede was the only person who did not give a reasonable explanation on the findings to date, while all the applicants and respondents had done so.
Independent Media could not get hold of Gamede for comment after several calls and emails.
Investigations also show how South Africa's oil was sold for less than R5 billion to several oil traders while the stock cost R7 billion to replace. The companies involved in the matter are now suing the state for losses.
Corporate affairs manager for CEF Jacky Mashapu explained in a statement that Glencore, which bought three million barrels of oil, admitted that the sale was invalid.
“As part of the agreement, SFF will refund Glencore for monies paid to SFF. The SFF took the matter to the WC high court to seek a declaratory to set aside the sale of the country’s strategic crude oil reserve which is currently underway.
“We are happy that Glencore has agreed to return what belongs to the country and our fate now belongs in the judge’s hands,” he added.
The companies who benefited from the bargain price included Vitol Energy SA, Vitol SA, Venus Rays Trading, Contango Trading, Taleveras Oil SA, Vesquin Trading, Glencore Energy UK and Natixis SA.
In counter arguments, some of the companies involved claim to have suffered financial losses due to the transactions and are calling on Rogers for an order awarding them with compensation.
However, evidence presented to the court proved that the companies knew the contracts presented to them were suspicious and unlawful.
Outa steps in to assist court
The Organisation Undoing Tax Abuse (Outa), who stepped in as an amicus curiae (friend of the court) to assist in the matter, stressed the importance of prioritising public interest over company profits.
In a statement, Outa said the reserves were arranged by Gamede and that the SFF and CEF management and boards were not aware of the deals until they were signed.
“There was no public tender process, no bid specifications, contracts were hidden even from the SFF and CEF management and boards and the National Treasury, and the oil was sold below market value."
Outa, in their findings, said that half of the oil sold was Basrah Light crude and about half Bonny Light, and pointed out how Bonny Light is more commercially valuable, cheaper to refine and more environmentally friendly.
The sale brought in $280 million (around R4.6 billion), seeing three million barrels of Bonny crude oil sold to Venus Rays Trade which was then resold to Glencore for $90 million (around R1.4 billion). Another three million barrels of Basrah crude was sold to Vitol for $78 million (around R1.2 billion) and two million barrels of Basrah and two million barrels of Bonny sold to Taleveras which was resold to Contango for $112 million (around R1.8 billion).
Outa pointed out that there were other deals as well which included three million barrels that were sold on 20 January 2016 to Vesquin Trading, which was not a buyer approved by the minister. Vesquin then sold these back to the SFF.
“Sometime in 2015/16 the SFF loaned 300 000 barrels believed to be the rest of the 10.3 million barrels of the reserves to a company called Enviroshore, which failed to return them. The SFF subsequently wrote off R60.402 million for this loss, according to its annual reports,” Outa said.
Outa argued that Gamede’s misconduct with the traders included the fact that Vitol proposed to Gamede the requirements of the request for proposal (RFP) and pointed out that:
* Vitol was permitted by Gamede to change its proposal after they submitted and implored him (Gamede) to “move quickly” and to close the deals.
* Venus was permitted to comment on the draft invitation before it was sent to traders, but changed the purchase price of the oil with Gamede on three occasions before sending him a letter of credit after he had informed them that the contracts had been put in abeyance.
* Taleveras and Gamede amended the sale agreement after Gamede informed them (Taleveras) that the transactions were placed in abeyance. Taleveras made payments into the trust account of Gamede’s dormant legal practice.
* The invoice submitted by Gamede is questionable, and purportedly reflects work done a few weeks/months prior to the awarding of the contract when Gamede was in full-time employment with SFF.
* Taleveras secured a quid pro quo arrangement to Gamede in exchange for not suing in terms of 2015 agreement and proposed that it be awarded oil contracts.
Outa also stressed the involvement of the traders:
* Vitol was improperly involved in the design of the RFP, was permitted to change its proposal after submission, was favoured, had a conflict of interest and did not conduct due diligence.
* Venus was improperly involved in the design of the RFP, the price of the oil kept changing and Venus ignored the notice.
* Glencore contracted with SFF and Venus despite the red flags, and Glencore failed to act with due diligence.
* Taleveras accepted an unlawful offer and engaged in risky trading, before proposing and accepting quid-pro-quo, then made payments to Gamede.
* Contango had improper meetings with SFF and was suspicious before the deal took place. Contango was directly involved in the transaction and failed to act after suspicion was raised.
Outa added that it appears that none of the oil traders requested proof from Gamede that the SFF board or Joemat-Pettersen had authorised the sale of the oil and were making desperate attempts to clear their names from the corruption in this matter.
In response, the oil traders argued that the SFF board was operating with intense corruption knowing that they (oil traders) negotiated in confidence and now wanted to be reimbursed.
Vitol and Vesquin who both hold the same attorney, said the SFF was corrupt, and that the CEF and the minister were reckless.
Vesquin argued that they entered into two agreements with the SFF on 6 January 2016 which included a sale and re-purchase agreement in terms of which the SFF sold to Vitol the three million barrels of oil.
“SFF agreed to re-purchase the same quantity of oil at a future undetermined date. A storage agreement was also done in terms of which the SFF leased to Vitol up to three million barrels of storage space.
“The flaws in the impugned decisions, and consequently in the agreements, were solely attributable to the bad faith and lack of oversight on the part of the applicants and the minister.
“Had they acted properly and with due regard to their roles, the flaws in the impugned decisions may well have been uncovered earlier and the Vitol transaction not concluded.
“The invalidity of the impugned decisions, and consequently of the agreements, is thus wholly attributable to the misconduct and maladministration of the minister, the CEF and the SFF.
“We accordingly submit that if the agreements are set aside, then the SFF must be directed to repay all its wasted costs incurred in the course of implementing the agreements,” they argued
Taleveras argued that they took possession of the oil, which was already in SFF’s tank’s, through constitutum possessorium and that they transacted directly with SFF in this regard.
“Taleveras financed the deal with SFF through a separate, private transaction with Contango and Natixis. SFF was not party to that financing arrangement.
“When it submitted its proposal to purchase the oil, Taleveras was not aware that it would be participating in a public tender process. It understood SFF’s request for proposal to be an invitation to make an offer for the rotation of oil, in the wake of their earlier failed attempt to conclude and perform a similar deal.
“We submit that, whether the court should find that an agreement of settlement has been reached between Taleveras and SFF or whether the parties are merely at one as to the appropriate remedy the court should order, it would be just and equitable to order restitution of the purchase price and storage fees, together with interest to Taleveras,” they said.
Before Glencore and SFF’s agreement, Glencore argued that the applicants’ approach to just and equitable relief envisages the SFF retaining ownership of the oil reserves, including the Glencore crude oil, and that the SFF repay the purchase price and storage fees to the traders with whom it concluded the impugned agreements.
“Just and equitable relief so proposed notably and concerningly does not apply to and ignores the position of Glencore, because Glencore did not enter into a sale and purchase agreement with the SFF and the net effect of the applicants’ approach is that Glencore, having purchased from and paid for the Glencore crude oil in an arms-length commercial agreement with Venus, would suffer a massive loss in respect of which no restitution is tendered by the applicants.
“We submit that there is no basis for the applicants to assert, as they do impermissibly in the replying affidavit, that Glencore is not entitled to anything by way of just and equitable relief, and that its claim lies against Venus.
“Glencore failed to take reasonable steps to ensure that the regulatory prerequisites had been complied with. Moreover, the Venus agreement was concluded with Gamede dishonestly based on the initial price set. Thereafter, Gamede and Venus engaged in price manipulation.”
“We submit that there is no factual or other basis for these allegations made by the applicants. Against that introduction, our heads of argument that deal with the Venus-Glencore transaction and why there is no evidence or basis to suggest that Glencore was party to any malfeasance in regard to that transaction,” they said.
The CEF argued for the court to make the concluding decision on the losses of each company involved and for the setting aside of all illicit deals.
Former minister was not part of illegal oil trade
Meanwhile, Tina Joemat-Pettersson is being accused of failing to supervise Gamede during her time as Energy Minister.
Joemat-Pettersson told Independent Media’s Special Investigation Unit that she was shocked at the claims that were made during the court hearing and only recently discovered about the matter between CEF and others via media reports.
“I have never been informed about it, nor invited or subpoenaed to make any statement and/or produce any documents regarding that matter.
“I have also learnt, from the media, about the disparaging remarks and allegations made in open court about my character, integrity, dignity and reputation, which is rather unfortunate. My rights are, naturally, strictly reserved.
“All I wish to state at this point is that I did not do anything unlawful and/or corrupt during my tenure as Minister of Energy.”
She said she could not respond to the allegation made against her unless the court releases the Gobodo Forensic Investigative Accounting (GFIA) report.
Independent Media visited the Western Cape High Court for the past few weeks attempting to get hold of the case documents, which include the Gobodo report, but the court refused to release the papers saying it was not available to the public until further notice.
Rogers’ personal assistant said all the documents were at his home and it was completely out of request to access it. When asked why the Gobodo report was not available, even to Joemat-Pettersson, who has been mentioned in it, the court failed to respond to questions.
“I have always requested that these documents be made public. It should be available, and only then once I have seen it and what is being said about me in these reports, can I respond publicly, Joemat-Pettersson said.
“I have made several requests and have caused several requests to be directed to the responsible officials, and their legal representatives for a copy of the said Gobodo forensic report, without success.
“I do not know the reason for such relief. It can only be in the interests of transparency for all concerned to make the said report public.
“Certain disparaging and defamatory statements were/are being made about me and my person in open court, which I deny and dispute. I have not been afforded an opportunity yet to state my side. I reserve my rights in this regard.
“Herewith, I am not implicated to the forensic report until there is a full report that is made available to the public. I will prove my innocence then. For now, it would be senseless to comment without the report,” she said
Rogers reserved judgment on the matter on Wednesday and did not advise on the next court date.
An update on this matter will be published as more information comes in.
INDEPENDENT MEDIA’S SPECIAL INVESTIGATIONS UNIT