🔒 The Editor’s Desk: Oilgate & SARS – how SA’s getting its own back

Many South Africans seem stuck in despair about the looted billions of the Zuma years, but events at SARS and developments with Oilgate show that hope truly springs. Despite the best efforts of the bad elements in SA society, many good people are working hard to punish wrongdoers and regain what was lost to looters. In this episode, Alec Hogg and I discuss Oilgate and the civil society response to it. We explore how quick legal action may save South African taxpayers billions of rands. We also discuss SARS and its efforts to make sure that everyone pays their share – no matter how politically connected they may be. When the daily grind of bad news wears us down, it’s always valuable to try and take a look at what is going right in the world. – Felicity Duncan

Hello and welcome to this week’s episode of The Editor’s Desk here on Biznews Radio, with me, Felicity Duncan, and Biznews editor-in-chief Alec Hogg.

Alec, there was a very interesting interview that we put up on Biznews this week looking at the story of Glencore and what we call Oilgate. Essentially, what happened there is that the billions of rands’ worth of oil reserves in South Africa were sold improperly, without following – by improperly, I mean, without following the standard processes that we would expect to see for this kind of government tender – they were sold and ended up in the hands of the well-known resources company, Glencore, which is a company that operates in a lot of countries where other oil companies fear to tread.

They have a lot of operations in West Africa and Central Africa, where perhaps other, more-conservative players like Chevron or whoever, they don’t really want to go there because they feel like it’s too risky. But Glencore operates in those places and they’ve produced great results and whatnot, but they’ve also gotten themselves into quite a fair amount of trouble over the years.

And they were involved in this oil deal ,which essentially involved buying the oil reserves at a rock-bottom price, a price that really undervalued what the country has, undervalued this natural resource. That deal happened and now there’s a lot happening in that space to reverse it. Do you want to explain to us a little bit about the moves that civil society in South Africa is taking to get things turned around?

It’s such a great story. At the time of Nenegate, in December 2015, all attention seemed to be on what was going on with the Ministry of Finance, the collapsing stock market, the weekend special finance minister Des van Rooyen, and then Pravin Gordhan, who was forced back on Zuma.

While all of this was going on, no one was really paying attention to a very, very stinky deal where South Africa’s 10 billion barrels of oil, which is the strategic reserve – in other words, if there’s some catastrophe around the world and you can’t get oil into the country, you’ve at least got these 10 million barrels, which will keep you going for a few weeks. So, that strategic reserve, most countries around the world have got them.

Ours was sold at below the market price, in a market, in a contago market – in other words, into the future – if you just sold that, instead of selling the spot today, if you sold it as a future, because the oil price was so low, you would have got more on the futures market. So, that’s the last time that you ever sell anything spot, in that kind of a market situation. Anyway, it happened. It happened under the radar. It was then uncovered some months later and now, civil society is digging into it and explaining that there was no due process followed.

As you can imagine, if you’re going to sell the country’s strategic oil reserves, you first of all get the best possible price – that is, put it out to tender. There was no tender. Secondly, you get the permission, you have to get the permission of the Ministry of Finance and Treasury. There was no Treasury involvement whatsoever. And thirdly, because it’s such an important aspect of your economy, the ministry of finance themselves have to actually sign off on the deal. That didn’t happen. The deal went through the office of Tina Joemat-Pettersson, who was a pretty weak, to be kind to her, energy minister in the Zuma cabinet.

And that was that, she signed off on it. And it happened. And 10 million barrels were sold at, we think, $26 a barrel. Outa are saying $31 a barrel. But anyway, that compares with $60 or over $60 a barrel today. So, the loss to the South African taxpayer is R4.5bn.

But what’s happening now is the central energy fund having rid itself of the bad actors, and civil society are going to court to get the original transaction overturned. So, Glencore has got the contracts, it purchased the oil, it has made R4.5bn – Glencore and others – at the expense of the South African taxpayer.

But now the South African taxpayer is saying, it was an illegal deal, you were buying stolen goods. And if you follow the law, if you buy a motor vehicle that has been stolen – you buy a motor vehicle from someone else, which they had stolen from the true owner – when you take possession of that vehicle and the true owner comes along, you have to give it back to the true owner. You cannot deal in stolen goods. That’s the point of law that’s being followed here, that the South African strategic oil reserves – because they did not follow due process of the law, of the country’s law, were actually sold stolen goods and the country should get it back. It’s a very, very import case not just because R4.5bn is at stake.

Fascinating and a really good example of how something that everybody thought was was lost, was set in stone, that’s the end of the story – actually, there are legal processes that we can go back, look at what happened, find a way to turn that around, and in the end, save taxpayers or reimburse taxpayers for these lost revenues. And I think that is and should be very encouraging to South Africans.

And it’s not the only example of where thoughtful minds in both governments and civil society are looking at things that have happened in the past and trying to find ways to not only punish the wrongdoers, but also get the money back, which ultimately is a very important part of it. So, for example this week there was some comments out from SARS saying that they’re really going to go after those who may have dodged taxes or made off with illicit revenues.

Yes, and good for SARS and good for Mark Kingon. Mark Kingon was the acting commissioner. He’s been with SARS for decades. He hung in there, despite the Moyane era. I don’t know how he managed to do it, but he did. And then, when he was not made commissioner – often when someone has been acting, and it was really their career ambition, and they didn’t get the top job, off they go, certainly in the private sector.

But this is a guy who’s really committed to serving and aligns with what Pravin Gordhan has often told us, that when he went to SARS to spend his 10 years there as the commissioner, he instilled in the organisation a belief that they were acting in a higher purpose. And certainly Mark Kingon is acting in a higher purpose. He didn’t leave in a huff. When Edward Kieswetter came in to become the new commissioner, Mark stuck around, continued to do his work, and now has been rewarded in a way, by being put, in part, in charge of what has got to be the most exciting job at the revenue services, which is going after the crooks.

This is really relevant, because when Moyane arrived, one of the first things he did – and we now know that he was terribly tainted – one of the first things he did was shut down the investigations unit. Apart from the fake news that went to the Sunday Times and that awful chapter in the history of South African journalism. But what he did, at that point in time, was to protect miscreants, and particularly those producing illicit cigarettes.

Now, cigarettes are a very profitable place to be if you are not paying the duties on them, because the duties, the taxation, is around 50% of the price of the cigarette. So you can imagine – if your normal margin, say, on a packet of cigarettes is 10%, once you don’t pay any duties, that shoots up to 60%. So, it becomes very lucrative for a criminal. And they clearly buy power, or influence in places of power.

And you can see this. It is not that difficult to join the dots and see what’s going on here, why there’s so much squealing from certain political players about what’s going on at SARS, because what SARS are doing, and what they were doing, was attacking the illicit cigarette trade. Then they were shut down by Moyane. Now, they’re going back after the illicit cigarette trade, who are the people who are funding certain squealers in high places.

So, just join the dots and you can see. Having Mark Kingon running that unit is going to be… you’ve probably got the best possible person on earth to do that job. And you can be sure that he will be bringing back in, or leaning heavily on some of those who, in the past, did very good work for SARS in that area. It’s great news and it’s yet another sign of progress in Cyril Ramaphosa’s long game, the long game of unpacking and unravelling these very deep and dark chains of profiteering at the public expense, which were allowed to be instigated during the Zuma era.

Yes, and it’s also, I think, such an important reminder that, even though at some point it seemed like everybody in government service was just in it to line their own pockets, throughout this time, throughout those ten lost years, there were actually still people who were hanging in there, who were trying to do what was right. And now they’re being given an opportunity to do that, where before they may have been shunted aside and marginalised and what not. Now they’re getting their opportunity to shine, even though they’ve been there the whole time.

And that’s an encouraging thing to keep in mind for South Africans, that it’s the case that there’s not a blanket lot of bad eggs in government, but actually there are people there with the public’s best interests at heart.

I would argue that the majority, the vast majority of public servants are there to serve and there are many examples of the point that you’ve just made. Think about the VBS – the Venda Building Society – scandal. There were a number of the municipalities that did not go in because there was somebody at the municipality who said, I’m not prepared to sign this off. And, although the mayor then tried to fire these people, they went through processes to make sure that municipality in particular didn’t lose the tens of millions that the other corrupted municipalities did.

You had, also with VBS, the whole thing would have changed, we would still not have known about that Ponzi scheme, were it not for a very brave person at Transnet, one of the financial managers there, who stood up just before the watershed moment on the 18th of December, 2017, when Cyril Ramaphosa won the elective conference – just before that, they tried to push through a deal where billions would be put into VBS by Transnet and thus keep the Ponzi scheme going. There was someone there who blew the whistle.

Similarly at South African Airways, there’ve been people who’ve blown the whistle, not least the whole board that walked out seven years ago. And in many other instances, however, there were the Mark Kingons and others like him who fought from within the tent. And we should never forget this: that South Africa’s institutions and South Africa’s core, the core values of this country, were put under enormous stress and they’ve held. They’ve held.

And they have ejected – the antibodies have actually kicked out the bad elements. And we get sometimes confused by this, by the noise in the media. But, in reality, things have turned in this country and they’ve turned very significantly. It takes a long time for the cancer to be excised from the system. The muck to be swept away. And while the muck is being swept away, it’s going to scream and shout as loudly as possible to try and hold back the inevitable. And I truly believe it is an inevitable tide.