DECLARATION OF INTENT

Dated 2 April 2004
BY
THE DEPARTMENT OF MINERALS AND ENERGY (DME),
THE SOUTH AFRICAN PETROLEUM INDUSTRY ASSOCIATION (SAPIA)
AND
THE AFRICAN MINERALS AND ENERGY FORUM (AMEF)

THE ABOVE MENTIONED HEREBY DECLARE THEIR INTENT TO DEVELOP AN EMPOWERMENT SUPPLIER DATABASE AND TO INVESTIGATE THE ESTABLISHMENT OF THE A SUPPLIER DEVELOPMENT AGENCY AND A RELATED PROGRAMME TO ACCELERATE PROGRESS ON EMPOWERING HISTORICALLY DISADVANTAGED SOUTH AFRICANS BY INCREASING THE PROPORTION OF THE LIQUID FUELS INDUSTRY'S PROCUREMENT SPEND THAT IS SPENT ON PURCHASES OF GOODS AND SERVICES FROM HISTORICALLY DISADVANTAGED SUPPLIERS

In recognition of:

• The letter and spirit of the Charter for the South African Petroleum and Liquid Fuels Industry on Empowering Historically Disadvantaged South Africans in the Petroleum and Liquid Fuels Industry;
• The commitment by the signatories to the charter and the programmes that have been put in place to ensure that the objectives of the said charter are achieved;
• The progress that has been made on empowering HDSAs in the three main areas specified in the charter:
  
  • Ownership and control
    
  • Human resource development
    
  • Procurement

And noting

• The challenges faced by the oil industry in meeting the requirements in terms of procuring services from HDSAs is due to limited access to HDSA suppliers because of inter alia:
  • The technical skills required to service the industry are not readily available;
    
  • Limited commercial expertise and ability to negotiate with companies of the size and sometimes the nature of the companies in the Liquid Fuels Industry;
    
  • Limited information by such suppliers about the industry;
  • Lack of experience and exposure in servicing the industry;
  • Limited exposure to and understanding of the industry;
    
  • Difficulty in breaking through existing relationships between suppliers and companies that they service;
    
  • Challenges faced by HDSA suppliers in securing the capital required to service the industry;
  • Inconsistencies between company BEE policies with technical and other policies;
  • Insufficient funds to ensure development of such suppliers;
    
  • Time, effort and commitment required to ensure supplier development takes place;
    
  • The short term solutions that are put in place leading to suppliers being dependent on the company that has assisted to establish it and therefore limiting the growth of that company;
    
  • The success of suppliers dependent to the large extent on the assistance of technical staff in the company;
    
  • Competing interests within the companies to satisfy requirements of Supplier development (external to the company) and Human Resources Development (internal to the company) from the same pool of limited resources;

The above parties in evaluating the progress made since the signing of the charter and;

In recognition of their mutual commitment in the charter to facilitate the development of strategies for intervention to ensure that suppliers are developed and that financing institutions understand the needs and characteristics of the industry;

Therefore agree to continue the development of the Empowerment Supplier database and to undertake a study on the most appropriate interventions for Supplier Development and to establish a business plan to test the viability of establishing a Supplier Development Agency ("The Agency") to benefit the industry. They also agree that each company will in addition continue its own procurement programmes and practices.

In the event of a joint decision that "The Agency" is a viable option it is the intention of the signatories to facilitate the development and the sustainable functioning of "The Agency" by facilitating a pooling of resources available in the industry. On the proving of such viability the participants undertake to encourage their members to make available a portion of their individual supplier development funds to the development and implementation of "The Agency" in a phased manner.

Phase 1: The investigating of the viability of "The Agency"
Phase 2: The development of "The Agency";
Phase 3: The implementation of "The Agency";
Phase 4: The long-term operation of "The Agency".

It is envisaged that The Agency will primarily serve the industry by:

• Prevention of "fronting" in the supply of services;
  
• Consolidating its efforts in supplier development;
  
• Matching supplier capacity to industry needs;
• Being the source of information to HDSA suppliers;
  
• Paying special attention to the development of suppliers for the industry;
  
• Providing industry with a list of accredited suppliers;
  
• Providing technical support to suppliers;

The Agency's objective will be:
- To serve as a link between the Oil Industry and HDSA suppliers;
- To enhance the benefits derived by both parties;
- To serve as a platform for joint strategy formulation on capacity building;
- To ensure progress is accelerated;

This will be achieved through:
- Creating and maintaining a database of accredited suppliers;
- Creating and maintaining a database of industry needs as indicated in its contracts and daily purchasing requirements;
- Establishing and maintaining relationships with training service providers and financing institutions;

The main functions of the agency therefore being:
- Database Management;
- Human Resource Development;
- Financial Management;
- Public Relations and Communication;
- Legal Advice;
- Research and Monitoring;
- Accreditation and Verification of Suppliers;

SIGNATORIES TO DECLARATION OF INTENT

South African Petroleum Industry Association (SAPIA)

African Minerals and Energy Forum (AMEF)

Department of Minerals and Energy