The Public Protector, in a closing report on allegations of maladministration and improper conduct by former energy Tina Joemat-Pettersson, has singled out only former CEO, Sibusiso Gamede, for possible sanction.
This recommendation by Public Protector Busisiwe Mkhwebane was in spite of evidence that Tina Joemat-Pettersson had approved the sale of 10 million barrels of strategic oil reserves held by the Strategic Fuel Fund Association in 2015 at the lower than market price of R5-billion.
The blunder is set to cost taxpayers hundreds of millions as oil and financing companies that were hoping to benefit from the lucrative and secret deal are suing the state in a civil matter for losses. The sale was halted in 2016.
While the focus of the PP’s investigation was whether “the decision by the former Minister of Energy, Ms Joemat-Pettersson to approve the sale of ten (10) million barrels of the strategic fuel reserves held by the Strategic Fuel Fund Association was irrational” the PP offers no opinion on the former minister’s conduct at all.
The closing report by the PP was issued on 16 September 2020 after an investigation following two complaints from DA MP, Pieter van Dalen, and FF+ MP, Anton de Waal, on 31 May 2016 and 1 June 2016.
Mkhwebane noted in her rationale for the “closure” that the sale of the strategic fuel reserves was the subject of an ongoing investigation by the DPCI Serious Economic Offences Units in Gauteng and the Western Cape.
She added that the issues raised by Van Dalen and De Waal were also subject to civil litigation in the Western Cape High Court.
“As a corollary to this, I took a conscious decision to allow the judicial process to take its course and for the court to make a competent pronouncement on the matter, which the Public Protector would by law be bound to in any event,” said Mkhwebane.
She said that the “pursuance of the matter and remedial action that I may consider should adverse findings be made from a further investigation will serve no judicious purpose”.
This was on the basis that the Accounting Authority and the Chief Executive Officer of the Strategic Fuel Fund Association would not be able to take any action against the former Chief Executive Officer of the Strategic Fuel Fund Association, Sibusiso Gamede “since he is no longer in the employ of the Strategic Fuel Fund Association” said Mkhwebane.
Because of this, she said, she was referring the matter to the DPCI to determine whether “Gamede or any person may have committed an offence”.
Whether Joemat-Pettersson is encompassed by “any person” is anyone’s guess.
During the investigation, Mkhwebane said “all relevant documents and correspondence were obtained and analysed”.
She probed in particular, Ministerial Directives of October and November 2015, which had guided “the rotation and subsequent sale of the strategic fuel reserves held by the Strategic Fuel Fund Association”.
Those interviewed by the PP included former Acting Chief Executive Officer of the Central Energy Fund (SOC) Ltd and now the Chief Executive Officer of the Strategic Fuel Fund Association, Godfrey Moagi, former Acting Chief Executive Officer of the Central Energy Fund, Sakhiwo Makhanya and the Acting Chief Executive Officer of the Strategic Fuel Fund Association, Thabane Zulu
Correspondence was exchanged between the Public Protector and Navenda Ncwana, on instruction of the former Acting Chief Executive Officer of the Strategic Fuel Fund Association, Godfrey Moagi.
While Gamede was subpoenaed, Tina Joemat-Pettersson appears not to have been interviewed.
This while it was “common cause” that the Minister of Energy “has oversight responsibilities over the Strategic Fuel Fund Association and the Central Energy Fund (SOC) Ltd, which are either classified as Schedule 2 or 3 in the Public Finance Management Act, 1999”.
It was also common cause also, said the PP, that on 13 January 2012, the Department of Energy and Strategic Fuel Fund Association had entered into “an Agency Agreement in terms of which the Strategic Fuel Fund Association was appointed as the Department of Energy’s lawful agent”.
As such it had been mandated to “manage the strategic stocks; trade in, replacing, selling; and storing of the strategic stocks in the name of the Principal (the Department of Energy)”.
On 20 April 2012, the Department of Energy, represented by the Acting Deputy Director-General, Thandeka Zungu, and the Strategic Fuel Fund Association (the Agent), represented by Adila Osman, had concluded an Agency Agreement, in terms of which the Strategic Fuel Fund Association was appointed as a lawful Agent.
In this regard they would, said the PP, manage the Strategic Stocks “in accordance with the applicable legislation (including, inter alia but not limited to the Central Energy Act, 1977, the Public Finance Management Act, 1999 (PFMA) and the PFMA Regulations as amended) as well as policies on Strategic Stock that may be issued or determined by the minister from time to time”.
Mkhwebane added that “it was also common cause that the former Minister of Energy, Ms Tina Joemat-Pettersson approved the sale of the strategic fuel reserves held by the Strategic Fuel Fund Association”.
On 7 August 2014, following the publication of the Draft Strategic Stocks Petroleum Policy and Draft Strategic Stocks Implementation Plan, “the former Minister of Energy, Ms Tina Joemat-Pettersson issued a Ministerial Directive titled ‘Department of Energy Ministerial Directive Issued to the SFF Management of Crude Oil and Petroleum Strategic Stocks for the Republic of South Africa’”.
In terms of this, said Mkhwebane, the SFF “was expected to acquire and manage the country’s strategic stocks on behalf of the Government in accordance with the directive and any other subsequent policy documents promulgated pursuant to the provisions of the National Energy Act, 2008”.
This directive had ordered the SFF to continually hold crude oil stocks and petroleum products and to submit an “Optimisation Proposal/Plan” within six months.
The trading of strategic stocks would be permissible “under a regime to be determined by the Department of Energy and approved by the Minister of Energy”.
The PP noted: “Further to that, the Strategic Fuel Fund Association was required to enter into negotiations and conclude agreements with the oil refineries, petroleum wholesalers and other designated organisations as the Minister may determine before the crisis occurs.”
As a result of Joemat-Pettersson’s directive, former SFF CEO, Bheki Gila, had submitted an “Optimisation Plan” for her approval.
The plan included leasing out Basrah Crude Oil in tank two at the SFF’s storage facilities in Saldanha for six months with an option of an extension for another six months “in the event the market conditions remained unchanged”.
Payment for this lease would be expected in US dollars at “10 cents per barrel per month for six months by the lessee of the tank aggregating to one million one hundred and twenty five thousand dollars (US$1.125-million) per month”.
This, it was suggested, would be “a complete reversal of the period when SFF did not derive revenues from the tanks or that when it did, it garnered a pittance of US$ three (3) cents for the past five to 10 years”.
The lessee’s stock should “at no stage be lesser than the quantum of the rented strategic stock”, the directive stated.
Joemat-Petterson approved the plan on 15 January 2015 but had “emphasised that the plan must be executed in a manner that both addresses the need of the country to have strategic stocks reserve that can respond adequately to the country’s needs when such needs arise and also as a catalyst towards ensuring financial self- sustainability of the Strategic Fuel Fund Association as an organisation”.
However, in September 2015, Gila resigned as the Chief Executive Officer and Gamede was appointed as the Acting Chief Executive Officer.
Soon afterwards, Gamede had written to Joemat-Pettersson requesting the withdrawal of her Ministerial Directive of 2 August 2015 in order “for the SFF to adequately fulfil its mandate of Energy Security, it is fundamental that the SFF be accorded the responsibility to ‘acquire, monitor and manage national strategic energy feedstocks and carriers’ as provided for in terms of Section 17 of the National Energy Act, 2008”.
Gamede asked the minister to allow the SFF “to engage in commercial activities that would ensure that the SFF is financially independent and sustainable. The growth plans of SFF are dependent on a business model that allows the SFF to venture into other economic activities within the Energy sector”.
And that is when the deal went more or less South.
It was later found that Gamede had received around R1.5-million in bribes from some of the eight oil companies who had competed for the closed bid tender.
Gamede undertook, at the time, to implement a Trading Department which would provide monthly reports to the minister on “trading activities”.
On 8 October 2015, Joemat-Pettersson responded to Gamede’s request stating that she granted the SFF “a renewed Ministerial Directive, based on a business model that would include SFF Trading in commercial stock, investing in Storage and Pipeline Infrastructure, Oil Pollution Control and Management, Storage facility management services as well as Rotation of Strategic stock”.
There were conditions however, including that “any rotation of strategic stock will be undertaken with Ministerial Approval, preceded by a detailed due diligence undertaken by the SFF, and supported with a comprehensive motivation to minister”.
A further condition had been that “the integrity of our Strategic Stock levels must be assured in all instances” and that a Trading Division be established within the SFF and “appropriately staffed”.
Soon afterwards Gamede had sought permission to sell off “strategic socks in Saldanha”.
All of 10.3 million barrels of crude oil.
Gamede told the minister that the stocks “had been sitting for many years and was losing its relevance.” He undertook to sell every barrel “at the prevailing market price”.
We know this did not happen and that the SFF secretly sold off the reserves at below-market prices.
Gamede even undertook at the time to use the proceeds of the sold stock “to purchase the 10.3 million barrels of crude oil from the open market”.
Joemat-Pettersson approved the plan on 12 November 2015.
The PP said that the minister had “emphasised that the sale plan must be executed in a manner that both addresses the needs of the country”.
In the end this turned out not to be the case at all.
However, the PP concluded that “the approval of the sale of the strategic fuel reserves by the former Minister of Energy, Ms Tina Joemat-Pettersson was premised on a sale proposal submitted by the former Acting Chief Executive Officer of the Strategic fuel Fund Association, Mr Sibusiso Gamede”.
Joemat-Pettersson’s approval had been taken “with a view to ensuring the sustainability and future growth of Strategic Fuel Fund Association, as well as to ensuring that the Strategic Fuel Fund Association becomes financially independent and sustainable”.
The sale also had to be “conducted in accordance with legislation regulating the sale of significant assets and any other prescripts applicable to the Strategic Fuel Fund Association”.
On 7 December 2015 Joemat- Pettersson approved the request “pursuant to the assurance” that Gamede “had perused the proposals and was satisfied with the propositions made by Venus Rays Trade (Pty) Limited, Vitol Energy (Pty) Ltd, Taleveras Oil SA (Pty) Ltd and GNI/Enviroshore”.
Joemat-Pettersson clearly trusted these officials enough to let them go it alone.
However, in a later media statement the minister suggested she had “concerns around governance lapses in the Group and the need to strengthen both governance and oversight responsibility of the Central Energy (SOC) Ltd over its subsidiaries”.
She also ordered a review of all the contracts concluded by SFF for the 2014/2015 financial year, “including all contracts and transactions entered into in terms of the Ministerial Directive issued to the Strategic Fuel Fund”.
A later forensic report had found that internal procurement policies were not followed, in that the bidding process was closed and not authorised by the Central Energy Fund (SOC) Ltd’s Board of Directors.
Gamede was also blamed for requesting approval for the sale from Joemat-Pettersson “without, first, obtaining the approval of the Central Energy Fund (SOC) Ltd’s Board of Directors”.
When it became obvious the deal had been riddled with corruption, then CEF board of director chair, Luvo Makasi filed an application seeking to set aside “the decisions to conclude the agreements and the contracts emanating from the approval by the former Minister of Energy, Ms Tina Joemat-Pettersson of the sale of the strategic fuel reserves”.
For now, Joemat-Pettersson has managed to avoid the costly oil slick that will now be left to taxpayers to clean up… and it is bound to be a hefty bill.
The matter continues in the Western Cape High Court . DM