Black economic empowerment in the South African petroleum and liquid fuels industry: Alignment with the B-BBEE Acts and Codes
11 Oct 2017
On 13 September 2017 the Minister of Trade and Industry (with the Minister of Energy) informed the public that the Department of Energy, and the Liquid Fuels Industry, intend to align the Liquid Fuels Charter with the Broad-Based Black Economic Empowerment Act 53 of 2003 (B-BBEE Act) and Codes of Good Practice published under the B-BBEE Act. Click here to view the 13 September Proclamation (the Proclamation).
The Proclamation highlights the objectives of the process of alignment, the rationale for the alignment and the key stakeholders that will participate in the process.
The Liquid Fuels Charter was first published in 2003 under an amendment to the Petroleum Products Act 120 of 1997. It was one of the first sector charters published and thus quite rudimentary. It included, for example, a requirement that all licences for exploration and production “reserve” not less than 9% buy-in by Historically Disadvantaged South Africans (HDSAs). This is notably less than stakeholder commitments in other sectors. For example mining, where a 26% commitment for HDSA ownership was made (although this is currently in contention, including challenges to Mining Charter III published earlier this year). 
The Department of Energy has been engaging with the fuel industry, trade unions and other stakeholders to draw up a scorecard to accompany the Liquid Fuels Charter for quite some time.
The status of its ‘alignment’ with the more recently published B-BBEE Codes for measuring B-BBEE status levels has been long awaited.
The B-BBEE Act and its Codes, published in 2013 (providing for a transitional period which ended in April 2015), required the alignment of sector charters. If sector charters were not aligned, they would be trumped by the provisions of the B-BBEE Act and Codes (in terms of section 3(2) of the B-BBEE Act, which took effect on 24 October 2015).
On 30 October 2015 the Minister of Trade and Industry published an exemption for 12 months for the alignment of the Charters for the “upstream petroleum industry and mining and minerals industry administered in terms of the Mineral and Petroleum Resources Development Act 28 of 2002”. This notice arguably did not cover all segments of the liquid fuels industry (i.e. those that do not fall under the MPRDA, as is the case with exploration and production (among other activities)). In February 2016 the Minister of Trade and Industry gave notice of the repeal of certain sector codes which were not aligned, but no mention was made of the Mining and Liquid Fuels Charters.
The Proclamation intends to progress this process of alignment of the Liquid Fuels Charter with the B-BBEE Codes. It is essentially a notification of the intention to prepare and publish a new Liquid Fuels Charter and the process of aligning it with the B-BBEE Codes. It also:
- notifies of a Steering Committee appointed by the Minister of Trade and Industry to initiate the process of alignment of the “B-BBEE Petroleum and Liquid Fuels B-BBEE Sector Transformation Charter”, after which a Council will be established for the development of a Sector Code;
- invites “major stakeholders” to participate in a consultative process for the purposes of aligning the Charter with the Codes;
- lists the objectives for the alignment, which includes addressing the disproportionate representation in the petroleum value chain based on the demographics of South Africa (para 4.2.2);
- sets out the rationale for a Sector Charter, which includes the inadequate transformation across the value chain (para 5.1.4); and
- identifies categories of major stakeholders.
The Proclamation does not contain particularly substantive provisions. However, interested parties should be aware of, and involved in, the process to the extent that future B-BBEE empowerment score requirements may affect their businesses, particularly in licencing contexts such as the wholesaling and retailing of liquid fuels. There is no doubt that a new Liquid Fuels Charter will include increased B-BBEE targets, particularly in a sector said to be lagging on black ownership,  and it will likely result in a more complex system of measuring and scoring B-BBEE points.
The Proclamation also provides contact details should members of the public wish to participate in this process by submitting comments.
- Proclamation 31 is signed by the Minister of Trade and Industry on 14 August 2017 and informed the public of the Minister of Energy and the Liquid Fuels Industry’s intention to align the Charter. The attached ‘public proclamation’ was signed by the Minister of Energy on 13 June 2017.
- The Liquid Fuels Charter’s scope is stated as “appl[ying] to the privately owned parts of the industry and to all parts of the value chain, inter alia:
- Exploration and production of oil;
- Liquid fuels pipelines, single buoy moorings (SBMs), depots and storage tanks;
- Oil refining and synthetic fuel manufacturing plants, including lubricants;
- Transport, including road haulage and coastal shipping;
- Trading, including import and export;
- Wholesale and retail assets / infrastructure.”