SUBMISSION BY THE SOUTH AFRICAN PETROLEUM INDUSTRY ASSOCIATION ("SAPIA")
TO THE SELECT COMMITTEE ON FINANCE
"THE PREFERENTIAL PROCUREMENT POLICY FRAMEWORK ACT 5 OF 2000"
(the "PPPF Act")
The South African Petroleum Industry Association ("SAPIA") represents the following South
African oil refining and marketing companies: BP, Caltex, Engen, PetroSA, Sasol, Shell, and
Total.
SAPIA members welcome the opportunity to comment on the abovementioned legislation insofar as the Act pertains to procurement practices and policies implemented by government departments and parastatals, and particularly where tenders for the supplement of petroleum products to these organs of state are concerned.
We support the Committee's review and consideration of the legislation on the basis that the Act, as currently worded, is outdated. In particular, we are concerned about the use of he important term "historically disadvantaged individual" which is limited by definition, to females, physically disabled persons and those previously excluded from the national franchise. In this regard, we believe that significant progress has been made across the board, both in the formulation of Empowerment legislation by the Department of Trade and Industry and at an industry level where stakeholders have, in consultation with government developed industry-specific solutions to empowerment challenges.
This progress is not however recognised nor reflected in the current definition of HDI in the abovementioned Act and as a result preferential point allocation for a tenderer's HDI status becomes skewed. SAP IA members are particularly concerned about the formulation of tender criteria and preferential point allocation for the HDI or BEE status of the tenderer.
The guidelines for preferential point allocation in terms of the Act consistently fails to acknowledge the tenderer's compliance with sectoral, industry-specific Empowerment imperatives, such as those enshrined in the Charter for the Liquid Fuels industry.
In this regard, we ask that this Committee properly consider and give effect to the significant progress made by the oil industry in South African under the guidance of our Minister of Minerals and Energy, the Honourable Ms. Miambo-Ngcuka.
All of SAP IA's members are signatories to the Charter for the South African Petroleum & Liquid Fuels Industry on Empowering Historically Disadvantaged South Africans In the Petroleum and Liquid Fuels lndustry. The Charter was signed and entered in November 2000 by SAP IA, each of the SAPIA member companies, the African Minerals and Energy Forum, ("AMEF"), Africa Oil, Exel Petroleum, the Department of Minerals and Energy, the Ministry of Minerals and Energy, the Central Energy Fund, and African Minerals Petroleum, amongst others.
This important agreement constitutes the industry framework for redressing historical, social and economic inequalities and progressing the empowerment of historically disadvantaged South Africans in the liquid fuels industry.
The Charter provides the framework for an integrated black empowerment strategy for this industry that encompasses equity ownership, (25% HDSA ownership of the entities that own the operating assets of the oil industry by 2010), capacity building, employment equity, procurement and skills development.
A Ministerial Empowerment Evaluation Committee has been formed for the purpose of evaluating company compliance with the Charter. This Committee will render compliance findings to the Minister in respect of the progress made by each company on a five point scale as follows:
1. Exceeds Charter requirements
2. Meets Charter requirements
3. Charter requirements not met, but substantial progress made
4. Committee not met, but reasonable progress made
5. Substantial non-delivery of Charter commitments
However, despite the existence of this comprehensive empowerment framework complete with mechanisms for measuring and rating compliance, tender requirements for the supply of liquid fuels to government and parastatal organizations continue to allocate preferential tender points that do not align with, and may juxtapose, the objectives, definitions or measures contained in the Liquid Fuels Charter.
By way of example, a tender document for the Supply of fuel to an organ of state may allocate as much as 24% of the bidder’s qualification points to a 50 + 1% BEEequity ownership profile Which can effectively render the tender non-competitive, despite the fact that the tendering oil company has complied fully with its obligations in terms of its sectoral empowerment initiative, namely the Liquid Fuels Charter.
It is our view that such point allocation practices effectively discount and disregard the significant progress that has been made by the oil industry and provides little or no reward to the oil company that has, for example, achieved a "1" rating by the Minister's Empowerment Evaluation Committee. We submit that a "1" rating by this Committee constitutes a reliable and objective measure of a bidder's empowerment progress on all fronts and provides a tool for distinguishing "fronting" from true empowerment.
Where for example, the organ of state is confronted by a bidder which claims that t is 51% black empowered, and another that claims it is 25% black empowered, the government department may distinguish the two competing bidders by reference to the Evaluation Committee's certification of the competing companies and take comfort in the fact that it is rewarding the truly compliant company.
SAPIA members urge this Committee to ensure that Charter compliance in the liquid fuels industry, as measured by the Ministerial Empowerment Evaluation Committee, is a worthy and defendable model of empowerment which should be recognized, properly acknowledged and rewarded in legislation such as the Preferential Procurement Policy Framework Act.
SAPIA members believe that the industry regulator, the Department of Minerals and Energy will likewise defend the Charter and its objectives. In support hereof, the Petroleum Products Amendment Bill, 25 of 2003, specifically references Charter compliance as a criterion for the allocation of licenses in terms of the Act.
We encourage the Committee to ensure that the legislation under review obliges government, parastatals and organs of state to recognise and reward bidders who are able to show compliance with their industry-specific HDI target profile and specifically reward those companies that are recognised and judged compliant by the Evaluation Committee.
We are of the view that the sustainability of black economic empowerment initiatives rests in part on a uniform approach byall government departments in South Africa that transcends industry 'borders' and ensures good alignment between government departments.