PETROLEUM PRODUCTS AMENDMENT BILL, 2003

1. PETROLEUM PRODUCTS AMENDMENT BILL, 2003 August 2003

2. ACKNOWLEDGEMENT • Sapia and its members wish to acknowledge the assistance given to them by the Department of Minerals and Energy in helping them to understand the intent of the draft Bill.

3. History and Outline • August 2001, DME published draft Petroleum Products Amendment Bill, 2001 and SAPIA members submitted extensive comment • The second draft Bill has recognised some of these comments • In terms of the Bill, DME will implement a system of licensing on all facets of an industry that has been informally regulated in the past. • This move to proper regulation in terms of an Act of Parliament is welcomed • Post promulgation, no person may “hold or develop a site, constructor operate an installation for the manufacture of petroleum products or conduct the business of a retailer or wholesaler without the appropriate license”. • The Pipelines Bill will separately regulate the pipeline network and storage facilities

4. Recent Government Interventions • There has been much action by Government in recent months, including: • Petroleum Pipelines Bill • National Ports Authority Bill • Petroleum Products Amendment Bill • New Clean Fuel Specifications • Change from IBLC to BFP and • Regulation of other product prices: LPG / IK • Implementation of the DAS system • Air Quality Management Bill

5. Certain Overarching Concerns • Several different Bills/Acts impact the same activities, facilities or operations in different ways. As a result, plants and facilities are potentially subject to differing pieces of legislation with overlapping jurisdiction which makes compliance extremely difficult. This does not promote investment • The relationship of the draft Bill to the jurisdiction of the Competition Regulator is also a cause for concern. • The extent of regulatory power given to the executive is also a concern, especially as the absence of the draft Regulations make a full assessment of the impact of the Bill difficult.

6. SAPIA supports the objectives of the White Paper, but does the Bill go further? • Paragraph 7.4 of the White Paper makes it clear that the phasing out of the Ratplan would be done simultaneously with the introduction of interim, limited legislation which would serve to prohibit, for example, self-service and vertical integration. • It is Sapia’s view that the Bill goes further than this. The Bill provides for: • A new overarching licensing system for the liquid fuels industry. Manufacturers will require licenses to manufacture petroleum products and Wholesalers and Retailers will require licenses. Licenses will be required to transport and store product in terms of the Pipelines Bill. Every site from which products are sold will require a site license. • A new regulator will be created known as the “Controller of Petroleum Products” who will be charged with overseeing the licensing system and implementing the objectives of the Bill

7. Criteria for allocation of licenses Allocation of site and retail licenses will be based on the following broad criteria: • promoting an efficient retail petroleum industry • facilitating environment conducive to commercially justifiable investment • promoting advancement of HDSA’s • creating employment opportunities and developing small business in the retail sector • ensuring country-wide availability of petroleum products at competitive prices

8. Criteria for allocation of licences cont. • There is at present an absence of detail as to how these broad criteria will be applied: • This leads to a lack of predictability and consequent investor uncertainty which is undesirable. • Industries which require large-scale capital investment by participants need stability and certainty in the legal framework and how it is to be applied. • Good legislative principles require that criteria for decision-making be made explicit.

9. Specific Clauses/Issues • These are detailed in our written submission and relate to these sections: • Section 2 (b) Prescription of prices at which petroleum products (pp) may be sold or bought • Section 2 ( c ) Publication of prices at which pp’s are sold • Section 2A (4) Vertical Integration Prohibitions • Section 2A (4) (b) Self –service Prohibition • Section 2B (1) (a) Promoting an efficient retail industry • Section 2C 4 (a) Entitlement to licence • Section 2D System for allocation of retail licences • Section 2B(3) One retail license per site • Section 12 Offences and Penalties • Section 12B Arbitration

10. Specific Clauses/Issues continued • Section 12 C (a) (5) Ministerial Power to make Regulations • Section 12 C (a) (VII) Transfer of ownership of licences • Section 12 C (b) Prohibited Business practices • Training Sites • The Retail Site License

11. Summary When considering the Bill, Parliament should ensure that: • There are no conflicts between the statutes making up the regulatory system; and • That structures, processes and techniques of governance created by proposed laws are consistent • That a climate of certainty is engendered. • That nothing in the Bill is in opposition to any principles which the Competitions Commission support.

12. Summary continued • It is therefore important that Parliament give consideration to the Pipelines Bill and the Petroleum Products Amendment Bill at the same time, and that the one is not approved without ensuring its rational consistency with the other and with sound competition law principles.

13. DRAFT PETROLEUM PRODUCTS AMENDMENT BILL, 2003Conclusion DISCUSSION QUESTIONS