Broad-based Black Economic Empowerment > Overview

PetroSA regards BEE as a deliberate socio-economic process or intervention strategy designed to redress (re-address) the imbalances of the past and to facilitate the participation of black people in the economy. PetroSA's BBBEE policy fulfils its corporate BBBEE responsibilities in an integrated manner. It has developed a strategy for advancing the empowerment of black South Africans within PetroSA and the Petrochemical industry.

• Increasing the number of new businesses to be created for black people;
• Increasing the number of new jobs to be created for black people;
• Maximising the amount of money to be spent on procuring goods and services from black suppliers with emphasis on businesses owned by women and disabled people;
• Increasing the participation of black people in equity participation (stakes) from other opportunities identified by PetroSA within and outside South Africa; and
• Ensuring that PetroSA leads other enterprises in the sustainable transformation and empowerment of black South Africans.

A project of this size will require the services of many companies and create opportunities for broad based equity ownership. PetroSA intends to maximise the involvement of BEE companies in the project, in the procurement of services, and in incorporating BEE companies as shareholders in the project, facilitating broad based BEE.

Equity Participation

Black ownership and management control of companies in the economy represents an important means of giving effect to real empowerment in the economy. PetroSA supports the inclusion of black owned companies in acquiring ownership and equity. The amount of equity to be made available to a black equity partner is indicated in our BEE policy as between 10% and 30%. It is implied that this be at the project level, rather than at a corporate level. The actual amount of equity offered may, however, be influenced by the amount of equity that PetroSA has in this crude refinery project, the amount of control that PetroSA may wish to retain, and any pre-emptive rights held by other (non BEE) equity partners.

MAGNITUDE OF FUNDING REQUIRED

The amount of funding required to execute this project, and the contribution required from potential black equity partners, may be beyond the means of such partners. It is therefore important for PetroSA to ensure that a black equity partner has the financial means to meet its funding obligations. Alternatively, adequate and appropriate assistance is to be provided by PetroSA to secure funding for the BEE equity partner. In addition to this, the consideration paid by the black company for the acquisition of its equity share, may be discounted from a normal commercial consideration. The magnitude of the discount will be project specific, and could take the form of a discounted acquisition price, funding arranged by PetroSA at a discounted interest rate, or a waiver of past costs incurred by PetroSA to develop the project. A proper financial due diligence will be performed on any potential black equity partner and adequate assistance will be provided by PetroSA to ensure that the black equity partner is able to meet its funding obligations before any equity is transferred to such partner.

DEVELOPMENT OF CAPACITY AND SKILLS

In addition to financial gain, one of the cornerstones of empowerment is the development of skills and capacity amongst black persons. Black equity participation therefore enables the development of critical and core skills through active participation by the partner in the activities of the project. Black equity partners should be companies with adequate management and employees to participate actively with PetroSA in project activities in order to be trained and developed. Most of the studies for this project will be conducted by specialist international engineering firms that have the in-house technology for a particular application. PetroSA will endeavour to place historically disadvantaged personnel in training positions within these service providers during all phases of the project. Where possible, PetroSA will promote partnerships between these international companies and relevant local companies to achieve the maximum transfer of skills.

SUSTAINABILITY OF BLACK EQUITY PARTNER

A specific concern related to BBBEE is the risk that any black owned company obtaining an equity position in a project with PetroSA will dispose of such equity position as soon as a profit can be made. This may result in mere enrichment rather than empowerment and capacity development, and may nullify the full purpose of the BBBEE equity participation objective. While the freedom of a black owned company to trade has to be respected, PetroSA will select potential black equity partners for this project carefully to ensure long-term sustainable involvement in the petroleum industry. The selection process of potential black equity partners will include consideration of the long-term objectives of the BEE Company, its business plan and commitment to remain and grow in the petroleum industry.

SUPPLIER DEVELOPMENT PROGRAMME

PetroSA will continue to regard supplier development as a vital component in achieving its BBBEE objectives. To this end, PetroSA has initiated a supplier development programme at its Mossel Bay refinery. The programme will continue to focus on the incubation of potential and emerging black entrepreneurs for a minimum of a year. PetroSA aims to provide human resources, technical assistance, identify further opportunities, identify entrepreneurs from the Coega area, create space for the workshop and resources to the programme. PetroSA has learnt invaluable lessons from the Supplier Development Programme concerning the maximisation of local content and black suppliers. Strategies are in place to increase BBBEE suppliers for the crude refinery project. Examples of criteria to be used to identify focus areas in the Supplier Development Programme:

• High spend / high value items (strategic focus, high impact).
• Items currently being imported.
• Items for which there is a clear lack of competitiveness in the existing supply base.
• Items for which global demand is increasing and there is potential for exports.
• Items for which the cost structure of local supply is potentially competitive with the cost structure of competing global suppliers.
• Items for which market failures appear to be preventing investment.
• Items for which local supply could be made more competitive or viable through realistic demand-side or supply-side interventions.
• Items for which there is repetitive spend over time (to create sustained local demand) - often operational rather than capital expenditure.

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