In December 2015, while most observant South Africans had their eyes fixed on consequences of Nenegate (collapsing investment markets and a spiralling currency), shadowy actors were engineering a bargain-priced sale of the country’s strategic oil reserves. In what subsequently became dubbed as Oilgate, the whole ten million barrels of SA’s oil reserves were sold below the market price to international resources group Glencore and others. At current oil prices, that ill-conceived transaction has cost SA taxpayers over R4bn. The wheels of justice are slowly grinding away as the new brooms in the SA government fight to have the deal reversed – while simultaneously exposing those who profited at the national expense. There was a major development last week – covered here by Stephanie Fick, chief legal officer at OUTA, who was a guest on Rational Radio. – Alec Hogg
In this interview, Stephanie Fick unpacked the stinky Oilgate deal. It is now common cause that the controversial sale of SA’s strategic oil reserves by someone who far exceeded their authority did not follow proper procedure. The deal was stuck at $31 a barrel, the absolute trough of the current cycle. Oil currently trades at double that level.
The correct process would have been to request bids for the 10m barrels of oil via a public tender rather than dealing direct with companies like Glencore. Then there would need to be a logical reason for doing so – if the oil was to be rotated then a plan would have been required. Furthermore, before any transaction could be concluded, approval would have been needed from National Treasury – after which the finance minister would have been required to sign off on the transaction. None of these steps were taken.
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Then Energy Minister Tina Joemat-Pettersson, who illegally approved the deal, said that it was misrepresented to her. Fick, an advocate, questions whether Joemat-Pettersson properly applied her mind to the issue as “there was a total disregard of procedures and someone got the money- nobody looked after the interests of South Africa.”
OUTA got involved in the latest saga after Glencore, one of the beneficiaries of the stinky deal, approached the court to prevent the Central Energy Fund from presenting apparently incriminating documentation in its legal fight to overturn the sale.
OUTA alerted the public and requested the intervention of new energy minister Gwede Mantashe, after which Glencore withdrew its interlocutory application the day before it was to be heard.
This opens the way for the main case to proceed, where the SA government is fighting to overturn the sale of the strategic reserves –Â if it wins, Glencore and the other companies who benefitted, stand to lose billions, not just on the price change but also the cost of having to store the oil over the past three and a half years. The total cost to the companies is around R4.5bn.
