AMEF

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AMEF

• PRESENTATION
• TO THE PPC
• 5 SEPTEMBER 2001
• CAPE TOWN

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AMEF

• CHALLENGES FACED BY HDSA COMPANIES IN THE
  IMPLEMENTATION OF THE LIQUID FUELS EMPOWERMENT
  CHARTER

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PRESENTATION OVERVIEW

• Presentation Objectives
• AMEF and its vision
• Liquid Fuels Empowerment Charters 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
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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 AMEFs views and
assessments
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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
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AMEFs VISION

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

• Ownership
• Ownership in the form of shares held (51)
• Control
• HDSAs 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 HDSAs

TRUE EMPOWERMENT FACES MANY CHALLENGES
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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
  BOCs into the retail industry

LEGISLATION MUST TILT THE PLAYING FIELD IN FAVOUR
OF BEE
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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
  BOCs
• 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
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TRANSFORMATION ISSUES

• Rural Development
• Fully support.
• Form part of larger Presidential Rural
  Development Projects
• Corporate Social Investment
• Necessary, however BOCs cannot match
  multinationals spend
• Allocation of weight to this issue by state
  tender boards need to be reviewed

STRIKE BALANCE BETWEEN ECONOMIC AND SOCIAL
OBJECTIVES
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SUMMARY OF CHALLENGES

• Mature Industry
• Commodities and low margins
• Access to refining margins
• BOCs are not vertically integrated
• Late comers
• Compete with long standing relationships
• Prime sites already taken up
• Pending deregulation
• Impact on investment by BOCs
• Economies of scale
• Key element in sustainability

GOVERNMENTS ROLE IS CRUCIAL
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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
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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
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Nicht rausnehmen - gehören zur Animation
Ten factors for success
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• THANK YOU