The Strategic Fuel Fund, responsible for managing the reserves, sold 10 million barrels of oil in December 2015 to Taleveras Group and joint ventures of Vitol Group and Glencore Plc. A probe of the $280 million sale, conducted when prices languished near an eight-year low, has persuaded the government to take action, Energy Minister Mmamoloko Kubayi said Monday.
The Central Energy Fund, which oversees the unit managing the strategic reserves, “is going to court to try and nullify the contracts,” the minister told reporters in Durban. “They’re also engaging with the traders because they don’t want to tarnish those relationships.”
Glencore and Vitol declined to comment.
The CEF’s Strategic Fuel Fund had previously described the transaction as a rotation of stocks, a perspective Taleveras agrees with.
“This is purely a rotational transaction as there is an underlying buyback obligation for crude and products, so the issue of branding this as an outright sale is unacceptable,” said John Dogo from Taleveras’s legal department. “Proceeds of the sale are with SFF, inclusive of storage fees invoiced monthly by SFF to date.” Those proceeds should have been used to purchase fresh supplies to maintain the quality of the SFF’s reserve, according to Taleveras.
Kubayi, who was named energy minister at the end of March, said a month later she had found “glaring governance problems” related to the crude sale. The CEF also failed to inform the National Treasury of the transaction as required, according to a report last year from South Africa’s auditor-general. “The accounting authority did not exercise reasonable care to ensure the safeguarding of assets of the public entity,” it said.