19 August 2002 1

AFRICAN MINERALS AND ENERGY FORUM

BEE IN THE OIL INDUSTRY

MAURICE RADEBE

19 August 2002

19 August 2002 2

OVERVIEW

Current Context Progress Policy Framework Practical experiences Issues & Concerns Expectations

Short Term Long Term

Way Forward

19 August 2002 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

19 August 2002 4

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

19 August 2002 5

DEFINITION OF BLACK ECONOMIC EMPOWERMENT

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

CONTROL Ability to exercise legal

rights associated with ownership

51% shareholding or majority shareholding

Control of the Board

MANAGEMENT Black management

cadre running the businesses

Responsible for day to day running of operations

TRANSFER OF SKILLS Entrepreneurial/

Innovative thinking Capacity Transfer Skill Transfer Employee training

OWNERSHIP Equity participation Asset ownership Acquire rights to and

obligations

Black Economic Empowerment

Window dressing and empowerment of the few must be avoided

19 August 2002 6

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

19 August 2002 7

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

19 August 2002 8

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

19 August 2002 9

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

19 August 2002 10

OIL INDUSTRY VALUE CHAIN

UpstreamOil & Gas

Exploration Worldwide

MvelaphandePetrosa

Liquid Fuel PipelinesSBM’sDepots

Storage Tanks

RefiningGenrefSaprefCalrefNatref

SynfuelsTepco

Product SupplyAnd

LogisticsMSA

Accommodation & Supply

Agreements

TradingImport & Exports

Trading inCrude OilMvelaphanda

MvumePetro-Energy

WholesaleMarketing

Afric OilTotal Rennaisance

ExelTepco

Mic/WDBSASanocoEcon

RetailSites

Country wide 5000 Sites

120 Various BEE Companies

EndConsumerMotorist

ControlledPump Price

19 August 2002 11

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.

19 August 2002 12

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.

19 August 2002 13

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

19 August 2002 14

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

19 August 2002 15

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)

19 August 2002 16

ISSUES & CONCERNS

Minister’s proposed Compliance & Monitoring Advisory Committee to create system for overall recognition, incentives & penalties

Problem now is to ensure that policy is implemented

19 August 2002 17

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.

19 August 2002 18

EXPECTATIONS

SHORT TERM Actively take steps to be aware of and

avoid unintended consequences and cross-cutting issues

Timing is vital for BEE sustainability, don’t delay interventions where identified

Formalise BEE policy Establish accreditation system

19 August 2002 19

EXPECTATIONS

LONG TERM Tilt the playing fields Closely monitor progress Ensure policy is flexible to meet

changing needs Incentivise & reward genuine

empowerment undertakings

19 August 2002 20

WAY FORWARD

Continue and improve dialogue & interface between government and industry

Always be aware and act swiftly on cross-cutting issues and unintended consequences

19 August 2002 21

AMEF

THANK YOU