REPUBLIC OF SOUTH AFRICA

PPAB ver12 of 28-8-03

PETROLEUM PRODUCTS AMENDMENT BILL

Version 28 August 2003

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(As introduced in the National Assembly as a section 75 Bill; explanatory summary of Bill published in Government Gazette No. 24752 of 15 April 2003) (The English text is the official text of the Bill)

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(MINISTER OF MINERALS AND ENERGY)

[B25-2003]

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 GENERAL EXPLANATORY NOTE:

[ ] Words in bold type in square brackets indicate omissions from existing enactments.

___________ Words underlined with a solid line indicate insertions in existing enactments.

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B I L L

To amend the Petroleum Products Act so as to define certain expressions and to substitute or delete certain definitions; to provide for the licensing of persons involved in the manufacturing or sale of petroleum products; to promote the transformation of the South African petroleum and liquid fuels industry; to prohibit certain actions relating to petroleum products; to amend, substitute or repeal obsolete provisions; to provide for appeals and arbitrations; to authorise the Minister of Minerals and Energy to make specific regulations; to substitute the long title; and to provide for matters connected therewith.

BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:—

Amendment of section 1 of Act 120 of 1977, as amended by section 1 of Act 61 of 1985 and section 1 of Act 68 of 1991

1. Section 1 of the Petroleum Products Act, 1977, hereinafter referred to as the principal Act, is hereby amended—

(a) by the insertion before the definitions of "inspector" of the following definitions:

"’bulk’ means a prescribed quantity of petroleum product;

‘Charter’ means the Charter in Schedule 1;

'hold' when in relation to land means the owning or leasing of land or buildings on land for the for the purpose of establishing or operating a site;";

(b) by the insertion after the definition of "inspector" of the following definitions:

" 'licence' means a manufacturing, wholesale, site or retail licence;

‘Liquefied Petroleum Gas’ means a petroleum product which consists mainly of propane or butane or both and which can be stored as a liquid under relatively low pressure for use as a fuel;

'manufacture' means the manufacture of petroleum products for commercial purposes, and includes the blending and re-refining of petroleum products, and 'manufacturer' shall be interpreted accordingly;";

(c) by the substitution for the definition of "Minister" of the following definition:

"Minister" means the Minister of [Mineral and Energy Affairs and Public Enterprises] Minerals and Energy;";
  1. by the insertion after the definition of "petroleum product" of the following definitions:

‘paraffin’ means a liquid petroleum product that is a complex mixture of predominantly, aliphatic hydrocarbons ranging from C9 to C16, used mainly for lighting, cooking and heating purposes, also known as kerosene.

‘prescribed’ means prescribed by regulation by notice in the Gazette;

" 'retail' means the sale of petroleum products to an end-consumer from at a site and "retailer" shall be interpreted accordingly;

'retail licence' means a licence to conduct the business of a retailer;";

(e) by the deletion of the definition of "service";

(f) by the insertion before the definition of "this Act" of the following definitions:

" 'site' means premises on land zoned and approved by a competent authority for the retailing of prescribed petroleum products;

(g) by the substitution for the definition of "this Act" of the following definition:

"this Act" includes any regulation, [or] notice and licence issued or given in terms of this Act;"; and

(h) by the deletion of the definition of "Treasury";

(i) by the addition of the following definitions:

" 'wholesale' means the purchase and sale in bulk of petroleum products by a licensed wholesaler to or from another licensed wholesaler, or from a licensed manufacturer or sale to a licensed retailer or to an end-consumer for own consumption use and "wholesaler" shall be interpreted accordingly;

'wholesale licence' means a licence to conduct the business of a wholesaler’."

Amendment of section 2 of Act 120 of 1977, as amended by section 1 of Act 72 of 1979, section 2 of Act 61 of 1985, section 2 of Act 68 of 1991 and section 1 of Act 46 of 1993

2. Section 2 of the principal Act is hereby amended—

(a) by the substitution in subsection (1) for the words preceding subparagraph (i) of the following words:

"(a) for the purposes of ensuring a saving [of] in, and the efficient and safe use of, petroleum products, regulate in such manner as he or she may deem fit, including the imposition upon any person of any duty in connection therewith, or prohibit—";

(b) by the substitution for paragraph (c) of subsection (1) of the following paragraph:

"(c) prescribe the price, or a maximum or minimum price, or a maximum and minimum price, at which any petroleum product may be sold or bought by any person, and conditions under which the selling or buying of petroleum products other than in accordance with the prescribed, maximum or minimum price may take place;"; and

(c) by the addition of the following paragraphs:

"(f) oblige any person to publish the prices at which petroleum products are available for sale sold, including conditions relating to the frequency of such publications, its content and structure, the method and manner of its publication and the displaying thereof;

(g) prescribe the quantities of crude oil or petroleum products to be maintained by any person.".

Insertion of sections 2A, 2B, 2C, 2D, 2E and 2DF in Act 120 of 1977

3. The following sections are hereby inserted in the principal Act after section 2:

"Prohibition of certain activities

2A. (1) Subject to section 2B, no A person may not-

(a) hold or develop a site;

(b) construct or operate an installation for the manufacture of petroleum products; or

(c) conduct the business of a wholesaler or retailer.
    1. manufacture petroleum products without a manufacturing licence;,
    2. wholesale prescribed petroleum products without an applicable wholesale licence;

    3. hold or develop a site without there being a site licence for that site;

    4. retail prescribed petroleum products without an applicable retail licence;

issued by the Controller of Petroleum Products.—

(2) (a) If a person engages in an activity in contravention of subsection (1) the Controller of Petroleum Products must by written notice direct that person to cease such activity forthwith.

(b) The Controller of Petroleum Products may allow a person to continue with an activity contemplated in paragraph (a) pending an application and the issuing of a licence if the cessation of such an activity is likely to lead to a material interruption in the supply of petroleum products.

(c) If an application contemplated in paragraph (b) is unsuccessful, the Controller of Petroleum Products must by written notice direct that person to cease such activity and, if applicable, to rectify any state of affairs resulting from that person’s activities within the period stipulated in the notice.

(3) If a person engages in an activity in contravention of a licence issued to that person, the Controller of Petroleum Products must by written notice direct that person to comply with the licence and, if applicable, to rectify any state of affairs resulting from such contravention within the period stipulated in the notice.
    1. Any person who has to apply for a licence in terms of sub section (1) must-

        1. in the case of a manufacturing licence be the owner of the property concerned and if not the owner must have the written permission of the owner,

        2. in the case of a site licence be the owner of the property concerned or in the case of publicly owned land have the written permission of the owner;

        3. in the case of retail and wholesale licences be the owner of the business entity concerned;
        4. do so in the form and manner prescribed.

(5) No person may make use of a business practice, method of trading, agreement, arrangement, scheme or understanding which is aimed at or would result in–

(a) vertical integration of ownership in respect of manufacturing wholesaling or retailing of petroleum products

(a) a licensed wholesaler holding a retail licence except for training purposes as prescribed, but excludes wholesalers and retailers of liquefied petroleum gas and paraffin;

(b) the sale of petroleum products using a system of self-service by consumers.
    1. self-service by consumers of prescribed petroleum products on the premises of a licensed retailer.

    1. A licensed manufacturer shall only sell petroleum products to a licensed wholesaler or a licensed retailer, or both, except for export purposes.

    2. A licensed retailer may shall only purchase petroleum products from a licensed wholesaler or a licensed manufacturer, or both.

Licensing

2B. (1) The Controller of Petroleum Products must issue licences in accordance with the provisions of this Act.

(2) In considering the issuing of any licences in terms of this Act, the Controller of Petroleum Products shall give effect to the provisions of section 2C and the following objectives:

(a) Promoting an efficient manufacturing, wholesaling and retailing retail petroleum industry;

(b) facilitating an environment conducive to efficient and commercially justifiable investment;

(c) promoting advancement of historically disadvantaged South Africans;

(d) the creation of employment opportunities and the development of small businesses in the petroleum sector; and
    1. ensuring countrywide availability of petroleum products at competitive prices.
    2. promoting access to affordable petroleum products by low income consumers for household use.

(23) Any licence issued by the Controller of Petroleum Products remains valid for as long as the licensee—

(a) the licensee complies with the conditions of the licence; and

(b) remains active in the licensed activity remains a going concern excluding a site;

(c) in the case of a site, there is a corresponding valid retail licence..

(3) The Controller of Petroleum Products may must issue only one retail licence per site.

  1. To ensure the continued operation of a licensed activity and the prevention of hardship the Controller of Petroleum Products may, upon application, issue a temporary license which shall be valid for a period not of longer than six months.

  2. It shall be a condition of a wholesale licence that the licensee must purchase and sell petroleum products-

      1. manufactured from coal, natural gas and or vegetable matter;

      2. that meet prescribed specifications and standards where applicable; and

      3. when such petroleum products are available; and

      4. at mutually acceptable prices, subject to section 2 of this (the principal) Act,

before purchasing and selling petroleum products manufactured from other raw materials;

2C Transformation of the South African petroleum and liquid fuels industry

  1. In considering licence applications in terms of this Act, the Controller of Petroleum Products shall-

      1. promote the advancement of historically disadvantaged South Africans; and

      2. give effect to the Charter .

(2) The Controller of Petroleum Products may require any category of licence holder to furnish information, as prescribed, in respect of the implementation of the Charter.

 

Transitional licensing provisions]

2CD. (1) For the purposes of this section—

'hold' means to own or lease land, or to possess of an option to purchase or lease land, that has been zoned and approved by appropriate authorities for use as a site;

and

'process of developing' means the construction of, or the completion of the infrastructure necessary to use such land as a site within a period of 540 calendar days twelve months from the date of commencement of the Petroleum Products Amendment Act, 2003.

(2) Notwithstanding any provision of this Act, aAny person who, at the time of commencement of the Petroleum Products Amendment Act, 2003—
    1. holds and is in the process of developing a site; or

      2. (b) conducts the business of a manufacturer, wholesaler or retailer, shall, subject to subsection (3), be deemed to be the holder of a licence for that activity.

    2. manufacturers or wholesales petroleum products, or retails prescribed petroleum products;

shall, subject to subsection (3), be deemed to be the holder of a licence for that activity.

(3) (a) Any person referred to in subsection (2) shall, within a period of six months from the date of commencement of this section, apply for a manufacturing, wholesale, site or retail licence, as the case may be, in terms of section 2A.

(b) Subsection (2) shall cease to apply if the person fails to apply for a licence within the period contemplated in paragraph (a).

(4) (a) An applicant contemplated in subsection (3) shall, on application, be entitled to be issued with a licence, for the operation of the activity concerned if the applicant is is in compliance with all national, provincial and local government legal requirements, that are in force immediately prior to the commencement of this Act,for the operation of the activity concerned for the operation of the activity concerned;

(b) Such applicant shall be subject to the general conditions of a licence set out in this Act, but not to any financial security requirement prescribed by regulation.

System for allocation of licences

2ED. (1) Notwithstanding any provision of this Act, tThe Minister may by regulation, in accordance with the objectives referred to in section 2B(1) and 2C, must prescribe a system for the allocation of site and their corresponding retail licences and the supply of prescribed petroleum products to such licensees, by which the Controller of Petroleum Products shall be bound: Provided that the Controller of Petroleum Products shall only be bound by the provisions of such a system for the period set out in that regulation or any amendment thereto or any substitution thereof, which period may not exceed ten years from the date of promulgation commencement of that regulation.

(2) Any system contemplated in subsection (1)—

(a) shall be published for comment in the Gazette prior to promulgation;

(b) must be based on the objectives referred to in section 2B(1); and

(c) may—

(i) link the allocation of site and retail licences to the total mass or volume of petrol and diesel consumed in South Africa;

(ii) link the issuing of site and retail licences to the total mass of petrol and diesel manufactured in South Africa or imported into South Africa; and

(iii) link the issuing of new site or retail licences to the termination or transfer of ownership of one or more existing site or retail licenses.

(2) The Minister shall prior to promulgating a system contemplated in subsection (1) invite public comment thereon by publishing it in the Gazette and duly considering such comments.

(3) A system contemplated in subsection (1)—

      1. must intend to transform the retail sector into one that has the optimum number of efficient sites;

      2. must intend to achieve an equilibrium amongst all participants in the petroleum products industry within the constraints of this Act;

      3. must be based on the objectives referred to in section 2B(1) and 2C;

      4. must promote efficient investment in the retail sector and the productive use of retail facilities-

        1. by limiting the total number of site and corresponding retail licences in any period; and

        2. by linking the total number of site and corresponding retail licences, in any period, to the total mass or volume of prescribed petroleum products sold by licensed retailers; and

        3. other appropriate means;

      5. must allow licensed wholesalers to trade with each other any contractual rights and obligations they may have, to supply licensed retailers with prescribed petroleum products;

      6. may be such that in the supply to a licensed retailer of prescribed petroleum products that meet prescribed specifications and standards, preference is given , on application, to wholesalers:-

        1. firstly, of such products manufactured from coal, natural gas and vegetable matter; and

        2. secondly, of such products manufactured from other raw materials;

      7. may link the issuing of a new retail licence to the termination of one or more site licences and the corresponding retail licences;

(f) may be such that the supply to a licensed retailer of petroleum products shall-

      1. be manufactured from coal, natural gas or vegetable matter, when available;

      2. meet prescribed specifications and standards, where applicable;

      3. be at mutually acceptable prices, subject to section 2 of this Act;

before the supply of prescribed petroleum products manufactured from other raw materials;

(g) may link the issuing of a new site license and the corresponding retail licence to the termination or transfer of ownership of one or more existing site licences and the corresponding retail licences;

(h) may link the issuing of a new retail licence to the transfer from a licensed wholesaler of contractual rights enjoyed by that wholesaler in respect of one or more licensed retailers, to another licensed wholesaler.

(4) The Minister shall from time to time review the efficacy of the system contemplated in subsection (1) against the objectives of this Act and may amend the system in an appropriate manner and the provisions of subsection (2) shall mutatis mutandis apply.

(5) Nothing contained in subsection (1), or (2) or (3) absolves any person from the obligation to apply for and hold possess hold a licence in terms of this Act.

2F System for allocation of licences for Liquefied Petroleum Gas and Paraffin

(1) For the purposes of this section ‘retail’ means the sale of liquefied petroleum gas or paraffin to an end-consumer and ‘retailer’ shall be interpreted accordingly.

    1. The Minister may by regulation, prescribe licensing systems for the wholesaling and retailing of liquefied petroleum gas and/or paraffin, or both by which the Controller of Petroleum Products shall be bound.

    2. A system contemplated in subsection (1) must—

      1. be based on the objectives referred to in section 2B(1) and 2C;

      2. be targeted at poverty alleviation for low income households;

    1. The Minister shall prior to promulgating a system contemplated in subsection (1) invite public comment thereon by publishing it in the Gazette and duly consider such comments.

    2. A system contemplated in subsection (1) may in designated areas, restrict the retail of liquefied petroleum gas or paraffin to one or more retailers.

    3. The Minister shall from time to time review the efficacy of the system contemplated in subsection (1) against the objectives of this Act and may amend the system in an appropriate manner and the provisions of subsection (4) shall mutatis mutandis apply.

 

Amendment of section 3 of Act 120 of 1977

4. Section 3 of the principal Act is hereby amended by the substitution for subsections (1) and (2) of the following subsections:

"(1) The Minister [may]—

(a) shall, subject to the laws governing the public service, appoint any person in the public service as Controller of Petroleum Products and may appoint persons in the public service as regional controllers of petroleum products or as inspectors for the Republic or any part thereof;

(b) may on such conditions and at such remuneration as he or she may in consultation with the [Treasury] Minister of Finance determine, appoint or authorise any other person or person belonging to any other category of persons to act as regional controller of petroleum products or as inspector for the Republic or any part thereof.".

Repeal of section 4A of Act 120 of 1977

5. Section 4A of the principal Act is hereby repealed.

Repeal of section 4B of Act 120 of 1977

6. Section 4B of the principal Act is hereby repealed.

Repeal of section 5 of Act 120 of 1977

7. Section 5 of the principal Act is hereby repealed.

Repeal of section 7 of Act 120 of 1977

8. Section 7 of the principal Act is hereby repealed.

Repeal of section 8 of Act 120 of 1977

9. Section 8 of the principal Act is hereby repealed.

Repeal of section 10 of Act 120 of 1977

10. Section 10 of the principal Act is hereby repealed.

Repeal of section 11 of Act 120 of 1977

11. Section 11 of the principal Act is hereby repealed.

Substitution of section 12 of Act 120 of 1977, as amended by section 5 of Act 72 of 1979 and section 8 of Act 61 of 1985

12. The following section is hereby substituted for section 12 of the principal Act:

"Offences and Penalties

12. (1) Any person who contravenes a provision of this Act, shall be guilty of an offence and be liable on conviction to a fine not exceeding R1 000 000,00, or to imprisonment for a period not exceeding ten years, or to both such fine and such imprisonment: Provided that if a directive issued in terms of section 2A(2)(c) or (3) is complied with within the period specified therein, the person concerned shall be absolved from criminal liability.

(2) The Minister may by notice in the Gazette amend the amount referred to in subsection (1) in order to counter the effect of inflation.".

Substitution of section 12A of Act 120 of 1977, as inserted by section 9 of Act 61 of 1991

13. The following sections are hereby substituted for section 12A of the principal Act:

"Appeal

12A. (1) Any person directly affected by a decision of the Controller of Petroleum Products may, notwithstanding any other rights that such a person may have, appeal to the Minister against such decision.

(2) An appeal in terms of paragraph (a) shall be lodged within 60 days after such decision has been made known to the affected person and shall be accompanied by—

(a) a written explanation setting out the nature of the appeal;

(b) any documentary evidence on upon which the appeal is based.

(3) The Minister shall consider the appeal, and shall give his or her decision thereon, together with written reasons therefor, within the period specified in the regulations.

Arbitration

12B. (1) The Controller of Petroleum Products may on request by a licensed retailer alleging an unfair or unreasonable contractual practice by a licensed wholesaler, or vice versa, require, by notice in writing to the parties concerned, that the parties submit the matter to arbitration.

(2) An arbitration contemplated in subsection (1) shall be heard–

(a) by an arbitrator chosen by the parties concerned; and

(b) in accordance with the rules agreed between the parties.

(3) If the parties fail to reach an agreement regarding the arbitrator, or the applicable rules, within 14 days of receipt of the notice contemplated in subsection (1)–

    1. the Controller of Petroleum Products shall must upon notification of such failure, request appoint a suitable person to act as arbitrator; and

    2. the arbitrator must determine the applicable rules.

(4) An arbitration arbitrator contemplated in subsection (12) or (3)—

      1. (a) shall be limited to determining only whether the contractual practices concenrd are unfair or unreasonable; and

        2. shall result in a final and binding order, including any order as to costs, made by the arbitrator.

      2. shall determine whether the alleged contractual practices concerned are unfair or unreasonable and, if so, shall make such award as he or she deems necessary to correct such unfair or unreasonable contractual practice; and

      3. shall determine whether the allegations giving rise to the arbitration were frivolous or capricious and, if so, shall make such award as he or she deems necessary to compensate any party affected by such frivolous or capricious allegations;

(5) Any award made by an arbitrator contemplated in this section (12B) shall be final and binding upon the parties concerned and may, at the arbitrator’s discretion include any order as to costs to be borne by one or more of the parties concerned.

 

Regulations

12C.

(1) The Minister may, without derogating from his or her general regulatory powers, make regulations—

(a) regarding manufacturing, wholesale, site or retail licences, including—

(i) the form and manner in which an application for a licence or an amendment to an already issued licence shall be made;

(ii) procedures to be applied in the evaluation of an application for a licence, and the period within which it shall be considered;

(iii) the monies payable for licences;

(iv) the form of a licence;

      1. conditions of licence restrictions which may be imposed by the Controller of Petroleum Products in respect of a particular licence or a category of licences, including-

        1. the rights, duties and obligations of licensees in the manufacture, handling storage, packaging, dispensing and sale of petroleum products; and

        2. conditions relating to the advancement of historically disadvantaged South Africans; and

        3. the number of retail licences that may be possessed held by a licensed wholesaler for retail training purposes;

(vi) the obligation of a licence holder to keep records and to furnish particular information to the Controller of Petroleum Products, and the frequency of furnishing such information;

(vii) the transfer of ownership of licenses excluding the price thereof of the licensed property;

(viii) the discontinuance termination of a business conducted in terms of a licence, and the procedures relating to such discontinuance termination;

(b) prohibiting a business practice which conflicts with any the objectives of the Act referred to in sections 2B(1) and 2C;

(c) regarding the records and information to be kept by the Controller of Petroleum Products, and the furnishing thereof to third parties in accordance with the provisions of the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000);

(d) regarding the continuity of supply of petroleum products by licensees under normal operating conditions, and in cases of potential or actual emergency including an amendment to a licence;

(e) regarding the specifications and standards of petroleum products;

(f) regarding the prohibition of the blending or mixing of different petroleum products or the blending or mixing of petroleum products with other substances which will lead to deviation from prescribed petroleum product specifications or standards or for the purpose of avoiding the payment of any tax, duty or levy;

    1. regarding the rehabilitation of land used in connection with a licensed activity by the licencee concerned, including the lodging of financial security for rehabilitation purposes and the composition and amount of such security."

    2. The period within which a decision on an appeal should be given..

  1. The Minister shall, except in an emergency, prior to promulgating any regulation contemplated in subsection (1)(e)-

    1. invite public comment thereon by publishing in the Gazette the full particulars of the specification or standard; and

    2. allow a period of not less than two months after the date of publication of such Gazette for the submission of public comment;

    3. duly consider such comments.

Substitution of long title of Act 120 of 1977

14. The following long title is hereby substituted for the long title of the principal Act:

"To provide for measures in the saving of petroleum products and an economy in the cost of distribution thereof, and for the maintenance and control of a price therefor, for the furnishing of certain information regarding petroleum products, and for the rendering of services of a particular kind, or services of a particular standard, in connection with petroleum products; to provide for the licensing of persons involved in the manufacturing and sale of certain petroleum products; to promote the transformation of the South African petroleum and liquid fuels industry; to provide for the promulgation of regulations relating to such licences; and to provide for matters incidental thereto.".

Short title

15. This Act is called the Petroleum Products Amendment Act, 2003, and comes into operation on a date to be fixed by the President by Proclamation in the Gazette.

Schedule 1

Charter