Issued by: Office of the Public Protector
26 June 1998
PUBLIC PROTECTOR'S INVESTIGATION INTO ALLEGED IRREGULARITIES WITH REGARD TO THE AFFAIRS AND FINANCIAL STATEMENTS OF THE SFF ASSOCIATION AND WHETHER THE REPORTS OF THE AUDITOR-GENERAL THEREON WERE CORRECT AND PROPER.
During August 1997, the National Assembly adopted a resolution requesting the Public Protector to investigate and report to the National Assembly on the alleged irregularities with regard to the affairs and financial statements of the SFF Association including, having due regard to the report of the Minister of Minerals and Energy and to the applicable law, whether the reports of the Auditor-General to Parliament thereon were correct and proper.
The issue came to the public's attention when the Minister of Minerals and Energy was reported in the media to have alluded in Parliament to a theft of R170 million at the SFF, which the Auditor-General did not detect.
The Minister had previously (on 12.2.97) ordered a management audit to be performed at the SFF after he had been alerted to payments made to an intermediary regarding certain oil transactions, which raised the Minister's suspicions. This management audit was done by a private audit firm on behalf of the Minister. The auditor's first report became available during August 1997, and was subsequently followed by a second report during October 1997.
From both these reports it was clear that there had not been a theft of R170 million, but allegations were made of other irregularities at the SFF Association. The reports were also critical of the Auditor-General's reports on the SFF Association.
The Public Protector's investigation primarily deals with the allegations made in these reports. The fact that the Minister's legal representative put on record during the current investigation that there had never been a theft was to be expected, since his auditor's reports never alleged a theft. Unfortunately, the recording of this admission does not do away with any of the allegations made in the reports of the Minister's auditors, and therefore does not affect the Public Protector's investigation materially.
The SFF Association is an institution looking after South Africa's strategic oil reserves. It deals with millions of rands. Profits made on trading with limited pre-agreed amounts of the strategic oil are used to offset the holding stock or paid to the State Treasury. The purpose of the Public Protector's investigation is, amongst other things, to look into the allegation of irregularities made in the Minister's auditors reports, to ensure that what is wrong, (if anything is indeed found to be wrong) be rectified, as well as to report on the criticism these reports level at the Auditor-General.
The Public Protector Act makes provision that any party against whom negative allegations are made by a witness, has the right to put questions to that witness at the investigation. The Act also allows a party to choose to have legal representation at the investigation. All parties chose to have such legal representation. The cost of such legal representation has been speculated upon in the media. Unfortunately, there is very little the Public Protector can do about such costs - legal representation of a party's choice is a right afforded to parties by law. (The Public Protector, however, does not pay for the legal costs of parties).
Issued by the Office of the Public Protector, Pretoria, 25 June, 1998 Enquiries: Dr M Schutte (tel: (012) 3222916)