1. AMEF
PRESENTATION
TO THE PPC
5 SEPTEMBER 2001
CAPE TOWN
16/01/2019

2. AMEF
CHALLENGES FACED BY HDSA COMPANIES IN THE IMPLEMENTATION OF THE LIQUID FUELS EMPOWERMENT CHARTER
16/01/2019

3. PRESENTATION OVERVIEW
Presentation Objectives
AMEF and its vision
Liquid Fuels Empowerment Charter’s vision
Vision in Context
Latest empowerment deals
Value Chain - BEE status
Empowerment Criteria
Petroleum Product Amendment Act issues
Cross-cutting issues
Transformation Issues
Summary of challenges
What can government do?
Way forward
Ten factors for success
MAIN FOCUS IS ON THE CHALLENGES FACED TODAY
16/01/2019

4. Overall presentation objectives
The main objectives are to:
highlight the challenges faced by black oil companies
propose action required to overcome these challenges
The presentation represents AMEF’s
views and assessments
16/01/2019

5. AMEF plays a key role in the oil industry transformation
AMEF - BACKGROUND
The African Mineral and Energy Forum (AMEF) was formed in 1998 to represent and promote the interest of newly-established mineral and energy companies from historically disadvantaged sectors in South Africa and to enable these companies to achieve a sustainable foothold in the industry.
AMEF plays a key role in the oil industry transformation
16/01/2019

6. AMEF’s long term vision is:
AMEF’s VISION
AMEF’s long term vision is:
“for the South African oil industry to be a model of a dynamic, sustainable and internationally competitive industry by 2010”
Premised on the incorporation and adaptation of international best practices by the industry.
The vision can only be achieved by setting short term transformational goals
16/01/2019

7. Transformational Goal
VISION
“The sustainable presence, ownership or control by historically disadvantage South Africans of approximately a quarter of all facets of the liquid fuels industry, or plans to achieve this”(1)
Signed by all stakeholders on 2 November 2000
(1)- White Paper on Energy Policy, Dec 1998
16/01/2019

8. HOW FAR ARE WE FROM ACHIEVING THE VISION?
VISION IN CONTEXT
SA is part of the global economy
State Oil Company in place
Increased pressure and awareness of Environmental Issues
Limited natural oil & gas resources
Transparency
Depressed demand & mature industry
High fuel costs & Interest burden
HOW FAR ARE WE FROM ACHIEVING THE VISION?
16/01/2019

9. LATEST EMPOWERMENT DEALS
Shell and Thebe Investments
Total SA and Total Renaissance
BP and MIC plus WDBIH
AMEF WELCOME THESE DEALS - THE CHALLENGE IS NOT YET OVER
16/01/2019

10. Product Supply and Logistics
Liquid fuels industry value chain
Upstream
Oil
and
Gas
Exploration
WORLDWIDE
MVELA-
PHANDA
Liquid Fuels
Pipelines
SBM’s
Depots
Storage Tanks
WAIH 20% IN ENGEN
TIH 25% IN SHELL
Product Supply and Logistics
Retail
Sites
Wholesale
Marketing
End
Consumer
Motorist
Refining
Trading
Afric Oil
Exel
Tepco
Total Renaissance
MIC & WDBIH
Genref
Sapref
Calref
Natref
Synfuels
TEPCO
Total
5 000 Sites
100
Exel
Tepco
Import
& Exports
Trading in
Crude Oil
MVELA-PHANDA
MSA
Accommodations
Supply
Arrangements
Price
Control
&
Full
Service

11. TRUE EMPOWERMENT FACES MANY CHALLENGES
EMPOWERMENT CRITERIA
Ownership
Ownership in the form of shares held (51%)
Control
HDSA’s must have decision-making powers
Sustainability
Black Oil Companies must be able to survive post deregulation
Operational involvement
A major cornerstone of sustainability is sound operational involvement
Skills transfer
Proper transfer of skill to HDSA’s
TRUE EMPOWERMENT FACES MANY CHALLENGES
16/01/2019

12. PETROLEUM PRODUCTS AMMENDMENT ACT
Centralised powers – Clear rules of the game and BEE support
RATPLAN – Balance between reducing sites and BEE
Regulated Pricing – Required to support BEE investment and maintain full service
Vertical Integration – Prohibition to protect dealers
Safety and Evironment – Support appropriate HSE rules
Phased deregulation – Support negotiated entry of BOC’s into the retail industry
LEGISLATION MUST TILT THE PLAYING FIELD IN FAVOUR OF BEE
16/01/2019

13. CO-OPERATION BETWEEN GOVERNMENT DEPARTMENTS IS CRITICAL
CROSS-CUTTING ISSUES
Slate payments – Strain on working capital
Customs and Excise – Payment terms and bad debts
Duty at Source – Option to revise payment terms
Access to funding – Commercial banks are risk averse
State Tender Board – Less than 25% allocated to BOC’s
Government Departments – delayed payments puts strain on cash flow
Economies of Scale– Key element for any BOC to survive
CO-OPERATION BETWEEN GOVERNMENT DEPARTMENTS IS CRITICAL
16/01/2019

14. TRANSFORMATION ISSUES
Rural Development –
Fully support.
Form part of larger Presidential Rural Development Projects
Corporate Social Investment –
Necessary, however BOC’s cannot match multinational’s spend
Allocation of weight to this issue by state tender boards need to be reviewed
STRIKE BALANCE BETWEEN ECONOMIC AND SOCIAL OBJECTIVES
16/01/2019

15. GOVERNMENT’S ROLE IS CRUCIAL
SUMMARY OF CHALLENGES
Mature Industry
Commodities and low margins
Access to refining margins
BOC’s are not vertically integrated
Late comers
Compete with long standing relationships
Prime sites already taken up
Pending deregulation
Impact on investment by BOC’s
Economies of scale
Key element in sustainability
GOVERNMENT’S ROLE IS CRUCIAL
16/01/2019

16. What can the Government do?
The DME is on the right path
Empowering legislation and regulation that tilts the playing field in favour of BEE is required.
In addition there should be alignment between the various government departments on concurrent issues.
Ensure there is a local approach to legislation
Get a lot closer to the BEE issues
16/01/2019

17. We must share the same goals
What is the way forward?
All areas of private business and government must embrace the provisions of the charter
Provide workable solutions and support to HDSA companies problems
Stamp out companies that play lip service to transformation
Increase awareness of the charter and its objectives
We must share the same goals
16/01/2019

18. 1 2 3 4 5 6 7 8 9 1 0 Ten factors for success Vision/aspiration
Nicht rausnehmen - gehören zur Animation
Ten factors for success
Vision/aspiration 1
Make everyone you know aware of the Charter
Support & Equity 2
Oil companies that are playing lip service to the Charter must be exposed
Procurement 3
State tender boards must be encouraged to support HDSA companies
Infrastructure 4
Financial institutions must be creative to support HDSA companies
Commercial/Retail 5
Big business must be put under pressure to deliver on BEE objectives
Financing 6
Government to change IDC’s and banking fraternity’s focus and approach
Fiscus 7
Concurrent issues must be sorted out with DOF etc
Legislation 8
Enabling legislation that tilts the playing field in our favor is required in all areas
Communication 9
More workshops should be held with key players in business and government
Leadership
1 0
AMEF to provide leadership in industry

19. THANK YOU
16/01/2019