AFRICAN MINERALS AND ENERGY FORUM

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AFRICAN MINERALS AND ENERGY FORUM

• BEE IN THE OIL INDUSTRY
• MAURICE RADEBE
• 19 August 2002

2
OVERVIEW

• Current Context
• Progress
• Policy Framework
• Practical experiences
• Issues Concerns
• Expectations
• Short Term
• Long Term
• Way Forward

3
WHO IS AMEF?

• Established to assist and promote BEE in mineral
  and energy sectors of SA Economy
• Mission To create an environment wherein Black
  entrepreneurs can compete on an equal footing in
  a globally competitive sector
• Key sectors covered are
• Oil, Gas Exploration
• Liquid Fuels
• Power Electricity
• Minerals

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AMEF OBJECTIVES

• To promote active participation of Black Business
  in the Minerals and Energy sector
• To assist in overcoming barriers to entry and
  building capacity of AMEF members
• To create forums for networking with government,
  industry and other BEE initiatives
• To address disparities in the availability of
  energy services
• To promote training and development programmes

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DEFINITION OF BLACK ECONOMIC EMPOWERMENT

• A true black economic empowerment deal
• must contain ALL four main aspects

Window dressing and empowerment of the few must
be avoided
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AMEF ACHIEVEMENTS

• RATPLAN quotas for service stations have been
  allocated to HDSA oil companies
• Access to distribution and storage facilities
• Permission to import products if there is a
  shortage
• Participated in the White Paper process leading
  to the 25 BEE target
• Participated in the Ministerial task Team leading
  to the Charter
• Signatory and major stakeholder of the Charter

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AMEF ACHIEVEMENTS

• Presented papers at the following gatherings
• Three Annual Oil Industry Conferences organised
  by Global Pacific - 1998, 1999 and 2000
• Liquid Fuels Summit - 2 November 2000
• Liquid Fuels Procurement Workshop - 23 March 2000
• Regular lecturing at MEETI / MEPC Training
  Programmes
• Board representation in WPC and Mineral Energy
  Policy Centre.
• Parliamentary Portfolio Committee for Minerals
  and Energy
• BEE Electricity Summit 19 August 2002

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AMEF ACHIEVEMENTS

• Submitted AMEF input on the following studies and
  legislative processes
• Electricity restructuring process
• Input into Oil industry pricing, MPAR, IBLC etc
• Current RATPLAN allocations
• Import Control on petroleum products
• Pipeline Tariffs
• Influencing procurement strategies
• Petroleum Products Act
• Minerals and Petroleum Resources Development Bill

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CURRENT CONTEXT

• Industry highly regulated
• Controlled by multinational companies
• Numerous barriers to entry
• BEE companies only operating in marketing sector
  of the value chain
• BEE companies have 14 ownership of the industry
  and share in 11 of the operating profits

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OIL INDUSTRY VALUE CHAIN
End Consumer Motorist Controlled Pump Price
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POLICY FRAMEWORK

• White Paper on Energy Policy Dec 1998
• Policy Challenges - The need to Achieve
• An efficient and internationally competitive
  industry
• An environment conducive to synergistic
  investment in the liquid fuels industry
• Meaningful inclusion of those interests that have
  been historically disadvantaged
• Vision for the future
• South African black interests will assume their
  rightful place in the affairs of the industry.

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POLICY FRAMEWORK

• White Paper on Energy Policy Dec 1998
• Cornerstones of future Government policy
• Black Economic Empowerment reflected in the
  composition of the industry at all levels and
  significant domestic black ownership or control
  in all facets of the industry.
• Tariff protection for vulnerable sectors where
  justified by cost-benefit analysis.
• Key milestone for phasing in of deregulation
• Sustainable presence, ownership or control by
  historically disadvantaged South Africans of
  approximately a quarter of all facets of the
  liquid fuels industry or plans to achieve this.

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PRACTICAL EXPERIENCES

• Liquid Fuels Empowerment Charter Nov 2000
• Stemming from the White paper, the charter was
  developed to provide
• Framework for progressing the empowerment of
  historically disadvantaged South Africans in the
  liquid fuels industry
• Definitions of HDSA, ownership, control and
  sustainability are incorporated
• Areas are identified which will assist in
  reaching these goals, eg, Supportive Culture
  Capacity Building Public and Private Sector
  Procurement

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PRACTICAL EXPERIENCES

• TWO MODELS FOR EMPOWERMENT
• BEE owned and controlled from inception - grow
  business through strategic partners and contracts
• Exel
• Calulo/Total Renaissance
• Sanoco Econ
• Various smaller service providers to the industry
• Equity purchase by BEE group into existing Oil
  Majors
• Worldwide/Engen/Afric Oil
• Thebe/Shell/Tepco
• MIC/WDBSA/BPSA

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ISSUES CONCERNS

• Policy is heading in right direction
• Amendments to Petroleum Products Act eagerly
  anticipated
• Mineral Petroleum Resources Development Bill
  access to BEE in upstream activities
• Definitions and accreditation system for BEE must
  be finalised (BEECom, BEE Act etc)

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ISSUES CONCERNS

• Ministers proposed Compliance Monitoring
  Advisory Committee to create system for overall
  recognition, incentives penalties
• Problem now is to ensure that policy is
  implemented

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ISSUES CONCERNS

• Unintended Consequences
• Price formulation changes (IBLC)
• Cross-cutting issues
• State Procurement of Liquid Fuels
• Refunds on slate levy
• Duty at source and import/export policies
• Provincial legislation/regulations (Environmental
  Impact Assessments)
• Role influence of strategic partners
• Home-grown small BEE companies must not be
  destroyed in merger processes.

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EXPECTATIONS

• SHORT TERM
• Actively take steps to be aware of and avoid
  unintended consequences and cross-cutting issues
• Timing is vital for BEE sustainability, dont
  delay interventions where identified
• Formalise BEE policy
• Establish accreditation system

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EXPECTATIONS

• LONG TERM
• Tilt the playing fields
• Closely monitor progress
• Ensure policy is flexible to meet changing needs
• Incentivise reward genuine empowerment
  undertakings

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WAY FORWARD

• Continue and improve dialogue interface between
  government and industry
• Always be aware and act swiftly on cross-cutting
  issues and unintended consequences

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AMEF

• THANK
• YOU