COP 17 strategy & Liquid Fuel Charter progress report by Department of Energy

NCOP Economic and Business Development

17 October 2011
Chairperson: Mr F Adams (ANC, Western Cape)
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Meeting Summary

The Department of Energy said that the Liquid Fuels Charter had been the pioneer of all charters as it was  signed back in November 2000 and it became law by being annexed to the Petroleum Products Amendment Act of 2003. The Charter provided a framework for progress in the empowerment of Historically Disadvantaged South Africans (HDSA) in the liquid fuels industry. A compliance audit was initiated in November 2010. This was a comprehensive, independent and representative assessment of the state of transformation within the industry against the set charter targets. It was to identify bottlenecks in  implementation and the nterventions required. It was to develop a standardised criteria to assess and monitor transformation and compliance within the petroleum and liquid fuels industry, throughout the value chain. The Committee was also briefed on the role DoE played in trying to address the challenges.

Members asked questions about the need to differentiate between ownership and control, and about the role of women and people with disabilities in the energy sector.

The presentation on the COP 17/CMP7 Energy Sector Progress Report described how the DoE had approved the establishment of both an internal and an external technical steering committee in April 2011. The purpose of the internal COP17 steering committee was to ensure that all energy sources were reflected based on the vision and mission of the Department. The external committee was comprised of the whole energy sector (government and business) and it was their responsibility to develop and implement energy sector work plans for COP17 and to ensure ownership and concurrence by the energy sector as a whole.

The Committee was also given feedback on the African Energy Minister Conference (AEMC) that the DoE and the African Union (AU) hosted in September 2011. The aim of the conference was to provide a high level platform for Ministers, as decision makers, to have the opportunity to deliberate and map a way forward on Access to Energy for Africa in preparation for COP 17 and to promote sustainable energy access for Africa in line with the UN declaring 2012 as the international “year of energy access for all”.

Meeting report

The Chairperson accepted the apology of the Minister, Deputy Minister and the Director-General of the Department. He emphasised that the Committee would not be dealing with the Liquid Fuels Charter in detail because the document was still before Cabinet.

Liquid Fuels Charter presentation by Department of Energy (DoE)
Mr Tseliso Maqubela, DoE Deputy Director-General: Hydrocarbons and Energy Planning, apologized that the Director-General could not lead the presentation as he was out of the country. It was important for the Minister to have been present but he was out of the country and the Deputy Minister was supporting the acting Minister in the Cabinet. The LFC progress report was complete and it would be tabled in Cabinet. The economic landscape in the country as far as liquid fuels were concerned, still had a long way to go. The benefits from activities in the sector had not reached most of the people in South Africa as intended. The impact was that job creation was not being spread wide enough. Economic opportunities were restricted hence small companies could not create the necessary jobs.

Ms Gasetseone Leketi, DoE Director, said that the presentation would outline the brief history of the LFC, progress to date, LFC strategic focus areas, and the role of the DoE in addressing challenges. The Charter was the pioneer of all charters. It was signed in November 2000 and it became law by being annexed to the Petroleum Product Act (PPAA) of 2003. The charter provided a framework for progressing the empowerment of Historically Disadvantaged South Africans (HDSA) in the liquid fuels industry. The charter embraced the Black Economic Empowerment (BEE) definition of empowerment, the Employment Equity Act, the Competition Act and the Constitution. The objective of the charter as espoused in the Energy Policy White Paper is to achieve over a ten-year period "sustainable presence, ownership or control by Historically Disadvantaged South Africans of a quarter of all facets of the liquid fuels industry, or plans to achieve this".

The Department had commissioned an LFC compliance audit in November 2010. The compliance audit was finalised in April 2011 and the final audit report with recommendations was in circulation in Cabinet. The objective of the audit was to have a comprehensive independent and representative assessment of the state of transformation within the industry against the set charter targets. It also would identify bottlenecks in its implementation, the interventions required and develop standardised criteria to assess and monitor transformation and compliance within the petroleum and liquid fuels industry, throughout the value chain.

The LFC strategic focus areas were: ownership, control, supportive culture, capacity building, employment equity, financing, preferential procurement and terms of credit to HDSA companies. There were a number of implementation challenges that the charter faced:
▪ LFC compliance was not monitored regularly and there were no serious consequences for non-compliance.
▪ Financial sustainability of BEE deals.
▪ Continued barriers to entry such as access to finance, access to infrastructure, lack of pricing transparency and skills transfer to retailers.
▪ The lack of women representation.
▪ The abuse of the HSDA definition that was used to include white females.

The Committee was briefed on the role that the DoE played in trying to address the challenges. The DoE prioritised recommendations on the compliance audit report whilst awaiting finalisation of BBBEE code reviews. The Department also sought to capacitate a framework for monitoring, evaluation and compliance, standardising transformation empowerment criteria across the value chain and continuing to collaborate with the Department of Trade and Industry in order to align the charter with the revised BBBEE Codes of Good Governance. In conclusion, Ms Leketi said that the future empowerment framework would ensure measurability and preservation of the cornerstones of the previous charter that were not adequately catered for in the generic codes.

Mr Maqubela added that there seemed to be a feeling or lack of ownership in the Charter. All the parties entered into the Charter voluntarily. What was disappointing was that the spirit of the Charter was fading away.

Discussion
Mr D Gamede (ANC; KwaZulu Natal) raised concerned with regards to control and ownership. To him control and ownership were two different things. One needed to develop a document which adequately dealt with control and ownership.

Ms M Dikgale (ANC; Limpopo) said that women were “in pain” when it came to business. What was the Department doing to ensure that women joined others who were “in the world of milk and honey”?

Mr J Nyambi (ANC; Mpumalanga) asked if there were any challenges that had not been reflected in the presentation.

Ms B Abrahams (Gauteng) asked if people with disabilities were included in the Charter.

Mr Maqubela responded that there were constraints to the level of detail that the Department could present. Operational control was an issue. As shareholders, BEE partners attended meetings, passed resolutions but they did not have any operational knowledge. The impact would only be seen when the issue of possible change of ownership arose The BEE company would not be able to take over the operational control of the company and run it in a sustainable manner because they would not have invested in the operational control. There was need to re-look at the 25%. He suggested that 26% would give shareholders some rights in decision-making. Going forward they would have to encourage operational control.

He said that the Minister had raised concern about the level of participation by women. None of the Chief Executive Officers (CEO) of oil companies in South Africa was a woman. This was an indictment on the oil industry. At one point PetroSA had an acting CEO who was a woman. The DoE was looking forward to the decision the PetroSA board would make with regards to the CEO. There were some areas or challenges that had not been covered because there would be contestations. The areas that had been covered were areas that the DoE felt that there would be no contestations. The DoE was further constrained by the fact that the report was already in the Cabinet system.

With regards to retailers, he replied that the licence applications they were receiving were worrying because they reflected a trend in that a particular section of the population was applying for the licences. The most lucrative sites were still unobtainable and the playing field was not level. In relation to people with disabilities, the DoE was not doing as well as they were supposed to do. There was one wholesale application the Department received from an association of people with disabilities and the application had been processed. However, he was not sure whether the entity was trading.

The Chairperson said that once the document was released there would be another public hearing on the document. There was a serious outcry by HDSA, Women in Oil and Women in Petroleum in relation to fronting and the fact that they were not recognised. He suggested that the Charter be reviewed bi-annually or every five years in light of the recommendations that had been made by the public.

COP 17/CMP7 Energy Sector Progress Report
Ms Mokadi Mathekgana, DoE Chief Director: Clean Energy, provided the background. Following the COP16 meeting and outcomes, and in preparation for COP 17 the DoE approved the establishment of both an internal and an external technical steering committee in April 2011. The purpose of the internal COP17 steering committee was to ensure that all the energy sources were reflected, based on the vision and mission of the Department. The external committee was comprised of the whole energy sector (such as government and business). The committee had a responsibility to develop and implement energy sector work plan for COP17 and to ensure ownership and concurrence by the energy sector as a whole.

The Committee was given feedback on the African Energy Minister Conference (AEMC). The DoE and the African Union (AU) hosted the conference on 15 and 16 September 2011 at the Sandton Convention Centre. The aim of the conference was to provide a high level platform for Ministers as decision makers to have an opportunity to deliberate and map a way forward on Access to Energy for Africa in preparation for COP 17. The main objective was to promote sustainable energy access for Africa in line with the UN declaring 2012 as the international "year of energy access for all". The key outcomes of the AEMC were presented:
▪ To identify energy solutions to ensure Africa had the resources to achieve economic growth and development while addressing the dual challenges of mitigation and adaptation to climate change in partnership with the developed world.
▪ To create a sustainable programme for universal energy access to advance on the scaling up of energy systems that were less-emission intensive and agree on solutions for infrastructure, provision of finance and the expansion of new and clean technologies for developing countries and in particular Africa in order to meet the Millennium Development Goals (MDGs).

At the conference, the Ministers resolved to support the expansion of generation capacity with emphasis on regional projects, enhance funding for policy and institutional development activities, support a sector wide approach to scale up energy access through energy planning and international cooperation and to enhance regional trade and energy resource development through support from development partners.

The Ministers also committed themselves to ensuring the success of these actions through full cooperation in developing regional and integrated energy plans which would identify priority energy projects across the continent, improving the efficiency of Africa's energy operations to reduce emissions and improve affordability and to work in partnership with key stakeholders, including business and development partners. A formal report on all the conference proceedings was being finalised.

Ms Mathekgana went on to present the options available for the energy seminar rooms: the African Union Pavilion, SA Climate Change and Response Expo, the Durban University of Technology (DUT) in partnership with International Renewable Energy Agency (IRENA) and the Nedbank building. In addition the DoE was working closely with Eskom on COP17 on energy matters in order to prevent duplication of processes and also to speak as a country instead of individual organisations. IRENA was partnering with the DoE to coordinate and support capacity building and training events.

Discussion
Mr Gamede asked if the Department was going to meet the targets for access to energy and if it was true that South Africa was second in Africa after Nigeria when it came to emissions. He asked if there was any scientific report that concluded that South Africa was a water scarce country. The Member reiterated the traditional idiom that "he who pays the piper, calls the tune". He asked if it was true especially in light of the fact that the UN and IRENA funded most projects.

Ms Mathekgana responded that the President, at the Copenhagen COP 15, said that South Africa would meet the emission targets of 34% by 2020 and 42% by 2025% subject to financial resources. It was clearly articulated that if there were no financial resources, the targets would not be met and if the financial resources were there, the targets would be met. One of the key debates of COP 17 was to come up with a design of the Green Climate Fund and how it would assist developing countries. South Africa was a water scarce country in terms of the study concluded by the Department of Water Affairs. About the idiom, she said that the country needed to partner and learn from other countries that had already developed. The energy sector was focused and was implementing…(inaudible)...affiliate to other national partnerships. South Africa ratified IRENA, hence there was a need for IRENA to assist South Africa. The objective of IRENA was to help developed countries to get up to speed with implementation of clean energy. South Africa approved the Integrated Resource Plan (IRP) hence they had moved a mile as compared to other countries on the African continent. Developed countries were not coming to the party to tell the developing countries what to do but they were coming to the party to assist the developing countries to move in relation to meeting the Millennium Development Goals. South Africa was emitting and it was second to Nigeria but insofar as South Africa was implementing the IRP they would move down the emissions table.

Mr Maqubela responded that comparing countries depended on the criterion was used such as GDP or per capita, hence the results could change depending on the criteria. Nigeria's emissions were high because of flaring and as soon as the country banned flaring, the emissions would drastically reduce. He however highlighted that COP 17 was not without contestations. Decisions could be made and agreed to before a conference started. There was a need to determine the stance that the country was going to take and decide what was not supposed to be compromised on, on behalf of the South Africans. There was no need to give up the position that the President had outlined as other parties wanted to do. There was a need to guard the position jealously.

Ms Mathekgana highlighted that COP 17 was different in that South Africa was hosting the conference hence there was a duty to welcome the world. The position that South Africa was going to take was not going to be compromised by their coordination process. All the sectors will be lead by their political leaders to ensure that the position of the country was not going to be sold at the expense of South Africans. She highlighted that since South Africa was the host, the political principals, being the Members of Parliament, were required to be at the conference earlier than other delegates to ensure that the policy position was taken care of.

Ms Dikgale asked if South Africa was included in the clean technology awards.

Ms Mathekgana responded that the clean technology award was led by the Department of Trade and Industry in terms of technologies in the South African context. Businesses would be participating in terms of the best practices and all sectors would be involved. The awards were national based.

The meeting was adjourned.

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