Transformation in the Fuel industry: Department of Energy presentation

Meeting report

Transformation in the Petroleum Industry: Department of Energy (DOE) briefing
Mr Zingiza Mavuso, Chief Director and Petroleum Controller, Department of Energy, presented figures that were assumptions based on data, to interpret progress made in the transformation of the fuel industry. The Liquid Fuels Charter of 2000 had aimed to have 25% black ownership across the value chain. The Petroleum Products Amendment Act (PPAA) of 2003, provided for the review of the Charter, and the ten years of the Charter’s existence would be marked on 10 November 2010. Audits were already under way to determine the exact extent of transformation.

Empowerment efforts in the form of Black Economic Empowerment (BEE) deals had resulted in designated shares of 20% by Sasol Limited for historically disadvantaged South Africans (HDSA) through Tshwarisano, and 25% by Sasol Oil (a division of Sasol Limited) through Inzalo, with Chemcity acting as incubator for historically disadvantaged or black economic empowerment companies.

Engen Limited was selling 20% of its shares to Worldwide African Investment Holdings in terms of the Equity Act.

British Petroleum established a R265 million deal in selling off the commercial and industrial arm to Masana- a 35% owned subsidiary of BP.

Chevron South Africa Pty Ltd, which owned the Cape Town refinery, had a 25% HDI South African ownership.

Shell South Africa Marketing had sold 25% in shares to Thebe.

Total South Africa sold 25% to Tocaso.

Procurement spending by oil companies with HDSA suppliers averaged 42% on goods and services as opposed to 1.9% prior to November 2000. On crude, however, HDSA was virtually non existent. This represented about 70% of procurement, so that this rendered the total procurement spend at only 10% to HSDA suppliers.

Black executive board member representation was 31% and the total percentage of black representation was at 70.92%.

Licensing, as a tool through which to drive transformation in the industry, had been operational since 2006. Of the 15 000 applications, 37% resulted in HDSA ownership, with 22 HSDA operators and 1 manufacturing plant of biofuel that was HSDA owned.

Mr Mavuso identified the Department’s main challenges as lying in the areas of management and control, industry pressures, ineffective incubator programmes, the capital nature of the industry, and the fact that there had been little significant progress after 10 years. He also highlighted the lagging-behind of women representation as a serious problem.

Discussion
Mr B Mnguni (Free State, ANC) commented that the figures did not add up, as the percentages did not seem to total 100% in all instances.

Mr Mavuso responded that all percentages stated were out of a 100 – for instance 57.1 was stated as a percentage.

Mr K Sinclair (Northern Cape, COPE) compared this to an earlier presentation. He made the point that a more quantitative approach was preferred. Mr Sinclair stated his main concern was how this would affect ordinary people in their day to day living and requested a meeting to engage on those aspects.

Ms E van Lingen (Eastern Cape, DA) questioned Mr Mavuso on his comments with regard the difficulties that entrepreneurs experienced in getting loans, even those as small as R150 000, and asked who was involved in this, and whether he was referring to BEE deals.

Mr Mavuso advised her of the new licensing deal broker, who was intended to prevent a futile exercise of making application for a license. This was the issue of a conditional license. He further elaborated on the important criteria necessary, such as economic feasibility, a competitive analysis and other matters.

Mr D Gamede (KwaZulu Natal, ANC) commented that he would be very interested in the results after the review, showing how different the position was after ten years, and what exactly amounted to transformation. Personally, he would say it was where the control lay, otherwise this would be seen as transformation in a segregational way.

The Chairperson added that it seemed that the industry was not transforming. He made an example of an application for a wholesale license to supply to mines, and pointed out the pitfalls, which included not being able to access the markets, the inability to get control of a company, and the fact that, despite making investments a person would still remain an employee, not the manager. He asked how this problem could be addressed. He further asked if South Africa was ready for deregulation.

Ms Neliswa Magubane, Director General, Department of Energy, said that before Mr Mavuso responded, she wished to advise Members that National Treasury had agreed to make R1.5 billion available as part of its planning function for a new pipeline between Durban and Johannesburg for liquid fuel to solve the out-of-capacity problem.

Mr Mavuso responded that a lack of enforcement was one reason for non-transformation, together with procurement and employment. It must be seen not as allied to any one cause, but was rather a holistic pattern. He added that as at 1 April, license applications could be lodged in the regions instead of at provincial offices.

Ms Magubane answered questions on the legislative aspects. The Department of Energy was currently implementing the law as it stood. The idea behind regional offices was to bring services to the people and not to create an impediment. She agreed further that turnaround times on licensing were too long; they were stated at 90 days, but that too should be decreased.

Mr Sinclair raised concern on the amount of red tape in the Department which created hurdles instead of reducing them to make services more accessible.

The Chairperson remarked that there were indeed lots of outstanding issues on energy.

Other Committee business
Consideration and adoption of the Committee’s Report on the oversight visit to KwaZulu Natal
The Chairperson announced the document could not be accepted, and would stand over to the next day for recommendations.

Joint International Study Tour to China; Deliberations
An oversight visit to China was contemplated, involving the Deputy Ministers and Vice-Presidents involved in Economic Development, Tourism, Renewable Energy Power mix, Trade agreements, mining beneficiation and similar issues. The invitation had been sent by a Deputy Minister in China.

The Chairperson then noted the dates.

He also mentioned that an invitation to a dinner was extended by the Consulate General of China.

Mr Gamede mentioned that a Department of Trade and Industry trip was scheduled for July to KwaZulu Natal, on small medium and micro enterprise empowerment. The Committee Secretary suggested that it would be useful to have a briefing from this Department.  

The meeting was adjourned.