Portfolio Committee CPT Parliament 10 May 2007 Mmbulaheni Mashanyu SASDA CEO

1. SASDA PRESENTATION Portfolio Committee CPT Parliament 10 May 2007 Mmbulaheni Mashanyu SASDA CEO “In the event of a loss of cabin pressure, the oxygen masks will drop from above your head. Pull the mask over your mouth and nose and continue to breathe normally. Please ensure your own mask is secured first before you assist other passengers, including children.”

2. Introduction & Background • The Department of Minerals and Energy (DME) requested PetroSA to lead the development of HDSA suppliers through a Supplier Development Programme for the Energy sector. PetroSA’s in-house Supplier Development Programme is largely informed by the study commissioned by DME to develop suppliers for the liquid fuels industry; • The pilot was expected to achieve eight broad objectives: • Platform for cost and operational efficiency, • Mayor industry players will understand DME requirements, • Demonstrate the feasibility of Concept, • Valuable lessons will be learnt, • Development of Operational Framework, • Will serve as a training ground for the industry, • Creation of an implementation model, • Creates an industry wide awareness.

3. Pilot Project Results • Number of companies 5 • Investment made by PetroSA R14million • Revenue made R72,3million • Fulltime Employees 90 +38 new • Market Expansion/ reach refinery, Saldanha, Milnerton, FA platform and Orca • Successful project 2006 Shutdown • Observation 5 companies in 1year, today we could have established 25 • Women - • Average Education level Standard 8( Grade 10) • Achievement All entities held their annual general meetings successfully Note: these are Z suppliers, and prove that rural development can work properly supported

4. Industry’s Need for Change • The inability of HDSA suppliers to diversify their customer base (i.e. to supply more than one oil company); • Lack of timely access to information about procurement opportunities; • Limited availability of skills critical to core industry operations; • Lack of access to financial resources, especially for capitalisation purposes; • The domination of large incumbent suppliers; • Long-standing relationships between incumbent suppliers and the industry; • fronting; • inefficiencies due to duplication of some BEE procurement processes, and • misgivings by the oil companies about the potential for ‘free-rider ship’, i.e. the potential for competitors to have access to suppliers in whose development they did not invest.

5. SASDA’s Mandate Vision To be a leader in developing globally competitive Black South African suppliers in the petroleum and liquid fuels industry. Mission To accelerate progress in the empowerment of historically-disadvantaged South Africans through increased access to industry procurement opportunities by: • Accrediting suppliers to evaluate their BEE status; • Developing black suppliers skills to meet industry’s required standards; • Capacity building through direct support and partnership with developmental agencies.

6. SASDA’s Strategic Objectives • To consolidate existing industry supplier development efforts, by: • harmonising suppliers’ accreditation; • Fully utilising the common industry database; • To implement and manage supplier development programme; • To actively source suppliers according to industry’s requirements; • To preferentially develop suppliers from designated* groups • To increase access to information by HDSA’s; • To facilitate HDSA supplier participation in global procurement; • To provide a mechanism for monitoring and auditing of compliance and • measure successes, through: • good corporate governance of the Agency • regular feedback between the Agency and industry

7. SASDA’s Functions • The refinement of BEE criteria, targets and measurements as well as the development of accreditation standards; • The management and further development of the empowerment supplier database (including broadening the database to also include information about procurement opportunities and service providers); • The establishment of enabling relationships between suppliers and service providers • Market research, industry and supplier monitoring and reporting; • Clarification, on request (focusing on resolving issues to do with unsuccessful bids or non-performance); • Alignment of strategies and actions of SASDA with other complementary initiatives and processes, e.g. those of the DTI, Department of Finance and SETAs; and • Reporting against agreed KPI’s (e.g. number of new accredited suppliers, number of new jobs created, average life-span of newly created suppliers, etc.).

8. SASDA Business Model

9. High High Emergence of Emergence of Size of Impact Size of Impact globally globally competitive competitive suppliers suppliers Impact Impact Broadening of Broadening of empowerment empowerment Progressive Progressive institutional institutional framework framework Common Common database database Low Low Beginning state Beginning state Time Time End state End state SASDA establishment SASDA interventions SASDA Implementation

10. SASDA Implementation

11. Supplier Classification • Class P–a Black supplier that has the capacity and competencies to deliver almost immediately on its offers to the industry, • Class R–a Black supplier that requires either a bit of coaching or assistance with capital raising or partnering with other suppliers of the same good or service, • Class Z- a Black supplier that requires extensive input in either skills upgrading or capacity building before it is ready to deliver goods and services it wants to deliver to the industry.

12. Key Performance Indicators • Total number of supplier staff trained • Number of new suppliers accredited • Total number of jobs created • Number and value of contracts acquired under SASDA guidance • Number and value of projects funded and undertaken • Number of supplier loaded onto database • Value and number of contracts recorded on the database • Tender /bid success rate of SASDA-affiliated HDSA suppliers • Number and value of white companies transformed • Percentage value increase to total procurement spent as a result of SASDA interventions “demand driven development”

13. OIL COMPANY SEGMENT Inputs: Audit DME report ZBEE Report Inputs Procurement short fall report Inputs 36 month rolling forecast procurement plan Inputs: No matches (Supplier Shortfall Report) Inputs: Signed off Oil company targets Inputs: Industry sign off Inputs: Board Approved Plan Inputs Approved project plan “Intervention toolbox” Inputs Tenders. Notification to matching Suppliers. Inputs Contract details from database Meetings Visits Oil Co. Procurement Spent Status Procurement plan Match Procurement Opportunities to suppliers database Individual Oil company Development plans Project Scoping Project Plan Funding Intervention Tender Process Follow up Outputs: Audit report Procurement short fall report Outputs: 36 month rolling forecast procurement plan Outputs: Confirmed matches and No matches reports Outputs: Signed off Targets per Oil company Outputs: Project scope Industry sign off Outputs: Project plan Application Outputs: Release of funds by Oil co. Outputs: Industry sign off” Outputs: “Outcome Report” Outputs: Reports Performance Contract renewals Metrics: Statistics BEE % spent BEE spent per Category % No of BEE to Total suppliers P,R,Z Women Youth Disabled Community BEE suppliers per value chain % spent per buyer Metrics: Statistics No Tender plan Received Duration of tender plan Plan Total value % R value per value Chain % R value per Category % BEE penetration Per category % BEE penetration Per value chain Metrics: Statistics No of matching Opportunities No of unmatching Opportunities % P suppliers %R suppliers % Z suppliers Sole suppliers International Suppliers White businesses Match per category Unmatched per category Metrics: Statistics % sent required No BEE required Per category No BEE required Per value chain No R suppliers No Z suppliers Mergers JV’s White Companies to be transformed Import replacement R value set aside For women, youth Metrics: Statistics Cost/budget Interventions Required Resources limit R value required Suppliers of service Project timeline SHEQ Standards Contract Minimum requirements gaps Partners contracted Type of supplier: P,R,Z Metrics: No signed off R value signed Off Project Duration Category of spent % contribution to Oil Company target, % contribution to value chain % contribution to Total spent Number of jobs Number trained % contribution to Industry target Metrics: Total R value paid Project funding Ops funding Non finance Contribution % fund to total Procurement % fund to EBITDA Metrics: No project plan signed off R value of Projects % projects to Target No projects In core business No projects in Global spent % non finance Resource deployed On site training provided Metrics: No tenders Issued Tenders Matching Unmatching No suppliers Notified Responses Received BEE short listed Metrics: Statistics

14. HDSA SUPPLIER SEGMENT • Inputs: • DME report • Audit • Contract renew. • Oil company • Tender plans • Forecast reports Inputs “Opportunity gap report” Inputs Awareness report Oil co. data Own data Inputs Enrollment application Credit check Org. Health Audit Inputs Assessment & “Gap closure report” (project spec.) Inputs Project scope Budget “Intervention toolbox” Inputs Referral form Audit Inputs Acc. Suppliers Tenders. Notification to matching Suppliers. Inputs “Outcome Report” Meetings Visits etc. Feed back Tender Process Identify business opportunities Awareness Programs ID of Prospective Supplier Assessment and “gap Closure ID” Project Proposal Plan Intervention Certification Follow up Outputs: Opportunity Gap report % spent report Outputs: Awareness report Outputs: “Prospect list” Enrollment Applications Outputs: Assessment/ “Gap closure report” P, R, Z Outputs: Project scope Budget Application Industry sign off Outputs: Developed suppliers “Sign off” Referral form Outputs: Audit report BEE Score Accreditation Outputs: “Outcome Report” Outputs: Performance Report Contract renewals Metrics: Number of adverts Amount spent No of suppliers Contacted per category Value of opportunity Type of medium Used Project leader Responsible Duration of program Response volume by Supplier calcification Metrics: No applications Supplier P Supplier R Supplier Z Categories Advertised Youth owned bus Women owned bus People with disability Community enterprise Supplier by region/ province Metrics: P supplier gaps R supplier gaps Z supplier gaps Technical Business Standards SHEQ Finance Materials Equipment Facilities Logistics transport Metrics: No projects Successful Project value Finance raised Projects done Project received Projects approved Projects rejected Projects signed off Project % per Category of spend % spent per category Metrics: No of Co developed; Amount spent No trained Qualification type Intervention type Standards obtained JVs formed Mergers done Acquisitions done Finance raised Metrics: No accredited Number of 50,1% Number of 25,1% Number registered Number Cos per Category Revenue made No of applications Received; processes Metrics: Number of Contracts won Value of Contracts Jobs created 50,1% and 25,1% BEE spent as % of total proc Metrics: No of renewals Increased contract Value Increased Jobs created Quality of service Conducive Environment Created Diversification Metrics: No tenders received No quotes received % procurement spent No of BEE suppliers as % of total Suppliers % procurement spent Of total procurement By individual Oil Co Amount spent on Supplier development 5Spent per category For Industry and Individual Oil Co

15. Income Statements - 28 February 2007

16. Balance Sheet - 28 February 2007

17. SASDA Governance & Processes (i) Board Charter – set out duties, rules & processes for Board of directors (ii) Board Committees • Audit, Finance & Risk • Human Resources & Remuneration • Strategy & Planning (iii) Verification process – verification of suppliers BEE status, technical & commercial competence (iv) Intervention process – process to develop suppliers to be technically & commercially competent (v) Business Development Charter - Developed by SASDA to operationalise SASDA’s business plan (vi) Policies & Procedures – Developed and implemented

18. Partnerships • Financial support –Standard Bank, Absa, Nedbank, IDC, ,Khula • Technical & SHEQ – Engineering consultants to assist in analyzing technical specifications from the industry • Mergers & Acquisitions advisors – database of law firms and corporate/financial advisors mainly for transforming non BEE suppliers,i.e. Law firms, Sizwe Ntsaluba, WDB Investment Holdings, Wip Capital, Nations Capital, Ngubane &Co, • Training institutions (business schools) – UCT, Wits, USB, Kwazulu Natal, Cida Campus. • Investment groups and BEE Advisory consultants

19. SASDA Supplier Database System • Gathers supplier general information and information related to BEE. • Gathers buyers contracts information per category and sub- category. • Analyse and interpret submitted information to generate preliminary BBBEE score pending verification. • Determines supplier BEE Procurement Recognition Level. • Generates industry indicator progress reports. • Generate consolidated progress reports. • Auto match tenders to potential suppliers using categories and sub-categories. • The system sends notification to matching suppliers. • When there is no match, then the opportunity for intervention is identified. • Enables buyers to search for suppliers using categories and sub categories to filter. “demand driven development”

20. Database Consolidation Project

21. Suppliers Registered to date PRELIMINARY BEE CONTRIBUTION LEVELS OF REGISTERED SUPPLIERS

22. Gather data, Interpret & Review Verification & Processing Finalise Rating Data Gathering Verification Methodology BBBEE Verification Framework Issue Service Enquiry and Form Forms to client Issue BBBEE verification Measurement Pack Conduct verification Interviews & site visits Finalize the rating report Complete Forms Both parties sign terms of verification engagement Draft a rating report & forward to client Verification Manager sign off Forms Submit completed form Client send back forms & supporting docs SASDA and the client engage each other on the contents Issue final verification report and certificate Review form for completeness Review forms & docs for completeness Client Admin Staff Jnr Evaluator Index and File Documentation Snr Evaluator Verification Manager Develop a Verification plan & Preliminary Report White Font = Control/Quality/integrity Step ** See detailed process

23. Interventions • Road shows requesting opportunities held with all oil companies in October 2005 • The Board Strategy session held on 15/02/06, agreed on the following activities for 2006. Internal projects were done BUT NO external projects were undertaken. • We only received one opportunity from Total to develop Inkwali Engineering.

24. Challenges • Different expectations from industry & DME( mandate); • Some oil companies continue to do their own supplier development, thus duplicating SASDA; • Establishment of satellite offices; • Establishment of the verification entity; • Information on procurement opportunities from oil companies; • Transfer of oil companies database to SASDA; • SASDA operations highly depends on the buyers; • Not all oil companies utilize SASDA’s services; • Recruitment of staff ; • Funding structure for SASDA; operational and projects, late payment; • Budget and Business Plan still not approved; • Crude oil procurements; • Different expectations from industry & DME( mandate); • Satellite offices being disputed by Industry; • Stakeholder board versus professional independent board.

25. Way forward • DME and Oil companies to provide direction regarding SASDA’s mandate; • Full utilization of SASDA services and resourcing; • Clear targets set for the individual Oil companies in view of 2010 industry charter deadline; • Agreement on regional satellite offices to support rural entrepreneurs and enable on job training; • Transfer of supplier database by oil companies to SASDA; • Develop common specification framework for Industry; • Restructuring of SASDA to be a multisectoral development agency; • Monitoring and evaluation of performance of individual companies by the regulator; • SLA between Oil companies, DME and SASDA prioritised; • Review of charter to have clearly defined and measurable deliverables; • Clarity on crude, jet fuel etc a part of value chain to be prioritised; • Funding model for SASDA outlined by the regulator; • Regulations to be developed to define SASDA’s role in enterprise development; • Quarterly reviews of performance should be considered; • Regulator should consider compliance to empowerment as a prerequisite to licensing.

26. Thank you ECONOMY IS PUMPING BUT... ( Rallying Cry) “Companies don’t feel under the microscope on other things in the same way as they do on equity issues, and this is one of the things I am very sore about. You do everything to put procurement-development programmes in place, but the companies are not interested and undermine it. “This is what is happening, for instance, with the oil companies. A formal supply-development programme was put in place with some resources and some personnel, but the oil companies will find every reason not to make this programme work,” she said. Business Times www.sundaytimes.co.za April 15 2007 “demand driven development”