Sale of South African Oil Reserves ‘Careless,’ Regulator Says

  • Fund didn’t notify Treasury, acted against law on public funds
  • Sale of strategic oil reserves generated 3.9 billion rand

South Africa’s Strategic Fuel Fund failed to notify the National Treasury of a sale of crude oil reserves and to properly safeguard the assets, the nation’s Auditor-General said in a report to lawmakers.

“The accounting authority did not exercise reasonable care to ensure the safeguarding of assets of the public entity,” the Auditor-General wrote in the report tabled on Sept. 23, referring to the management of the fund. The SFF also “did not inform the National Treasury of the sale of its 10 million barrels of strategic crude oil reserves, as required by the Public Finance Management Act,” it said.

The SFF, a unit of the Central Energy Fund whose primary shareholder is the Department of Energy, sold 10 million barrels of oil in December, when Brent crude oil prices were at an eight-year low, for $280 million as part of a rotation of stocks. The department said in July it will review all contracts related to strategic reserve rotation and storage.

The fund’s former acting chief executive officer, Sibusiso Gamede, resigned in July before the Department of Energy announced the contract review. This was after the department objected to an offer by the SFF for the assets of Chevron Corp. in the country. The department also launched a probe into that purchase attempt.

The sale of the oil assets generated 3.9 billion rand ($285 million), according to the Auditor-General’s report. It was originally claimed that the revenue from the transaction was 5 billion rand, Johannesburg-based Business Day reported on Monday.

The media desks of the Auditor-General and the SFF wouldn’t immediately respond to e-mailed questions.

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