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Secret oil sale yielded even less than stated R5bn

Sep 26 2016 15:21
Liesl Peyper

Cape Town - The unlawful sale of 10 million barrels of crude oil of South Africa’s strategic reserves yielded R3.9bn – more than R1bn less than the R5bn previously suggested by the Strategic Fuel Fund. 

In May this year, the SFF came under fire when allegations surfaced that it had sold 10 million barrels of crude oil in a closed tender at below market prices in December last year.  

READ: Energy Fund downplays 'secret' oil sale

In the SFF’s annual report for 2015/16, the auditor general highlighted the crude oil reserve sale as unlawful, as the fund neglected to inform National Treasury of the proposed transaction as required by the Public Finance Management Act (PFMA). 

The auditor general also said in the annual report that the SFF “did not exercise reasonable care to ensure the safeguarding of its assets”. 

Furthermore, the transaction did not yield R5bn as previously stated, but actually only R3.9bn. Experts argue South Africa sold the stockpiles at a period when oil prices were at the bottom of the cycle. The transaction also put South Africa at risk of having to buy fuel at higher prices to replenish reserves. 

DA spokesperson for energy, Pieter van Dalen, said in a statement that he intends to demand that the transaction be reversed. “This will prevent the state from buying back fuel for the SFF at higher prices and wasting billions of public money through a loss-making exercise,” he added. 

The sale of the strategic reserves is currently the subject of an investigation by the auditor general to ascertain whether there had been lapses or irregular actions. 

READ: AG to probe R5bn 'secret’ oil deal

Energy Minister Tina Joemat-Pettersson earlier said the authorisation of the sale had been done with certain conditions, among others that the rotation of fuel stock would be undertaken with ministerial approvals and due diligence by the fund. 

From the auditor general’s report, however, it is clear that Finance Minister Pravin Gordhan didn’t know about the transaction. 

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