Minister sees `glaring' problems in South African oil stock sale

CAPE TOWN and JOHANNESBURG (Bloomberg) -- South Africa has found “glaring governance problems” related to a 2015 sale of the country’s crude oil reserves, Energy Minister Mmamoloko Kubayi told lawmakers.

Kubayi’s department has told the Strategic Fuel Fund, which is responsible for managing the reserves and conducted the $280 million sale, that legal action will be taken, she said in Cape Town on Tuesday. The SFF, a unit of the Central Energy Fund that reports to the Department of Energy, had previously described the transaction as a rotation of stocks.

South Africa’s Auditor-General criticized the SFF for failing to safeguard the nation’s oil reserves when it sold 10 million bbl of oil in December 2015, when prices were at an eight-year low. The fund’s former acting chief executive officer, Sibusiso Gamede, resigned before the Department of Energy announced in July it would review contracts related to the sale.

The department last year started a separate probe into the attempt by the SFF to buy assets in the country from Chevron Corp.

Kubayi said she’ll seek advice on whether to appeal a South African court judgment that found the government didn’t comply with the constitution in seeking bidders for a nuclear-energy program. The Western Cape High Court last week ordered the government to hold public hearings and a parliamentary debate on the program.

“There are things we could have done better, such as public participation,” Kubayi said. “I am studying the judgment and will meet with the legal team tomorrow.”

The court set aside a 2015 decision to procure new nuclear capacity and nullified co-operation accords the government has concluded with countries including Russia, the U.S. and South Korea. Judge Lee Bozalek ordered the state to pay all costs.