Strategic oil stocks sale overturned

The Western Cape High Court has reversed the sale of SA’s entire strategic fuel stock in 2015 and also awarded compensation to the buyers, including for hedging losses, which will be costly to the state. The state must also pay the costs of the trading entities involved in the litigation and the multiple counsels employed by each. A BusinessLIVE report says the deal – pulled off by the then acting CEO of the Strategic Fuel Fund, Sibusiso Gamede, was done without Treasury permission under the guise of a ‘stock rotation’. It was signed off by then Energy Minister Tina Joemat-Pettersson. The 3m barrels were sold for $28 a barrel – even though crude was trading at $38 a barrel at the time. In a lengthy judgment, Judge Owen Rogers calculated the amounts owed to each of the trading entities, including payment for the oil, interest earned, storage costs and hedging fees.

Judgment

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Originally three trading entities bid in a closed tender for the oil, but the application involved more than eight, including Glencore, Taleveras, Vitol and Vesquin, after some of the original traders sold the oil on. Glencore settled with the SFF before the judgment. A Business Day report says the SFF and its parent, the Central Energy Fund (CEF), welcomed the judgment on Friday. SFF CEO Godfrey Moagi said: ‘We are vindicated by this High Court ruling. If these unlawful transactions were left unchallenged, the country would have suffered huge financial losses given the repurchase price of the oil reserves at the prevailing market rates.’ He added: ‘We will ensure that all measures are in place to institute consequence management against all employees cited in the case for wrongdoing, particularly those who are still in the employ of SFF.’ Gamede left the company shortly after the fraud of the ‘rotation’ was uncovered. CEF CEO Ishmael Poolo said the company was considering whether to appeal the award of hedging losses.

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