Tag Archive | B-BBEE

BEE : Black Industrialist Policy ready to go

DTI with further Black industrialist plan…..

The Black Industrialist Policy is now in place engineered by the Department of Trade and Industry (DTI andBEE image approved by Parliament. It was submitted to Cabinet by Trade and Industry Minister, Dr Rob Davies and approved in early November. The purpose of the policy, the Cabinet says, is to focus on growth and competitiveness of Black-owned enterprises.

The plan is designed to “facilitate the meaningful participation of Black-owned and managed companies within industry” and is another extension to DTI’s Industrial Action Plan (IPAP). It extends, Minister Davies says, the NDP and President Zuma’s nine-point plan laid out in the 2015 State of Nation Address.

More Black control, more money

The scheme offers a cost sharing grant with the DTI, ranging from 30% to 50% to approved entities to a maximum of R50m. The value of the grant in terms of any proposal will depend on the level of Black ownership and management control and must be for capital investment and other support measures such as working capital.

Minister Davies said in his media briefing relayed on the parliamentary precinct that a number of private banks have already approached DTI prepared to partner with government on such an initiative. He said the idea was “to unlock the industrial potential that exists within Black-owned and managed businesses through deliberate, targeted and well-defined financial and non-financial interventions.”

DTI, he said, particularly wanted to “speed up the entry of Black industrialists to enter strategic and targeted industrial sectors and value chains.” According to Minister Davies, South Africa will not be able to industrialise to maximise growth “unless it simultaneously includes the Black industrialist on a sustainable basis.”

It all comes back to manufacturing

Rob-DaviesDavies said that the only route for future of the economy was to build the manufacturing sector and the inclusion of the black industrialists had to be encouraged. The DTI has earmarked R1bn of seed capital to assist the Black industrialists to raise the necessary equity required to access the private sector/banking market to access debt funding. This capital would be complemented by funding from developmental finance institutions.

He added that while incentivising the inclusion of the Black industrialists in the manufacturing sector, the parties involved “needed to be committed, willing to take risks and be willing to look for long-term returns and not short-term rents.”

” This policy proposes focused efforts to facilitate inclusion and participation of Black industrialists in manufacturing activities, with an understanding that more equal societies tend to grow faster than those that are unequal,” said the Minister.

Previous articles on category subject
SA’s economic woes not BEE, says DTI – ParlyReportSA
25.1% is maximum BEE control, says DTI – ParlyReportSA
DTI does flip flop on BEE codes – ParlyReportSA

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SA’s economic woes not BEE, says DTI

BEE and economic climate not connected…..

lionel october 3In his introduction to the Department of Trade and Industry (DTI) presentation to Parliament on the current position with regard to the implementation of Black Economic Empowerment (BEE) as of August, 2015,  DTI’s DG, Lionel October, said that contrary to some claims, BEE was nothing to do with the many economic problems that beset South Africa.
In his overview, before discussing the detail of the B-BBEE Act, the Codes and Sector Charters, October said he wanted place the need for urgent transformation in its proper context. He said that indeed South Africa, as an emerging economy, had been hurt by global factors recently by Chinese currency interventions and originally by its own energy supply problems.

Key to future, says DTI

However, he said, economic transformation in the form of black advancement, procurement from black entrepreneurs, the transfer of basic mineral wealth into beneficiated products and a rebuilt and transformed manufacturing sector held the key to development.   BEE was nothing to do with the pervading “doom and gloom” scenarios that were persisting in business and industry circles.

Lionel October said “things now needed to be speeded up”. He claimed that the country now had all the legislation, tools and direction needed to contribute the shortage of jobs and quoted JP Landman by saying that South Africa faced a further problem that population growth of 200,000 births a year more than the previous year every year was as much a problem currently, he said.

The big sell

In tracing the development of BEE since the commencement of the B-BBEE Amendment Act in 2014, the adoption of the B-BBEE Codes of Good Practice in May this year, DTI had held 46 workshops to explain and help in the development and understanding of the need for black empowerment. It was not a racial issue, he insisted, but a programme of necessity if South Africa was to survive economically.

He said that the process of establishing at BEE Commission was at “an advanced stage” – the new acting commissioner having been announced recently.

B-BBEE ACT trumps all

Acting chief director of BEE at DTI, Liso Steto, then reported that the new “trumping” provision in the Broad-Based Black Economic Empowerment Act will take effect in two months time when the 12-month transitional period expires. An example of “trumping”, he explained to MPs, was if, for example, a government department put out for tenders and ignored the provisions of the B-BBEE Act. In that case, the Act would “trump” any regarding the tenders.
This trumping therefore, he said, will take precedence over any other law and relates to all other instruments of black economic empowerment, such as Codes of Good Practice and Sectoral Charters. The provision would come into effect in October 2015, by regulation.

Codes get to nitty gritty

On Codes, Steto said, the major development had been the issue of relating “employment equity” to “management control”, with the latter now being the uniform name. Also “preferential procurement” and “enterprise development” were merged for evaluation into one element re-named “enterprise and supplier development”.

Minimum requirements had been introduced for “ownership”, “skills development” and “enterprise and supplier development”, as above.

Fighting “fronting”

Acting DG Steto re-confirmed that 25.1% remained as the target for black ownership. Emphasis was laid on the expression “true ownership” when explaining the 40% sub-minimum applicable on the net value of ownership in the hands of black people. Only investments regulated and based in South Africa will qualify as a “mandated investment”.

On Sector Codes, it was confirmed that ten sectors had been given extensions since 2013 but the final, final date was now October 2015 for all sectors. To date tourism, property, agriBEE, forestry, the media, advertising and communication were in line for approval. The process of aligning the mining charter with the liquid fuel charter had begun.

Split must come

Rumour has it “in the corridor” that these will eventually be split but the whole issue of the implementation of the Minerals and Petroleum Resources Development amendments have to be resolved before such an event can even be considered, resulting in this be an issue way into the future.
Questioning from MPs was limited, a concern being expressed by parliamentarians that the whole issue of verification agencies had to be speeded up by DTI and re-clarified. Lionel October said this was a priority.
MPs also complained that the threshold increase for BEE exempt micro enterprises, now being introduced, from R5m to R10m seemed a strange move if the idea was to develop more small manufacturing businesses but DTI responded that their view was different and the necessity to reduce red tape in the SMME world was essential.

Other articles in this category or as background
25.1% is maximum BEE control, says DTI – ParlyReportSA
DTI does flip flop on B-BBEE codes – ParlyReportSA
Equity quotas court ruling affects BEE legislation – ParlyReportSA
B-BBEE Codes of Good Practice far more onerous – ParlyReportSA
One year to implement B-BBEE Codes – ParlyReportSA
Liquid fuels industry short on BEE charter – ParlyReportSA

Posted in BEE, Finance, economic, Fuel,oil,renewables, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

25.1% is maximum BEE control, says DTI

DTI upbeat on implementation of BEE codes…..

lionel october 3

In a report to Parliament on the amended BEE Codes of Practice and their implementation as from 1 May 2015, Lionel October, Director General of Department of Trade and Industry (DTI) and his B-BBEE staff team, emphasised that the generic scorecard was aligned to government’s key priorities. He also said the State had no ambitions to take their target on black control beyond 25.1% of ownership.

Supplier Development is new title

DG October said the main emphasis of the codes had now switched to greater emphasis on what was previously termed procurement – now referred to as “supplier development”. This approach was more in alignment with the National Development Plan (NDP) objectives, DG October said, simply because that was the main direction needed to empower the development of black enterprises and build the economy on a stable growth path.

“In fact the German auto industry working with the German Chamber of Commerce had established a fund

BMW-Werk Südafrika

in South Africa”, he said, “for financing, training and building expertise in black businesses to supply the auto industry”.

There was considerable discussion on this by members and DG October said that there had been a general recognition in business and industry of the word “must” had replaced “may” in terms of B-BBEE requirements; that level four had to be reached for incentives and in general now “certainty” had been restored to the business environment on BEE issues, he felt.

Five “Elements”

The generic scorecard now had five elements, he said, which all companies, except those micro-exempted, had to comply with for recognition. All employment equity and management control had now been merged into one of those elements, now termed “management control”.    Sector codes were now to be aligned by 1 Nov. 2015, as set out in Code 003.

He said that “in response to public submissions” the import exclusion principle would be maintained and that the definition of an “empowering supplier” in the context of code alignment was a compliant entity which could demonstrate that its production and/or value adding activities were taking place in this country.”

DTI said that that “deviations of sector codes in terms of targets must be over and above those of generic codes and companies that derive more than 50% of revenue from sectors where there is already a sector code must be measured in terms of that sector code.”

DTI has no doubtful intentions

George Washington, having cut down the cherry tree, with his fatherIn general, DG October said in response to questions from MPs about the amendments, it had been his impression that business seemed to accept there were no political mala fides on the part of DTI; just a wish to get on with the planned NDP growth path which required the co-operation of business and industry on black empowerment.

The funding of Sector Charter Councils was a “joint responsibility between government and the private sector and entities must report annually on their B-BBEE status to sector council who will in return reports to the BEE Commission”, DTI said.

New sectors in the sights

Sector codes were being considered for the tourism, which had reached the stage of gazetting for public comment; “alignment” was being reached in the construction, integrated transport, ICT, financial services and chartered accountancy sectors; the property and forestry sectors had reached gazetting stages and marketing, advertising and communication were with their appropriate ministries for approval.

DG October mentioned the fact that the manufacturing industry stood alone as there were so many different sectors but over a period, aspects would be dealt with such as the film industry and textile and clothing industry.

DTI concluded their input to the meeting by advising that a technical assistance guide to B-BBEE was in process and DTI were in the process of finalising the B-BBEE verification manual.

Recent faux pas

rob davies2Opposition members asked how it was that DTI went so wrong with the question of  downgrading the pointing system for employment schemes and why it was that the Minister of Trade and Industry, Dr Rob Davies, had to retract that portion of the amendments which were not gazetted for public comment.

Chairperson Joan Fubbs intervened at this point, noting the Minister had taken the blame, had apologised for the mistake and could do no more than admit that DTI had been wrong.

DG October added that at a DTI workshop on the subject with “some stakeholders” this direction had been considered as a good option for broader rather than narrow empowerment but it had now been recognised by DTI that “they had gone down the wrong route as far as investor confidence was concerned”.

DTI had now reversed everything with the promise that this would not occur on the agenda again.

Better ideas could come

It had also been realised that such a move could also destroy imaginative plans for black management control such as that pitched by Standard Bank where 40% shareholding went to staff who could have representation on the board; 40% went to recognised BEE shareholders and 20% went into community organisations and trusts.

In answer to direct questioning by MPs, DG October confirmed that by the term “black”, DTI translatedlionel october this as African, Coloured, Indian and Chinese. He also confirmed that all these groups, if foreign and not South African citizens, were excluded.

More than 25.1% “unrealistic”

DG October, when asked by ANC MPs whether the 25.1% target for black ownership was realistic and fair considering that the demographics in South Africa demonstrated a far larger proportion of black people, he said that 25.1% could be considered as a “basic critical mass to engender a solid forward movement”.  To go any further would be unrealistic, he added.

In Malaysia, he said, local ownership was considered fair at 30% and other African countries as high as 50%, but he felt that in South Africa, where the need for the transfer of skills and training from large to small companies, especially through supplier development by state utilities and large businesses, was essential, this was a fair percentage assumption and which called for co-operation and fairness between all parties, all bearing in mind “a pretty hideous past”.

Redress of the past in all preambles

joan fubbsAt this point, Chairperson Joan Fubbs referred to the South African Constitution, reading out the clauses which not only stated that all were equal despite race colour or creed but that discrimination was possible if it was fair and she reminded MPs that redress of the past was “fair”.

She asked for all “not to isolate clauses in the Codes to determine personalised interests but get on with job of re-aligning communities that had been excluded from ownership for over 300 years”.

One ANC MP asked that the focus on big businesses be less emphasised and that DTI rather spent considerably more time with the job of developing ownership of black small business, which he stated could be “the power house of South Africa”.

He called for legislation that enforced government and public utilities, “as custodians of state power” to set an example on supplier development since, he said, one could hardly expect the private sector to follow suit, if the SOEs did not lead the way on this issue.

Incentives needed, not law says DTI

DG October said such sort of things were “impractical in the real world” and said the main challenge was a phased process of change which now had the support of many in positions of power in business. He also emphasised that B-BBEE had to tie in business and industry with incentives rather than with the law.

When asked about his recent public statement that he had set DTI’s target to produce “100 black industrialists”, he was referring rather to 100 black industrial leaders “financed and supported by DTI initiatives”.

Other articles in this category or as background
BEE comes under media scrutiny – ParlyReportSA
Rumblings in labour circles on BEE – ParlyReport
B-BBEE Codes of Good Practice far more onerous – ParlyReportSA
One year to implement B-BBEE Codes – ParlyReportSA

Posted in BEE, Facebook and Twitter, Finance, economic, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

DTI does flip flop on BEE codes

B-BBEE codes changed on “management control”…

Rob+DaviesA  lack of understanding of the effect of B-BBEE Codes on business and the industrial environment, despite a workshop on the subject, was demonstrated when the department of trade and industry (DTI) amended its own amendment in a matter of days on the point scoring issue in terms of broad- based employment share ownership schemes.

More emphasis has been placed in the Codes generally on procurement from black business, now referred to as “supplier development”.

As you were…

However, the minister of trade and industry, Dr Rob Davies, confirmed in a statement that the second amendment corrected the changes as far as employment schemes were concerned and any such changes would not be retrospective on deals already done, such earlier deals continuing to reap the same benefits under B-BBEE Code pointing as before.

Control is everything

Minister Davies said that DTI still had a think tank operating on how further to make BEE in generalplan BEE more effective insofar as pressure on business was concerned to effectively ensure that management, control and ownership by black persons was increased.  His task team appointed would report back by the end of the month. He repeated this in his budget vote speech.

DTI completely avoided established government procedure by issuing an “explanatory notice” to a gazetted publication on B-BBEE procedures by announcing a completely new aspect on the rules on B-BBEE award-pointing, in this case termed as “amending guidelines”, thus avoiding the issue of public comment.

Most worrying was the fact that minister Rob Davies failed to make any reference to this in his earlier introduction to DTI’s strategic plan to Parliament a week before, subsequently presented to the portfolio committee on trade and industry by DG Lionel October and then to the select committee on economic affairs in the NCOP.

Forgot the union movement

Just as as business leaders were, so was the trade union movement, many of whose members are part of share employment schemes, options or not, and are therefore touched on the issue of reduced profit and dividends.

As far as not mentioning this in a budget vote speech, which was an excellent opportunity to inform business, there is fine line, say opposition members, between failure to disclose to Parliament and avoiding a contentious disclosure to Parliament that that might compromise a negotiation but in this particular case of changes to B-BBEE, the matter  appears to have only involved some members of cabinet and certainly none of the large spectrum of stakeholders involved. It all came as a big surprise.

The minister has published two further notices on the amended B-BBEE Codes regarding the second phase now implemented. The Chamber of Mines was yet another body caught by complete surprise, thinking that their relationships, in this case the minister of mineral resources, were far better than they actually now seem to be. There seemed to be a vacuum in communications.

DTI has now reported to Parliament on subject

To the rescue...

To the rescue…

DTI, in the form of DG Lionel October, has since reported to Parliament on the subject of the amended B-BBEE Codes of Good Practice and explained that Minister Davies had admitted that DTI had taken the wrong route with all good intention “to take a narrower view on black management control” but now had apologised for the descision, now reversed, on this aspect of the pointing system. All is reversed, retrospectively as well.

A full report is with our clients with further comments by DTI on the Codes and their application as revised “after the event”.     This analysis of DTI’s presentation will be archived to this website in the course of time.

In the meanwhile, we note that there is useful extra-parliamentary political comment on http://www.polity.org.za/article/da-geordin-hill-lewis-calls-for-debate-in-parliament-over-elitist-bee-codes-2015-05-08

Other articles in this category or as background on this website
http://parlyreportsa.co.za/bee/dti-earns-ire-parliament-bee/
http://parlyreportsa.co.za/bee/liquid-fuels-industry-short-transformation/
http://parlyreportsa.co.za/bee/one-year-implement-b-bbee-codes/
http://parlyreportsa.co.za/bee/b-bbee-codes-of-good-practice-far-onerous/

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Employment Equity regulations unexpected

Employment Equity Act surprises on race issues….

The reality of the Employment Equity Amendment Bill passed in Parliament last October is now beginning to kick in with the enforcement of the Bill by the regulatory process.   The Bill has now become an Act but the regulations are not what were expected on the race issue insofar as equity returns are concerned.

Oddly enough there were few objections or queries on the Bill when the draft Bill was presented for public comment by the department of labour (DoL) over eighteen months ago.  The legislation looked destined for an easy passage through Parliament but opposition party DA members appeared to be divided on a number of issues.

In an unusual turn of events, the Bill, when introduced into Parliament, allowed for foreigners whose applications for citizenship were turned down before 1994 on the basis of their skin colour and such persons can be included in employment equity (EE) returns in future.    This occupied much of the discussion in Parliament and MPs appeared to be relaxed that employment in terms of BEE would be regulated by DoL according to the demographics in the related areas.

Fines based on turnover

Fines were proposed in relation to turnover of the entity in question which could fall into eleven categories varying from agriculture to manufacturing, quarrying and mining to catering and transport and from wholesale, trade and commercial agencies to finance and business services.   Electricity, gas and water entities were mentioned, as were construction and community and personal services – all with total annual turnover thresholds given.

Most public comment in the parliamentary public hearings warned of criminalising business and strong objections were voiced on this issue.

Furthermore, the provisions of the Bill allowed for all white, Indian and coloured women who had been gender disadvantaged in terms of statutory law at any stage will also qualify for inclusion in terms of equity reporting.     The Employment Equity Bill was the third in a raft of four new labour bills presented to Parliament last year.

Business lagging in action

In its briefing to Parliament before the parliamentary public hearings, DoL suggested to parliamentarians that “business and industry has been riding roughshod over the law which had been unrevised for nearly 15 years and it was time now that provision was made in their budgets for considerably more than the negligible fines of the past.”

At the time of the Bill, it was assumed by most in the public hearings that the reference to “equity in terms of national or regional demographics” would mean that employers could set equity targets or make plans as called for in what could be interpreted as reasonable and according to the geographic area each company or entity was located.

The Bill said that “guidance would be given” on this provision by the DoL. The Bill was passed and became an Act with, as always happens, the regulations awaited – a matter then purely between DoL and the employer.

Race proportional representation

It appears from press reports that the regulations “giving guidance” on the issue of race demographics are a far more contentious item than the issue of the fines objected in the public hearings in Parliament.

The employment equity plan that each company must draw up, it is reported, now call in terms of the regulations issued for the targets to represent national demographics, not regional demographics as was expected, but still wherever the entity is of 150 employees or more wherever that entity is located.

It is unlikely that this matter will be debated in Parliament again unless a legal challenge results over the particular portion of the regulations concerned or the whole Bill is overturned constitutionally, which seems unlikely. Pressure on government to relax in general terms the consequences of new labour laws is coming from a number of directions.

Previous articles in this subject
http://parlyreportsa.co.za//bee/employment-equity-amendment-bill-looks-set-easy-passage/
http://parlyreportsa.co.za//labour/employment-equity-bill-criminalises-offenders/
http://parlyreportsa.co.za//bee/turnover-fines-employment-equity-breaches/
http://parlyreportsa.co.za//bee/court-ruling-equity-quotas-affects-bee/

Posted in Facebook and Twitter, Labour, LinkedIn, Special Recent Posts0 Comments

One year to implement B-BBEE Codes

B-BBEE Codes of Practice far more onerous….

The final Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice (Codes) have been published. Companies will be granted a one-year transitional period to align with and prepare for the implementation of the revised Codes.

Trade and Industry Minister Dr Rob Davies has stated that the amended codes are a “new beginning” aligned to government’s transformation ambitions and follow a period of much debate and which were earlier released in October last year.

The revised codes deliver a reduction of elements, from seven to five, within the generic scorecard, comprising ownership, skills development, enterprise and supplier development, management control and socioeconomic development, and changes to the points required for compliance.

The codes set the minimum requirement for ownership at 40% of net value, with skills development accounting for 40% of the total weighting points, and enterprise and supplier development required a subminimum requirement of 40% within each enterprise and supplier development element, namely preferential procurement, supplier development and enterprise development.

Now five elements

All companies, barring micro enterprises, will be required to comply with the five elements of the B-BBEE scorecard including  all organs of state and public entities; and  “natural or juristic persons who conduct a business, trade or profession in South Africa, which undertakes any economic activity with organs of state or public entities.”

There is an increased threshold in points required to achieve a better B-BBEE status and exempted micro enterprises have now a threshold of R10m and general companies, known as QSEs, have a range of R10m to R50m.

On the new enterprise and supplier development enterprises totalling 40 points, 23 points are required as black ownership majority. Procurement is down to 12 points, of which only five points relate to all suppliers with black economic empowerment credentials, three points to qualifying small enterprise suppliers and four points for exempt micro enterprises with a 15% target each.

No help to importers

Commentators have pointed out that many companies acquire total, or at least most of their imported goods on international markets and this will place them a complete disadvantage. The amended codes outline in much more clarity that large companies are required to comply with all three priority scorecard elements – namely ownership, skills development and enterprise and supplier development.
Refer to articles in this category
http://parlyreportsa.co.za//bee/bee-comes-under-scrutiny/
http://parlyreportsa.co.za//bee/turnover-fines-employment-equity-breaches/
http://parlyreportsa.co.za//bee/mprda-bill-causes-contention-parliament/
http://parlyreportsa.co.za//bee/new-b-bbee-bill-avoids-circumvention-of-the-law/

Posted in BEE, Trade & Industry0 Comments

B-BBEE Codes of Good Practice far more onerous

One year for implementation…

ladderThe final Broad-Based Black Economic Empowerment (B-BBEE) Codes of Good Practice have been published. Companies will be granted a one-year transitional period to align with and prepare for the implementation of the revised Codes.

Trade and Industry Minister Dr Rob Davies has stated that the amended codes are a “new beginning” aligned to government’s transformation ambitions and follow a period of much debate and which were earlier released in October last year.

The revised codes deliver a reduction of elements, from seven to five, within the generic scorecard, comprising ownership, skills development, enterprise and supplier development, management control and socioeconomic development, and changes to the points required for compliance.

Black ownership goes to 40%

The codes set the minimum requirement for ownership at 40% of net value, with skills development accounting for 40% of the total weighting points, and enterprise and supplier development required a sub-minimum requirement of 40% within each enterprise and supplier development element, namely preferential procurement, supplier development and enterprise development.

All companies, barring micro enterprises, will be required to comply with the five elements of the B-BBEE scorecard including  all organs of state and public entities; and  “natural or juristic persons who conduct a business, trade or profession in South Africa, which undertakes any economic activity with organs of state or public entities.”

There is an increased threshold in points required to achieve a better B-BBEE status and exempted micro enterprises have now a threshold of R10m and general companies, known as QSEs, have a range of R10m to R50m.

On the new enterprise and supplier development enterprises totalling 40 points, 23 points are required as black ownership majority. Procurement is down to 12 points, of which only five points relate to all suppliers with black economic empowerment credentials, three points to qualifying small enterprise suppliers and four points for exempt microenterprises with a 15% target each.

Commentators have pointed out that many companies acquire total, or at least most of their imported goods on international markets and this will place them a complete disadvantage. The amended codes outline in much more clarity that large companies are required to comply with all three priority scorecard elements – namely ownership, skills development and enterprise and supplier development.

Refer to articles in this category
http://parlyreportsa.co.za//bee/bee-comes-under-scrutiny/
http://parlyreportsa.co.za//bee/turnover-fines-employment-equity-breaches/
http://parlyreportsa.co.za//bee/mprda-bill-causes-contention-parliament/
http://parlyreportsa.co.za//bee/new-b-bbee-bill-avoids-circumvention-of-the-law/

Posted in BEE, Facebook and Twitter, Finance, economic, LinkedIn, Mining, beneficiation, Trade & Industry0 Comments

Objections to Minerals and Petroleum Resources Bill

Exploration investment threatened……

Roughnecks wrestle pipe on a True Company oil drilling rig outside WatfordProposed changes to the Minerals and Petroleum Resources Bill (MPRDA) were given the “thumbs down” sign by a number of international participants in the oil and gas industry who provided the minister of mineral resources with a solid indication that the amendments to the Bill are not acceptable as they stand if major investment is to be expected or gas exploration encouraged.

Shell SA was largely ambivalent, although calling for greater clarity on a number of issues.

Confrontation was clearly evident from some of the submissions made by members of the oil and gas exploration industry, however, to a number of principles contained in the MPRDA Bill, the most common issues being lack of clarity for investment purposes and objections to the consolidation of the B-BBEE charters for mining and liquid fuels.

Plenty to think about

oil rigWhilst the chairperson of the portfolio committee of mineral resources claimed there were over six hundred pages from the private sector on the subject which the minister of mineral resources already had stated would probably be a contentious matter, a number of exploration companies were quite vociferous in their objections, both in their oral hearings and when it came to questioning from MPs.

At the last minute the submission from PetroSA was withdrawn subsequently explained by the CEO of PetroSA to the portfolio committee on energy as being for reasons of signatures to various confidentiality agreements.

The amendments contained in the Bill are extensive, including proposals to seek to promote beneficiation of resources: extend government ownership into all ventures; place two state officials on the boards of companies to monitor BEE compliance; the combining of both industry BEE charters; the dissolution of the Petroleum Agency of SA (PASA) and to declare “certain minerals” as strategic resources.

Anadarko at sea over Bill

anardarkoAnadarko SA, a subsidiary of Anadarko Petroleum Corporation who stated they were one of the world’s largest independent oil and gas exploration and production companies with over 5,000 employees and were currently in partnership with PetroSA in Mozambique waters, said their primary areas of concern with the MPRD amendments were that they caused total fiscal instability and uncertainty, something they were not used to working with.

They preferred a dedicated regulator to deal with the oil and gas industry who dealt with only that, they said.   On the issue of fiscal stability, their CEO, Emil Ranoszek, stated that the new Bill “lacked robust economic stability provisions to protect the rights and legitimate expectations of existing rights and permit holders going from an exploration right through to a production right”.

Risk at unacceptable levels

Anadarko, he said, was “committed to establishing a mutually beneficial relationship with the South African state and that oil and gas companies and (they) were ready to make significant investments in South Africa but the Bill in its current form disturbed this balance and raised commercial risk to unacceptably high levels”.

Ranoszek noted that PetroSA was a 20% shareholder in the areas where Anadarko already had a license.    Anadarko was one of the few companies in the world, he said, which had the technical knowledge to “draw the water depths” where they were currently working. If the terms, conditions and risks were deemed to be too high and Anadarko decided not to proceed with operations, then the company would relinquish its licenses.

How PetroSA was going to decide to handle such a situation was unknown and he could not speak for them.

Money flowing to communities

When asked how Anadarko was contributing to the job creation situation in Mozambique, Ranoszek replied that this had been both in the form of direct and indirect jobs from services providers and other sourcing companies. The revenue generated was in the billions of dollars, he said, with the result that Anadarko “was literally building small towns along the coast.”

Anadarko was presently funding a programme in a Mozambican University for the study of petroleum engineering “to upscale the locals in terms of petroleum skills and knowledge.”

ExxonMobil says no clarity

Exxon mobileRuss Berkoben, president of ExxonMobil said the amendments would have several adverse consequences for the growth potential of the South African oil and gas industry. There was “much ambiguity as to the State’s intent”, he said.

Clarity was required regarding the concept that the state would be issuing so-called special shares if it exercised an option for an interest and the state’s right to appoint two directors to a management board of a production operation.”  The Bill gave no clarity on how such matters would be applied.

Berkoben said the minister had to recognise the differences between the petroleum industry and the mining sector and it was his opinion was that PASA should be retained as a body, an entity that understood many of the complexities of his industry, some of which he outlined.  The dissolution of PASA was unwise, he suggested, and with no idea of what regulations were intended, the situation regarding investment had become totally fluid.

BEE  and beneficiation a problem for industry

On the issue of the proposed fines for non-BEE compliance, ExxonMobil said that this would further compromise the viability of certain petroleum operations and discourage expenditure on exploration and development work programmes.  On beneficiation requirements Berkoben stated that he could not visualise how these were applicable to the petroleum exploration or gas industry in reality, other than the minister having rights to offer fuel to outlets with different pricing structures downstream.

When asked by MPs if ExxonMobil had consulted at ministerial level on the Bill and its proposals, Berkoben replied that the answer was simply that ExxonMobil had not been consulted as a stakeholder originally regarding the basis of the proposed changes and he felt that they were being imposed on the oil and gas industry. They were unwarranted, he said.

SA may loose opportunity

impact fieldSean Lunn, managing director of Impact Oil and Gas Ltd, told the committee that the company held an exploration right and three technical cooperation permits along the eastern coast of South Africa and prospects so far identified lay in very deep water and a long way offshore, with the Agulhas current which heavily impacted on exploration along the coastline.

He explained that the oil and gas exploration industry was a dynamic, worldwide business and countries were ranked by their “prospectivity” in fiscal terms, resulting in an industry that was willing to take such risks as proposed on South Africa’s East Coast, one of the most dangerous in the world, when it provided the rewards that were commensurate with the risks taken.

Impact was partnering with ExxonMobil, he explained, and the potential benefits for South Africa “were great, not to mention that the country could become self-sufficient in oil and gas.  South Africa was currently considered to have very high geological risk as no major oil or gas fields had yet been found.

If the current process was unable to find a mutually workable solution, the possibilities that existed offshore may, therefore, lie untapped for decades to come and the huge potential benefit to the country could remain unrealised, he concluded.

Perilous uncertainties

A briefing by the Offshore Petroleum Association of South Africa (OPASA) was made by the acting chairperson, Vusumuzi Sihwa, who re-iterated that the oil and gas exploration environment was challenging environment; high risk; had a surprisingly low success rate with a massive capital outlay to explore a hostile offshore environment such as the East Coast of Africa; and with no guarantee of commercial success.

South Africa’s potential resources, coupled with the current legislation, encouraged the industry to take these huge risks but the MPRDA Bill created “perilous uncertainty for the industry” through lack of stability, uncertainty, coupled with added confusion through the disbandment of PASA.

Sihwa said oil and gas companies could simply shift their focus to other global opportunities.  He suggested that a full working group of all stakeholders, not just some, be convened before the President signed the Bill and the group engage meaningfully and in good faith to reach a mutually agreeable way forward.

OPASA recommended that an upstream petroleum regulator be retained as one unit in one location.

Changing playing fields

Under questioning, the company said existing regulations and the operating environment were very favourable, which was why almost all the prospecting blocks were taken up. The current amendments had brought an element of uncertainty to the table; “the rug was being pulled from under the feet of the industry and this was now a worry, especially whilst projects were in process.” Companies had come into South Africa in terms of a set of rules which were now being decisively altered, he said.

With regard to the liquid fuels charter, OPSA complained that they have never been part of any matters involving mining charters and it was incorrect to impose regulations historically from one industry upon another industry.

Unintended consequences of Bill

sasolIn a separate presentation, Sasol, represented by Johan Thyse, said that Sasol was different to many in the oil and gas industry as it was present throughout the value chain. Consequently government policy and regulation affected the company extensively. Thyse warned the chairperson that the Bill, as it stood, would have serious unintended consequences for both industries.

He said the proposals if left unchallenged would severely affect Sasol’s ability to execute its strategy in South Africa and play its role in the National Growth Path and in the National Development Plan.

Sasol commented in detail on issues surrounding free carried interest and also the mining charter as compared with the liquid fuels charter; the concept of “concentration of rights” which they were highly critical of; the transfer of petroleum licencing; what was referred to in the Bill as regional regulators; the disbandment of PASA and beneficiation as it affected Sasol.

Environmental off beam

They were particularly and deeply concerned regard environmental management issues proposed and the authorisation of issues surrounding increasing the extent of a mining rights through amendments; the removal of prescribed time-frames on many issues and the matter of redefinition of strategic minerals and any consequent effect upon on exports.

Under questioning Sasol said there was total lack of clarity on many issues. Coal for example did not follow cadastral boundaries on the issue of rights as did maritime resources and there was confusion on beneficiation targets and time-frames as to whom and what it applied to.

When asked whether the Bill, with its uncertainties and bearing in mind Sasol’s stakeholders and shareholders, would make it easier or harder to operate in South Africa Thyse replied that “due to the lack of clarity on investment in the Bill, Sasol certainly would re-look at how and where it would invest.”

Investment climate threatened

shellJan W Eggink, Upstream General Manager, Shell SA, said their primary concern where matters equity ownership provisions in the mining charter and how this would the affect investment climate. He said that his company fully supported government’s B-BBEE agenda and matters related to a state interest in the petroleum and mining industry but he needed clarity on whether mining, offshore gas exploration on BEE issues could possibly be combined under one set of rules in view of their disparity.

Under questioning, Egglink called for “more constructive engagement with government” on the combining of matters affecting both the mining and onshore gas industry”.  His overall opinion was that it was difficult to say much on the MPRDA without any knowledge of how any regulations might work.

It was after the Shell presentation, that it was announced by the chair that the PetroSA submission had been withdrawn although the absence from the hearings had been noticeable.

Refer previous articles in this category
http://parlyreportsa.co.za//bee/mprda-bill-causes-contention-parliament/
http://parlyreportsa.co.za//uncategorized/mineral-and-petroleum-development-bill-grabs-resources/
http://parlyreportsa.co.za//energy/draft-mprda-bill-for-comment/

Posted in BEE, Energy, Enviro,Water, Facebook and Twitter, LinkedIn, Trade & Industry0 Comments

BEE comes under media scrutiny

New BEE Codes & Bill to fill gaps…

rob daviesMinister of Trade and Industry, Dr Rob Davies, says the new BEE Amendment Bill and the revision of the Codes would go a long way in plugging the gaps that, in his view, businesses had taken advantage of with such moves such as fronting. The amendments would also avoid the “tick-box” manner of BEE compliance that seemed to be developing in the country, he said.

When asked about a time limit on BEE, he was clear in his reply.  “The eventual idea is to create a non-racial society in which these kinds of racial categories will no longer be considered. We are nowhere near putting a time limit on this happening”.

Now five code elements

He said that the new legislation and Codes would reduce the exorbitant amounts of money that small enterprises had to pay to consultants to prove BEE compliance. “The current generic scorecard contains seven elements and these have been reduced to five in order to align the elements more closely with the trajectory of the economic growth and development in the country.”

Minister Davies pointed out that in terms of the new Bill, about to be assented to by the President, had a total of 105 points assigned to the five elements.

Social imperatives

“Black economic empowerment is not just a social and political imperative”, he said. “We need to make sure that in the country’s economy, control, ownership and leadership are reflective of the demographics of the society in the same way the political space does. That’s why we are saying Black Economic Empowerment (BEE) remains an economic imperative.”

Minister Davies said the tandem launch of the Codes signalled the opening of a sixty-day period in which business and all other members of the public can submit their comments on the Codes for consideration before all the changes are finalised.

He concluded, when addressing a media conference on the subject, “We cannot expect to grow and develop as a country if the leadership of the economy is still in the hands of only a small minority of the society.”

BMF comes in

At the same meeting, Black Management Form’s Xolani Qhubeka, endorsed the amended Codes on BEE but warned “that whilst they area a step in the right direction, still more has to be done.”

The media asked whether, in stating that the new Bill had lightened the regulatory requirement for small business, whether this was because of the Bill or the new Codes.

Minister Davies indicated that the Codes were still under debate and this is “where reform would take place”. One of the areas being looked at was where bigger companies had to go through a lengthy verification process when dealing with smaller companies, he said.

“ Much of the comments are about the numbers, targets and the time to reach the targets but some of the fundamental principles will continue whilst the parameters and the timeframes are being discussed.”

All about fronting

When asked about the idea of incentivising plans for ownership as he perceived it, Minister Davies said this came back to the fronting question and what the problem with BEE, as it stood, was all about.

There was ownership as a proper and wholesome economic concept and there were also simple formal contract of some sort of shareholding, he said. “What has happened is that most of BEE is some kind of share transaction”.

He said his department was “weary” of empowerment of plans and new companies where  a kind of ownership had been established that was a share transaction deal. He said that BEE in its proper form had to deal with such subjects as procurement and skills training and added, “What we want to see is the entering into real ownership relationships with people who are empowered and can exercise the economic powers of ownership.”

BEE not a failure

On being asked whether, in introducing criminalisation to BEE legislation, he thought BEE had failed, Davies said “ We cannot conclude that BEE is a complete failure. I think that some aspects of it so far have showed some progress. We have seen the emergence of business people from historically disadvantaged communities playing leadership roles in business, state-owned enterprises, and government.”

“ What is lacking is the impact that was desired by the legislation originally. With any kind of legislation there will always be a need to tweak it. The fundamental difference between SA and other emerging economies is that people were subjected to racial categorisation. This had to do with social definitions. People were classified by the apartheid regime as white, black, coloured and Indian.”

“Depending on how one was classified through the Population Registration Act,” he went on, “ this defined your life chances; your education; your skills development and even for small business development. Apartheid neglected black small businesses until about ‘five minutes’ before the democratic transition.”

How long will it last

Questions then arose from the floor on the “sunset clause” issue, with one person saying that all this was 20 years ago, and people entering the economy had come through a new education system. Why could there not be term limits on this and why were there no deadlines, they asked on such legislation.

Minister Davies again referred to the past and brought up the 1913 Land Act and “the history of disempowerment of peasant farmers in the Transkei, who competed with white commercial farmers. One could clearly see how these farmers were disempowered and prevented from being commercial farmers so that they could be available to go work in the mines. Small black shop owners were not allowed to operate in the city centre and compete with the white shop owners.”

He acknowledged that it was twenty years since this had all had completely changed but the life span of disfranchisement effects has continued. “White people still have the best chances that other people do not have and this is the fact of the matter and is what have had to deal with.

Fronting penalties

When asked about the penalties on fronting, Minister Davies said at the moment as the law stood the only remedy was the common law offence of fraud; and, he added, fraud is criminally punished. “The only remedy at this point in time is the criminal one. And a maximum ten year sentence, subject to court process, is the legal process for cheating.”

Get rich quick

When it was pointed out by a questioner “that some people got richer through BEE regulations whilst a number of others stayed far behind”, Minister Davies responded by saying that BEE had to be got onto a “broader base” and this is why a Commission for BEE had been established.

He said, “You put somebody in a certain position so that you could pretend that the enterprise is something other than it is in terms of empowerment.” The Commission would look at this, he said, and in the worst case scenarios it would recommend that such cases go through the criminal justice system.

When asked when the Commission likely to be established the Minister explained the parliamentary process of legislation, the advertising of posts for a Commission and the setting up of procedures, all of which took considerable time.

More background articles on subject
http://parlyreportsa.co.za//bee/rumblings-in-labour-circles-on-bee/
http://parlyreportsa.co.za//bee/new-b-bbee-bill-avoids-circumvention-of-the-law/
http://parlyreportsa.co.za//bee/bee-bill-to-stop-fronting-tabled-in-parliament/

Posted in BEE, Cabinet,Presidential, Facebook and Twitter, Finance, economic, Labour, LinkedIn, Trade & Industry0 Comments

New B-BBEE Bill avoids circumvention of the law

lionel octoberB-BBEE legislation needs overhaul…

Director General Lionel October led the department of trade and industry’s (DTI) presentation on the new B-BBEE Amendment Bill  to the portfolio committee on trade and industry, stating that the anchor BEE legislation in place for some ten years badly needed a “proper mechanism to support the actual implementation of black empowerment and methods to deal with non-compliance and circumvention”.

He said the new changes resulted mainly from the work of the President’s Special Advisory Council charged with investigation into the areas where monitoring, evaluation and reporting were clearly ineffective, resulting in a need and to introduce penalties and criminalise those who purposely made false declarations.

Maximum penalty only set by Bill

The Bill, he said, set the maximum penalty but it was up to the courts to set penalties according to circumstances’.

The purposes of the new Bill was to give further effect to the aims and objects of black empowerment legislation, said October, and especially to improve monitoring and evaluation of SA business and industry on the subject; strengthen access to procurement opportunities for black business with focus on opportunities; and funding to improve the technical capacity of the verification industry.

NEDLAC, BUSA, Black Business Council and government departments had been consulted, including all departments in the economic and employment “cluster”, he said.

Most agree changes needed

October said that public hearings had also been conducted. On the whole, these  submissions in broad principle had supported the necessity for amending legislation with a certain number of changes being acknowledged as badly needed, mainly because of misunderstandings particularly in the area of verification and scoring and to clear up a number of unintended consequences of the original Act.

Nomande Mesatywa, chief director of B-BBEE at DTI, told parliamentarians that the objectives of the Bill were to line up other legislation impacting on B-BBEE and also to line up with the Codes of Good Practice.

The Bill established a B-BBEE Commission to monitor and evaluate black empowerment as practised; to deal with non-compliance issues and circumvention and give effect to government policy on the issue of black business empowerment.

Material amendments included a whole number of key definitions and re-definitions and matters regarding the establishment of the B-BBEE commission office.

MPs complain of racial bias

A number of MPs complained that definitions included that of black persons, defining them as black, coloured and Indian, which was simply re-introducing racially based legislation based on skin colour.

October said DG had no option but to follow procurement legislation where the scorecard used such determinations. He said that South Africa was not returning to such levels as had been practiced “in the bad years” but it was now the option or choice of business in terms of a scorecard system whether to do business with government or not.

He said that South Africa was not like Malaysia or Zimbabwe where only nationals of a certain skin colour or nationality could do business with government.

MPs still disagreed with DTI and said not only was the legislation racially based but it disenfranchised white persons from an opportunity that was their constitutional right.

Furthermore, there was a differential between national and foreign business where one’s nationality was prejudicial in dealing with government on tenders and this was bad for investors to see and contributed to the idea that South Africa was unfriendly to foreign investors.

Fronting the main problem

Again, DTI rejected such notions stated by opposition MPs, October defending the proposals in that the B-BBEE legislation before them was mainly aimed at those attempted to defeat the regulations on “fronting” and by supplying false information when submitting scorecard facts. It also remained purely an option for business whether it wished to comply or not with the scorecard system when applying for government business, which he confirmed amounted to some 45% of GDP.

He concluded that it was important for government to have a B-BBEE commissioner as a party to investigate, regulate and impose penalties on those who wished to defeat the purpose of the legislation and who wished to counter government policy on the necessity to empower middle class black development; black small business development and therefore improve the black contribution to GDP.

Posted in BEE, Earlier Stories, Finance, economic, Labour, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

BEE Bill to stop fronting tabled in Parliament

Fronting control not passive participation is aim…..

Department of Trade and Industry (DTI) has published a notice stating that it has tabled a Broad-Based Black Economic Empowerment Amendment Bill before Parliament, the eradication of “fronting” being perceived as one of the main objectives of the proposals.

In a statement released at the time, the amendments seek amongst other things to establish a B-BBEE commission “to deal with compliance” in respect of B-BBEE-related legislation and  strengthen compliance-related monitoring and evaluation and providing for offences and a maximum penalty.

On the issue of fronting, DTI have referred to in a number of documents issued by the department, although by now suggesting criminalization of the issue a clearer legal definition is going to have to be found, commentators have noted. DTI in the past has said that any process of black participation in business must result in an increase in the ownership and control of the economy by black persons.

The BEE  scorecard currently being used by business gives points for direct empowerment which focuses on black ownership of enterprises and assets through shares and other instruments that provide the holder thereof with voting rights and economic benefits, such as dividends or interest payments.

Control means, according to DTI in their BEE statements, the right or the ability to direct or otherwise control the majority of the votes attaching to the shareholder’s issued shares; to appoint or remove directors holding a majority of voting rights at meetings of the board of directors of that shareholder and the right to control the management of that shareholder.

DTI has been particularly vocal on the subject that passive ownership by black people is in itself not sufficient to bring about “transformation” or where investors have very little control over the direction of investment decisions made by fund managers. Such passive ownership of enterprises can also lead to a form of ‘fronting’ “and this needs to be guarded against”, says DTI.

Minister of trade and industry, Dr Rob Davies, has referred to this matter and further consequences of the new Bill in a number of DTI press statements recently and conferences he has addressed.

The Bill also contains more regulations to control B-BBEE verification agencies involving an independent regulatory board of auditors is also part of the minister’s proposals contained in the Bill and the provision or creation of incentive schemes to support black-owned business. The Bill is notable in that it follows the BEE scorecard principle of specifically defining a “black person” as Africa, Coloured or Indian.

A draft bill was published for comment and no doubt the portfolio committee on trade and industry will announce public hearings before the committee in the new parliamentary session of 2013. The Bill as tabled is available on the DTI website.

Posted in BEE, Cabinet,Presidential, Land,Agriculture, Mining, beneficiation, Trade & Industry0 Comments

Western Cape BEE figures disturbing, says labour minister

Releasing this year’s annual report on the Commission for Employment Equity (CEE) at a parliamentary media briefing,  labour minister Mildred Oliphant said that there were some trends which “were disturbing” which she had noted had come from provincial governments.

Oliphant said while figures as far as BEE were concerned were improving in the employment of blacks at top senior management level in both the public and private sectors, the report showed white males and females were more likely to be recruited or promoted and the Western Cape government was still performing poorly with regard to the representation of black people, particularly Africans.

She quoted from the report, “The Western Cape is the worst performing province in terms of race and gender in both government and the private sector, across every occupational level.”

Labour director general, Thembinkosi Mkalipi, said, when the issue arose of whether party politics was involved in the observation, that employers themselves had provided employment equity statistics and his department did not interfere in the capturing and compilation of data

Mkalipi said amendments clauses to the Employment Equity Act contained in the Bill currently before parliament would speed up the process of transformation. There were many companies still resisting change, he said, and fronting was still an issue. The amendments including criminalising certain issues, so that fines could be raised and that this might further rectify the imbalances in equity returns next year.

Posted in BEE, Cabinet,Presidential, Labour, Trade & Industry0 Comments

Property Sector Charter B-BBEE Codes now in force

Codes immediately effective

The department of trade and industry (DTI) has published in terms of a government gazette a property sector charter setting out the sector’s codes of good practice for black economic empowerment.

It is immediately effective, the gazette states, being “binding on all stakeholders operating in the property sector”.

According to DTI the charter will apply to all residential and commercial property; all land zoned for development; and property services including “but not limited to valuation, sales, letting and management.”

The charter will also apply to the subsidiary of a holding company or the division/business unit of a company if the primary business of that subsidiary, division or business unit is dealing in property or providing services

DTI, as stated by the minister, Dr Rob Davies, seeks to “facilitate access to finance for ownership and development.”

Amongst activities excluded from the conditions involving B-BBEE regulations are amongst other things, the acquisition of mortgage loans; the “securitisation” of mortgage loans and matters dealing  the  banks.

The charter underwent a comprehensive consultation process and was published for comment in draft form late last year.

Posted in BEE, Finance, economic, Justice, constitutional, Land,Agriculture, Trade & Industry0 Comments

Control of fronting one of objectives of new BEE Bill

As part of a media presentation held by department and trade of industry (DTI) and in a cabinet statement issued a few days before. it was re-affirmed that a Broad-Based Black Economic Empowerment Amendment Bill, 2012, was about to be tabled Parliament.  The Bill has at one of its main aims the objective of controlling what is termed as “fronting”.

The Bill was published by DTI in November last year for public comment and fulfils a specific stated wish of DTI minister Rob Davies to criminalise  fronting as a statutory offence.

The new Bill will establish a Broad-Based Black Economic Empowerment (B-BBEE) commission to strengthen compliance-related monitoring and evaluation, and also the regulation of B-BBEE verification agencies, by the independent regulatory board of auditors.

The B-BBEE functional body will also, the statement said, provide for “the creation of incentive schemes to support black-owned businesses as part of DTI’s national B-BBEE plan.”

Posted in BEE, Cabinet,Presidential, Justice, constitutional, Trade & Industry0 Comments

Oil industry stakeholders to meet on B-BBEE audit

Chairperson Sisi Njikelana told parliamentarians and those who attended the portfolio committee of energy meeting on the audit findings of the Liquid Fuels Charter (LFC), that all stakeholders in the industry will  meet to discuss the way forward  to improve the black empowerment stake in the oil industry.

His comments followed a presentation of the audit by Moloto Solutions by Tseliso Maqubela, deputy director general hydrocarbons for department of energy (DoE) together with Ms Gosetseone Leketi, the DoE liaison officer who had worked on the audit. It is understood that that such a meeting has taken place and that procurement by the oil industry was a major discussion point.

Maqubela told parliamentarians that DoE could now proceed on the subject of black empowerment within the oil industry without just anecdotal information but with extra basic facts and home truths garnered in an exercise, which, with the exception of a few companies, was marked by good co-operation amongst the industry.

DoE had placed the audit findings on its website a week earlier, the original survey of the LFC being commissioned in 2010 and its findings being only up to that date. The document was placed before cabinet in April this year, the audit having been completed by Moloto Solutions as late as April 2011.

In the light of the fact that the LFC had an expiry date of 2010, the purpose of the audit, as explained by the minister of energy at the time, was to establish the level of compliance with the BEE factors laid out in the charter before renewal was negotiated if it was to be, the industry not having its own B-BBEE sectoral agreement through the department of trade and industry.

DoE in its recommendations following its own summation of the audit suggested that a sectoral B-BBEE code be developed through DTI after agreement at the recommended stakeholder’s meeting and that the issue of penalties for non-compliance should be debated.

However, Sisi Njikelana said that his approach to penalties was that they were not going to be “important” if all co-operated and that DoE would not necessarily have to legislate for this necessarily. But he reminded all present that “we do not have another ten years like before.” There had to be some very urgent improvements, he said.

“We need a systematic way to track demographics but in order to get meaningful change” all involved have to apply their minds”, he said. An official ongoing monitoring body that was more effective and constantly updated progress amongst oil companies was suggested by Njikelana.

In presenting their views on the report, Gosetseone Leketi of DoE said that oil industry participants had agreed to the application of the LFC in its industry ten years before BEE legislation was applied in South Africa generally.

Presumably now DoE would have to consider how to amend the LFC after negotiation with oil industry participants or alternatively consider a separate document along the lines of other sector industry BEE charters, studying the success and failure of the separate oil industry scorecard factors in South Africa and its verification system to date.

Concern was expressed by Moloto Solutions in the audit that the department of trade and industry, with its current work load, could take on another sector industry BEE draft.

In very broad principle, Moloto’s audit findings indicated overall compliance with the charter at 48% with black shareholding averaging at 18.91%, albeit narrow-based, with a very low participation by black women as shareholders. Only one company has met the LFC target for shareholding control which participants at the meeting assumed to be Total whose French shareholders had made a major sale to black owners upon exiting.

As far as the audit was concerned generally, Leketi said skills development areas stood out with a poor record, as did employment equity and also preferential procurement in certain aspects. On the issue of procurement, the audit findings indicated considerable effort by Moloto to establish the background and factors behind the procurement of crude oil and the mechanisms involved, which they had clearly found difficult to establish in some cases due to competitive factors.

Leketi noted that this was an area where black employees had to gain more control and experience, according to Moloto Solutions. Leketi said that this was a DoE view.

The report separates, as a distinct entity, employees who are “foreign nationals” and Leketi pointed to the difficulty some companies had in reporting structures on product issues where responsibility and organogram management structures were constantly changing without any reference to the particular trading conditions in any country.

For example, Maquebela subsequently said on this issue in discussions later, “Suddenly an international company with its head office in Hong Kong could decide that Africa would report through Egypt for, say, LPG, he said, and the management in that area would have no understanding of (B-BBEE) conditions applying in this country”.

Leketi, in presenting the report, said the audit stated up front that that punitive measures should be designed against companies that do not make “the 25% cut” and that “some way” has to be found the develop supportive cultures for BEE within company behavioural patterns, especially in line management.

Companies, the report said, should place on notice boards employment equity achievements and targets and companies should urgently upgrade their black recruitment programmes, especially amongst black women  and improve the overall knowledge base of the their own staff at all levels regarding BEE employer requirements and targets if achieved or not achieved.

The findings were specific, Leketi said, on the need for “employee capacity building” at all levels with reward and achievement acknowledge programmes to accompany skills acquisition, especially in “scarce skills” areas.

Maquebela stressed in his comments that in his view, on the aspects of skills training which was so absent in most companies (particularly scarce skills needed in cleaner fuel development, he said) that the principle of “learning by doing” should be emphasised and that “internationals” should take a lot more advantage of their ability to send employees overseas on training courses.

The meeting concluded by chairperson Sisi Njikelana saying that bearing in mind the date of the findings, “the industry must have another platform to express itself”.

Tseliso Maquebela agreed with this route but warned that he rejected those findings where oil companies had said during the audit that they were not aware of the conditions that they or their employers had to meet with regard to black empowerment.

“Nobody could be in this industry and not be aware of exactly where they stood in regards to targets, timings and the details of LFC requirements in addition to BEE regulatory aspects.”    He rejected any idea that employees interviewed should have been ignorant of why the audit was being conducted and what the onuses were upon on their employers.

He stated however that he agreed with the findings of the report that there was great ignorance generally amongst employees of the urgency behind the need for industry to re-organise along BEE lines and noted the comments in the audit that much appeared to be done in an atmosphere of haste after initial interviews had been conducted.

 

Posted in BEE, Cabinet,Presidential, Energy, Finance, economic, Fuel,oil,renewables, Justice, constitutional, Public utilities, Trade & Industry0 Comments

Parliament lists its recommendations to minister of energy

In a parliamentary report on the department of energy’s strategic report for the year 2011/2, of which the final recommendations will go to the minister of energy, a call was made for “loopholes” in the Petroleum Products Act to be expedited and to increase funding of both the nuclear regulator (Nersa) and the Nuclear Energy Corporation of South Africa (Necsa).

Both Nersa and Necsa had drawn attention in their annual budget vote presentations earlier to Parliament on the general shortage of funds appropriated in terms of Pravin Gordhan’s 2012/3 budget, Nersa complaining that their budget was so insufficiently funded as to become a “danger to South Africa”.

On the subject of Nersa, the final page of the committee’s report to the minister states that Nersa should have its “mandate increased” to cover “petroleum pipeline and piped gas” and also to deal with the “deteriorating electricity infrastructure situation”. The report also said that Nersa should involve itself in South Africa’s nuclear build programme, as should Necsa.

In the subject of electricity distribution, recommendations included the necessity of introducing urgently the smart grid plans which became evident during departmental presentations. They drew attention to the SANEDI plan, called by the Central Energy Fund a “Smarter Grid”, which was the integration of two main utility infrastructures in South Africa, the electricity grid and the existing information and the telecommunications infrastructure.

The committee drew the attention of the minister to their concern on the continued reliance on the Sasol pipeline carrying natural gas from Mozambique, asking the minister to note their views that gas exploitation would become a major issue in the development of Southern Africa.

They noted that refinery capacity figures were “very low”, as evidenced by the quantity and volumes being imported, and that storage capacity and infrastructure development in this area was therefore an immediate necessity. On refineries generally, the committee noted the “very encouraging stance” adopted by PetroSA on its own refinery project, “Project Mathombo”.

The committee drew attention to the work of the South African Supplier Development Agency (SASDA) to accelerate progress in the development of black suppliers in terms of BBEEE and economic growth plans of government but said that “Engen, BP, Shell and Chevron have not contributed at all to transformation in the areas where SASDA was involved”.

The recommendations to the minister pointed out that promises were made in terms of the agreements signed “but nothing has happened”. SASDA’s attempts to get the companies on board, “even after engaging their respective CEO’s, had proved fruitless”.

 

 

Posted in Cabinet,Presidential, Electricity, Energy, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Public utilities, Trade & Industry, Uncategorized0 Comments


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