19 August 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

19 August 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 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 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/Innovati ve 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 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 AMEF ACHIEVEMENTS  Presented papers at the following gatherings : Three Annual Oil Industry Conferences organised by Global Pacific , 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 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 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 OIL INDUSTRY VALUE CHAIN Upstream Oil & Gas Exploration Worldwide Mvelaphande Petrosa Liquid Fuel Pipelines SBM’s Depots Storage Tanks Refining Genref Sapref Calref Natref Synfuels Tepco Product Supply And Logistics MSA Accommodation & Supply Agreements Trading Import & Exports Trading in Crude Oil Mvelaphanda Mvume Petro-Energy Wholesale Marketing Afric Oil Total Rennaisance Exel Tepco Mic/WDBSA Sanoco Econ Retail Sites Country wide 5000 Sites 120 Various BEE Companies End Consumer Motorist Controlled Pump Price

19 August 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 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 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 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 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 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 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 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 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 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 AMEF THANK YOU