There will be no commission paid to third parties to “facilitate” the latest partial sale of SA’s crude oil reserves, the Central Energy Fund (CEF) has confirmed.
Just under five-million barrels of the Strategic Fuel Fund Association (SFF) stockpile — a reserve intended to grease the national economy in times of crisis — is up for grabs as per a formal sale process to be concluded before March 31 2023. The sale was authorised earlier this year to offset the cost of cushioning consumers from the recent surge in fuel prices.
Responding to queries, the CEF confirmed there would be no “middleman” in the upcoming transaction, unlike the 2015/16 “Oilgate” sale which netted commissions of R22m for former SFF CEO Sibusiso Gamede. “SFF will be selling directly to interested bidders and will not be paying any entity commission to facilitate the transaction. This will be a direct sale,” said CEF spokesperson Jacky Mashapu.
The SFF was established during the apartheid era to act as a buffer against international oil sanctions. The existing stockpile is about 10m barrels, of which just under half (5 x 950,000 barrels) is due to be sold. The SFF is a wholly owned subsidiary of CEF.
The “Oilgate” saga involved the entire stockpile, sold to various companies at heavily discounted prices, signed off by then energy minister Tina Joemat-Pettersson, without a public tender. The crude oil remained at the SFF facility as per a storage agreement. It later emerged that the SFF and CEF management and boards were initially unaware of the deals. In November 2020 the Western Cape high court overturned the sales and ordered the SFF to refund the buyers and pay various additional costs.
The DA is of the firm opinion that SA needs to gazette and implement a comprehensive strategic fuel stocks policy. This was a recommendation of the Moerane commission of inquiry as far back as 2007.
— Kevin Mileham, DA energy spokesperson
The latest sale has also highlighted the absence of a comprehensive fuel stocks policy, at a time of geopolitical uncertainty. A 2007 commission of inquiry recommended SA adopt a comprehensive fuel stocks policy, but to date there is none. Mashapu confirmed the absence of a statutory requirement for a strategic stockpile: “The minimum amount has never been evaluated. It was supposed to have been determined after the department of energy had finalised the strategic stocks policy that was gazetted in 2012.”
The policy void has prompted concerns that SA could find itself vulnerable in an international fuel supply crisis, particularly in light of the closure of some local refineries. SA imports much of its refined product.
DA energy spokesperson Kevin Mileham said the party believes SA needs a strategic reserve, either of crude or refined products or both. “The DA is of the firm opinion that SA needs to gazette and implement a comprehensive strategic fuel stocks policy,” said Mileham. “This was a recommendation of the Moerane commission of inquiry as far back as 2007, when SA last experienced a fuel shortage crisis, and has never been acted upon.
“We also need finality on a way forward as a country on whether we rebuild our refining capacity, [in which case we have to secure a crude oil pipeline of supply and strategic reserves of crude] or whether it is in our best interests to import refined fuels, and build up a strategic reserve of the latter.
“A strategic reserve [whether crude or refined products] should be sufficient to cover a 90-day supply line disruption and to mitigate the costs of unexpected spikes in import costs and rand/dollar exchange rates,” added Mileham.
The pending sale is a case in point, with the proceeds due to be injected back into the fiscus to cover the cost of a temporary reduction in the general fuel levy earlier this year. The temporary reduction was necessary due to the combined effect of the global economic recovery post-Covid and the war in Ukraine which “placed significant pressure on domestic fuel prices”, the National Treasury and department of mineral resources and energy said at the time.
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