Since the post-apartheid era began in earnest in 1994, South Africa's government has made great efforts to support new companies owned and operated by black Africans. Moreover, a raft of policies is now in place that requires the country's established companies to help these new businesses.

Several empowerment companies have been established in the oil-trading sector, but it appears that they sometimes find it difficult to raise letters of credit (L/C). This appears to have a detrimental impact on established companies according to some of their bosses. They are complaining about the terms under which their businesses are apparently obliged by government policy to do business with the new breed of African companies.

Gross negligence

The suspended chief executive of the Central Energy Fund (CEF), Renosi Mokate, has told of two instances where he claims his company or its subsidiaries have lost out because empowerment companies have failed to raise L/Cs.

Mokate claims that losses were made at the CEF subsidiary, the Strategic Fuel Fund (SFF), through no fault of his. He has been charged with gross negligence over an oil contract in which SFF had a contract with empowerment company Sky Oil.

L/C failures

The suspended executive says that the empowerment company did not provide a L/C by the agreed date, which delayed the completion of the deal. Mokate says this case was made more complex because Sky Oil had already complained to the minerals and energy department that the SFF did not want to give it a contract and was obstructing empowerment.

Mokate says his company bent over backwards to help Sky Oil, but in the end the empowerment company defaulted and SFF was stuck with the cargo. In the interim, another empowerment company apparently approached SFF to buy the cargo but it could not provide a L/C either.

Eventually the cargo was sold to Caltex for less than SFF bought it, which according to Mokate resulted in a net loss of R22 million.

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