Five-Year Review of the Liquid Fuels Charter: briefing

MINERALS AND ENERGY PORTFOLIO COMMITTEE
16 August 2006
FIVE-YEAR REVIEW OF THE LIQUID FUELS CHARTER: BRIEFING

Chairperson: Mr E Mthethwa (ANC)

Documents handed out:
Parliamentary Portfolio Committee Briefing by Department of Minerals and Energy
Charter for the South African Petroleum and Liquid Fuels Industry on Empowering Historically Disadvantaged South Africans in the Petroleum and Liquid Fuels Industry

SUMMARY
The Department of Minerals and Energy gave Members a brief overview of the Liquid Fuels Charter. The Liquid Fuels Charter is the first in South Africa and was signed during the 2000 Liquid Fuels and Petroleum Industry Empowerment summit. Since the Charter was signed some movement has been seen but not as fast as the Department would want. Members were told that fronting in Black Economic Empowerment companies was a problem and needed to be addressed urgently.

Members wanted to know why state-owned enterprises did not comply with the requirements of the Charter; why refineries were refusing to apply for licenses; why fuel retailers often failed financially and why the Ministerial Empowerment Evaluation Committee had been disbanded.

MINUTES

Briefing by Department of Minerals and Energy (DME)

Mr N Gumede, Chief Director: Hydrocarbons, gave Members a brief overview of the Liquid Fuels Charter. The ten-year target set out in the charter would not be met. The Liquid Fuels charter is the first in South Africa and was signed during the 2000 Liquid Fuels and Petroleum Industry Empowerment summit. Since the charter was signed some movement has been seen but not as fast as the Department would want. The Minister appointed an empowerment evaluation committee, following the signing of the charter. The committee would give advice on the progress in meeting the charter requirements and ascertain the stability of deals. The committee was dissolved during April 2004. Consultants were appointed during 2005 to conduct a five-year charter review and to advise the Minister on developments, which could impact on Black Economic Empowerment (BEE) in the petroleum industry. The consultants would also assess the sustainability of BEE transactions. The Minister would also be advised on a possible corrective course of action that could be taken. Members were told that BEE companies needed to share the blame when it came to compliance with the charter. Some BEE companies are guilty of fronting because they do not read through the contract that they are given to sign. Some state owned entities have not yet submitted an application for their licence.

Discussion

Mr E Lucas (IFP) commented that the petrol industry is a difficult industry to break into if one does not have money. He said that the large petrol companies own the majority of the petrol outlets. He suggested that a committee be established to guide and train retailers. He wanted to know if it would not be the right time to start trading in crude oil.

Mr Gumede replied that they do need a committee to evaluate deals. The problem however is that BEE companies do not want to give the information, which has been requested. He said that crude oil is a procurement issue that they need to look at.

Adv H Schmidt (DA) wanted to know why state-owned enterprises did not comply with the charter. He commented that he is concerned about pipeline companies that have not yet made plans to apply for a license as the deadline for the applications are looming.

Mr Gumede replied that there are refineries that are refusing to do deals. Should the need arise the government will import fuel until the refineries agree to apply for a license. He said that the refineries simply refused to comply with the BEE component.

Mr C Kekane (ANC) commented that the Department focused on gender equity but have not included disabled people in the presentation.

Mr Gumede replied that they are looking into the issue of disability.

Ms N Mathibela (ANC) wanted to know what she could do to help empower women in the industry.

Ms B Tinto (ANC) and Mr Kekane wanted to know why petrol filling stations did not always survive financially

Mr Gumede replied that there are a number of reasons why petrol stations go under. He said that one of the reasons is that the taxes which the owner needs to pay “heaps up”. He said that they now had a tool to correct this problem.

Mr Mashanyu, Chief Executive Officer of the South African Supplier Distribution Agency, commented that commitment in South Africa is a problem. Private oil companies refuse to publish tenders, but complain when bigger oil companies do not approach them for a tender. He commented that transparency is important for the industry.

The Chairperson wanted to know why the Empowerment Evaluation Committee (EEC) was dissolved. He said that there are a lot of issues which have come out of the presentation that needs to be taken up. Fronting in companies need to be addressed urgently. He commented that the charter needs to be enforced and that robust engagement is needed with the refineries. The situation is not encouraging and no stone will be left unturned in trying to find a solution.

The meeting was adjourned.