Jul 05, 2012
Liquid fuels charter audit findings disappointing – MinisterBack
Africa|BP South Africa|Chevron|Engen|Engen Petroleum|Moloto Solutions|Shell|Africa|South Africa|Building|Energy|Media Briefing|Oil Groups|Solutions|Dipuo Peters|Infrastructure|Operations
© Reuse this
The report, undertaken by independent audit firm Moloto Solutions, found that the industry has deteriorated to below 2006 levels with regards to the Petroleum and Liquid Fuels Charter (LFC) guidelines on enterprise development, skills development, employment equity and preferential procurement, said Energy Minister Dipuo Peters on Thursday.
The DoE commissioned Moloto in November 2010 to audit BP South Africa, Chevron, Engen Petroleum, PetroSA, Sasol Oil South Africa, Shell Marketing and Refining South Africa and Total South Africa, focusing on the period from 2000 to 2010.
The audit measured the companies against 13 elements within the charter, namely ownership, management control, supportive culture, capacity building, employment equity, private sector procurement, access to joint facilities, refining capacity, retailing, wholesaling, financing, terms of credit and synfuels supply within the companies.
The intention of the audit was to measure the extent of compliance with, and effectiveness of, the LFC for the ten-year period, as well as any bottlenecks encountered in its implementation.
The audit found that the average compliance level for each element examined was 3.5 out of 7 companies, or 50%.
“Overall, the findings of the audit are extremely disappointing, given the timelines since the signing of the charter in 2000,” Peters said at a media briefing, in Midrand.
She commented that, since 2000, the petroleum industry achieved a black-ownership level of 18.91%, as opposed to the 25% target set by the LFC, and that only one of the audited firms fully complied with the requirements of ownership by black shareholders.
Management control and ownership emerged as the two top performing elements in the LFC audit. Each company met the minimum requirements of ownership in their firms, but only 50% met the 25% charter target, and while not fully compliant with regards to management control, the oil groups had historically disadvantaged South African (HDSA) representatives in executive, nonexecutive and independent director positions.
Despite some achievement in ownership within the industry, the establishment of serial investors not actively participating in key operations was a “drawback on this knowledge-intensive industry” and adversely impacted on black economic-empowerment (BEE) imperatives.
The continued focus on compliance with the BEE framework has been detrimental to some of the key LFC elements, particularly enterprise development, Peters said, adding that the performance-rate gap between the two frameworks is 22%. The audited companies achieved 70% compliance in terms of the BEE framework, compared with the 48% compliance with the LFC.
The audit exposed capacity building or skills development, employment equity and access to infrastructure as the three elements of the assessment in which performance was worst.
Technical skills transfer to HDSAs, which Peters dubbed the largest “lost opportunity”, suffered the biggest setback at all levels during the past ten years. Further, she noted a decrease in the percentage spent on skills training and learnerships for HSDAs.
The audit also found that, during the ten-year period, only two of the companies procured crude oil from previously disadvantaged entrepreneurs.
However, in efforts to mitigate the shortfalls in meeting the charter targets, Peters would, within the next three weeks, speak to each CEO individually to discuss and negotiate a timeframe to allow the company to rectify its compliance.
Any areas identified as bottlenecks would be addressed and remedies and solutions would be suggested in meeting the new deadlines set.
Peters warned that should the offending companies continue to disregard compliance with the charter, they could face having their operating licences revoked.
A unit within the DoE has been established to fully focus on ensuring industry complies with the charter.
The department also aimed to analyse where elements of the current broad-based BEE codes of good practice could be incorporated into the LFC and where elements were lacking in both frameworks.
While the frameworks held notable synergies, both had shortcomings - the LFC lacked uniform measurability, while the codes of good practice failed to embrace certain key sectoral imperatives, Moloto explained in its report.
“The key recommendation is that the department facilitate the development of a sector code in line with the BEE framework or a process that could achieve similar objectives, taking into account the expected changes to the broad-based BEE codes,” the report stated.
Moloto made several other recommendations, which the DoE would consider, along with Cabinet’s view, when moving forward with the LFC, said Peters.
South African Petroleum Industry Association executive director Avhapfani Tshifularo noted the findings of the charter audit. "Once we have had a chance to thoroughly review it, we will engage with the department directly to address any issues.”
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Energy News
Recent Research Reports
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
This Week's Magazine
South Africa remains an important manufacturing and export platform for Ford Motor Company, says executive chairperson Bill Ford. However, he adds that other countries on the continent are “becoming interesting”, and that the US carmaker is casting its net wider for...
Germany’s Max-Planck-Society (MPG) and the Max-Planck-Institute for Radio Astronomy (MPlfR) are investing €11-million (about R150-million) into South Africa’s MeerKAT radio telescope array programme. The money will be used to design, build and install S-band radio...
Infrastructure spend in sub-Saharan Africa will grow from $70-billion in 2013 to $180-billion by 2025, says PwC capital projects and infrastructure Africa leader Jonathan Cawood. This is one of the findings of PwC’s Capital Projects & Infrastructure report on East...
Private-owned defence and aerospace manufacturer Paramount Group and the Ichikowitz Family Foundation unveiled its Anti-Poaching Skills and K9 Training Academy in Magaliesburg last month.
The inclusion of Bluetooth to provide sub-three meter accuracy and heightened functionality for users is one of the ways to change existing wireless networks into engagement networks. An engagement network differs from common wireless networks in that it enables the...