OGSP - official government selling price
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OSP - official selling price
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Spot - spot market price
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VLCC - very large crude carriers
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The material in this collection comprises the papers collected by Van Zyl when he was General Manager at Strategic Fuel Fund (SFF), which he gave to Stephan Brummer of the Mail and Guardian, then donated to SAHA. It includes transcripts, earlier documents brought in as evidence, reports of the inquiries or hearings, as well as documentation contemporary to the main period in question. The bulk and detail of evidence brought was such that particularly detailed documentation (such as individual shipping movements, audit trails, financial transactions), plus duplicates of pertinent correspondence and reports as presented in sequence, will be found in the series ‘G’ called Evidence.
This collection can usefully be seen in two contexts - the transition of government and its agencies from the Apartheid to the post-Apartheid eras, and the role that oil and its dealings play in governments.
Transition of government
Following the end of the government of national unity, and the democratic elections of 1994, the ANC-led government began vigorously to transform government agencies.
The agency which is the focus of this collection - the Strategic Fuel Fund (SFF), and particularly its general manager, Stephanus Jacobus 'Kobus' van Zyl, came repeatedly under fire as the new Minister of Minerals and Energy Affairs, Penuell Maduna, set about implementing changes.
During the period of his ministry, (13.5.96 to June 1999) there were three major inquiries/hearings into the running and dealings of SFF, and its former General Manager.
There was also pressure on them to transform their staffing and new board appointments were made.
During Maduna's time as Minister, there were also two issues where the ANC government came into the firing line - namely the controversial appointment of former Liberian businessman/ politician, Emmanuel Shaw II of IAS, as a highly paid consultant to look at the re-structuring of CEF (parent company of SFF)[1], and the government's contentious sale of oil reserves reducing stocks from 35m to 10m barrels in 1998, raising R800m to go into the fiscus.
The role of oil and government in Apartheid-South Africa
SFF was set up by the Apartheid government in 1969 as a company to deal in and store crude oil. This was in order to beat the oil sanctions against South Africa. The nature of its role required protection under secrecy legislation[2], concealing deliveries and punishing any revelations about dealings with up to 7 years imprisonment.
SFF dealt through intermediaries, and via various shady shipping deals[3] - as suppliers tried to disguise their support of the Apartheid regime. SFF in fact not only built up considerable reserves of oil in storage, but had the position of supplying BP, Caltex, Sasol, and Engen with crude oil. Shell and Total managed to be supplied by their parent companies. SFF also sold internationally.
The proceeds of SFF oil sales were deemed to go into the government coffers.
With the lifting of oil sanctions by the UN in December 1992, the secrecy provisions were also revoked. In 1994, there were accusations that the climate of secrecy and control over oil imports was continuing. SFF sales were said to be at a large profit. The petrol companies as well as the new government wanted changes. For one, the Liquid Fuels Taskforce was set up to review and recommend new arrangements for controls over the oil industry.
Establishing the exact quantities of the oil reserves was another, and in 1995 the then Minister 'Pik' Botha, and supported by the deputy-President, Thabo Mbeki, ordered an extensive audit by Inspectorate M & L (Pty.) Ltd. of the accuracy of records as to strategic crude oil stock, and through this, the management of SFF.
Organisational structures and S.J. van Zyl
SFF was a subsidiary of the Central Energy Fund (CEF), along with Mossgas, and Soekor - each had roles as semi-government agencies to research, produce, deal in and store energy to aim for self-sufficiency in a sanctions-besieged country.
The CEF board was appointed by the Minister, and there was considerable overlap of membership on the boards of each company.
The General Manager (GM) of SFF, S.J. van Zyl, also had overarching roles of management in CEF, and directorships on the other companies. He was GM from 1.4.89 until his suspension in mid-1997.
He was attributed with making SFF profitable and market-wise, and was personally involved with the day-to-day international dealings.
Oil deals and oil accounting
It was particularly the relationship that Van Zyl had forged between SFF and Fakry Abdelnour, (trading as Interstate and African Middle East Petroleum AME - with offices in Geneva, Panama and Monte Carlo), that came under the spotlight by Minister Maduna. Abdelnour acted as an intermediary for the oil dealings between SFF and the Egyptian Government Petroleum Company (EGPC), for which he gained a commission of 6 US cents per barrel.
Prior to this, South Africa was relying on Iran, which had been virtually the only country which overtly exported crude oil to South Africa.
When the Shah was deposed, Iran joined the oil boycott.
When, despite the lifting of sanctions, this deal with Abdelnour continued, Maduna ultimately ordered Van Zyl to terminate the arrangement. Van Zyl insisted there was 'nothing untoward' in the deal. Abdelnour himself, declared there was no fraud involved, and that it was a contractual arrangement with SFF.
Independent audit ordered by Minister Maduna
When through a vigorous exchange of letters between himself and Van Zyl, and other attempts, Maduna could not get any satisfactory answers re the Interstate deals, in February 1997 he ordered that an 'independent audit' of SFF be conducted by Nkonki Sizwe Ntsaluba (NSN), an accounting firm[4]. Barend Peterson was the main NSN accountant involved in the process of auditing and investigative interviews. Their terms of reference included investigation of the 3rd party commission to Abdelnour, how much was paid out, who knew about it, and the accounting and auditing procedures which covered this.
NSN made their interim report to the Minister on 24.3.97. Van Zyl's suspension by CEF as general manager followed, pending an investigation, which led to an disciplinary hearing called by his employers.
Disciplinary hearing against Van Zyl
This took place over a year later after the suspension, and was initially under the chair of Dr Sereti, commencing on 31.8.98. CEF/SFF terminated this arrangement, and the hearing went ahead under Mr Sangon, and a verdict of guilty on 4 of 5 counts was declared on 2.11.98. Van Zyl was represented by Janse van Rensburg, Strydom and Botha.
Auditor-General's Special Report
Prior to this, on 18.6.97 the Minister raised in Parliament the discrepancy of R170m made in the Auditor-General's report to Parliament on 31.3.94 compared with Price-Waterhouse's (CEF/SFF auditor's) 7.2.94 report for the 1992-3 financial year. The amount had been ascribed to 'strategic stock transfers' - but the Auditor-General did not disclose it to Parliament.
The Auditor-General, H.E. Kluever, took exception to the Minister's speech in which he suggested that Kluever had 'done some nimble footwork'. He raised objections not only about the Minister implying loss, theft or transfer of the money, but also to the implied attack on the office of Auditor-General itself. Indeed the appointment of NSN without full consultation and collaboration with the Auditor-General also rankled.
The Special Report tabled in August 1997, detailed their responses, drawing on SFF documentation, and attempting to show that the reason they did not disclose was not because of something untoward, but because of the old secrecy provisions, and changed accounting procedures.
The whole matter was then taken up by parliament who requested the Public Protector investigate and report back to the National Assembly.
Public Protector's Inquiry
The Public Protector, Selby Baqwa, ran the inquiry assisted by auditors, and commencing hearings on 20.4.98. NSN, who finalised their 1st report to the Minister on 26.8.97 and their 2nd report on 13.10.97, furnished much of the documentation they had gathered during their investigations. Extensive verbal evidence was given in the hearings, resulting in reams of transcripts.
The bulk of these are from June, and then again from October finishing in December 1998.
The Inquiry had a broad mandate - to look into the alleged irregularities in SFF financial management, with the issue of the allegedly missing R170m being central. One of the arguments hinged on the change to the accounting policy in 1993.
Subsequent oil and government issues (beyond this collection)
Historically, CEF has stayed in place, with the now re-named iGas, the new PetroSA, Petroleum Agency of South Africa, and a diminished SFF as subsidiaries. Penuell Maduna left the Minerals and Energy portfolio after the June 1999 elections, and took on the Ministry of Justice and Constitutional Development.
His successor, Minister Phumzile Mlambo-Ngcuka, in December 2000, dissolved the SFF board after 'serious irregularities' were revealed in the awarding of contracts to sell off and replenish oil reserves. She ordered three separate investigations into the matter.
SFF was also involved in dealing oil with the Saddam Hussein regime, using an intermediary, Imvume, which has allegedly close ties with the ANC, and in 2005 come before the public notice again regarding its dealings with PetroSA.
