Zellah Fuphe

1. Possible initiatives to promote the involvement of indigenous entrepreneurs in the African energy landscape10th African Oil and Gas, Trade and Finance ConferenceAlgiers 2 – 5 April 2006 Zellah Fuphe NOT AN OFFICIAL UNCTAD RECORD

2. Contents • Key Characteristics of the African Energy Sector • Energy consumption patterns • Sector players • Constraints for emerging players • South African experience • Consumption patterns by fuel • Refining players • Marketers • Electricity generation players • What has changed? • And why? • The way forward • What is required – from government and emerging player • About Worldwide

3. Key characteristics of the African energy sector • Africa is resources rich but energy poor • Oil, natural gas, coal, hydro and renewable energy potential • Energy markets are underdeveloped • Reserve to production ratios are generally high • Africa’s energy consumption is generally limited • Both in absolute and relative terms • South Africa is an exception in Sub-Saharan

4. energy consumption per capita (MBtu) Source : Energy Information Administration

5. The Present institutional scene – who are the players? • Depends on the sector • Upstream oil & gas • Commonly dominated by the international majors, complemented by national oil companies (e.g. Sonangol in Angola, PetroSA in South Africa, etc) • Downstream oil & gas • Private sector dominated by the local marketing subsidiaries of the international players, especially in Southern Africa • More indigenous players in East and West Africa

6. The Present institutional scene – who are the players? • Coal • Private industry often dominated by a few large players • Generally global companies such as BHP Billiton, Anglo, Rio Tinto, etc • Electricity • Commonly dominated by public utilities (mostly vertically integrated • companies) • Privatisation has generally not occurred and only limited participation by Independent Power Producers • Renewable energy • Generally focused on smallerand more indigenous solutions • with more scope for the local private sector

7. Key constraints for newcomers • Market access is often problematic with considerable barriers to • entry, particularly for indigenous private sector players • Capital intensive • Knowledge intensive • Characterised by ‘old boys’ networks • Playing field is not level • Often due to lack of independent regulation of the sector or as a result • dominant positions by majors and/or national oil companies/public • utilities (e.g. Eskom)

8. The South African experience

9. SA energy consumption by fuel Source :BP.com

10. SA refining players (pre 1994 and current) Source : SAPIA/Engen/Sasol

11. SA liquid fuels marketers (% market share) Since 2000 all the major oil companies but one, have sold equity stakes to empowerment partners Only remaining emerging player of significance is Afric Oil Source : SAPIA

12. SA Electricity generation players (pre 1994 and current) (Installed capacity) In 2005 private producers accounted for only 3% Source : Engineering News

13. What has changed in the SA energy landscape

14. Oil and Gas • Oil • Upstream • Renewed exploration interests, generally by smaller independents, mainly foreign players • Downstream • Emergence of Historically Disadvantaged South African (“HDSA”) players • mainly as minority partners to the marketing division of international oil majors. • Afric Oil, a Worldwide subsidiary, only remaining significant independent black • player • Gas • Still an emerging industry dominated by Sasol • Natural gas from Mozambique is replacing coal gas • Few new players in the distribution of gas

15. Coal • Largely a private industry • In 2001 • Production at 144.1 MT • 21 Coal producers, 9 of which were HDSA companies • HSDA’s produced 6.75% • HDSA export allocation at 1% • In 2004 • Production at 242.9 MT • 32 Coal producers, 20 HDSA’s • HDSA’s produced 14.8% • HDSA export allocation at 4% • In 2006, Eyesizwe Coal, biggest black controlled coal company will have a controlling stake in the JSE listed Exxora Resources (enterprise value of R 14 bn) Source: Department of Minerals and Energy

16. Electricity • Very limited structural change, dominated by Eskom (96% of generation; 100% transmission, and 60% distribution in terms of energy supplied) • Fragmented local government arm distribution centres in early stage of rationalisation • Structural and market reform (introduction of competition) was attempted in late 1990’s but has since been abandoned • Generation sector is being opened up for private participation (30% of new capacity to be provided by private players)

17. Drivers of transformation

18. Oil • The Liquid Fuels Empowerment Charter (02/11/00) • Aimed at promoting the 25% participation of HDSA’s in the entire value chain of the industry by 2010 • Since signing • All but one of the oil companies have HDSA shareholding, 2 of which include the refining business • Additional wholesalers have entered the market • Supplier Development Agency • Aimed at facilitating the procurement of services and goods from local suppliers to lessen international dependence • Current HDSA spend is 17% of total spend (excluding crude oil)

19. Oil (cont.) • Concerns • Sustainability of the equity deals • 25% actual ownership target might not be met due to cyclical nature of the business and limited dividend stream as a result of clean fuels capex • No participation of HDSA’s in crude oil supply • Some emerging players do not play by the rules

20. Coal • Mining Empowerment Charter • Licensing regimes with transparent objectives and requirements to further local content/development • Quattro and South Dunes initiatives • Giving HDSA access to export facilities • Concerns • Viability of assets being disposed by the majors • Traders are seen as undermining transformation process • Emerging company operating expertise • Ensuring emerging players get past the “junior miner” phase

21. Electricity • Some municipalities have exited capital intensive project investments • Kelvin Power station privatisation • Indications of further privatisation on municipal generation assets but none complete yet • Independent Power Producers (“IPPs’”) • Cabinet approval of 30% new generation by IPP’s • Licensing of viable private initiatives (NERSA) • Private industry s’ need for own supply of electricity (Opportunities for Co-generation and behind the fence plants) • Accelerated economic growth has put pressure on supply capacity • However it could mean more private sector opportunities • Concern • The sub region needs new capacity urgently • Could compromise participation of emerging players

22. ProposedWay Forward for the continent

23. Requisite government support to foster increased participation by indigenous players • Energy is key to economic and social development in Africa • Adequate investment in the sector is crucial • Infrastructure spending needs to increase • Pro-active policy intervention, regulation and support from Government is required • Leveling of the playing field to facilitate entry by new players • Financial support for local start-ups may be required • Contracting and procurement strategies need attention • Cost-reflective pricing of energy is important • Will also stimulate increased local private sector participation, especially with regard to the imported inputs

24. Requisite government support to foster increased participation by indigenous players cont. • Special schemes for promotion of a renewable energy industry based on local players • should be considered • Incentive / subsidy schemes for renewable energy technologies • Transparent and autonomous regulation • South African experience with industry charters and supplier development • initiatives is worth considering • There is a role for both the public and private sectors, with further scope for local and indigenous players

25. Emerging sector players have responsibilities too… • Commitment to the sector • Long term players • Sector knowledge • Ability to be self sustainable post sector reform or government support • Play by the rules • Contribute towards sustainable energy sector • Adhere to sound corporate governance • Promote competition for the benefit of the consumer and the country of • operation

26. About Worldwide African Investment Holdings

27. About Worldwide • A company of many firsts • Formed in 1994, Worldwide is one of South Africa’s first black controlled and managed investment holding companies • Worldwide is the first SA black company to enter the liquid fuels sector in 1995 • Worldwide is the first SA black company to acquire a stake in an integrated oil company, through its 20% stake in Engen Limited – SA’s market leader • Worldwide is the first and only South African company of its kind to focus • exclusively on the broader energy sector

28. The African energy space OIL & GAS ELECTRICITY COAL Exploration Exploration GENERATION Thermal Gas Gas Production Oil Production Mining Nuclear Hydro Other renewable Oil Marketing Pipelines Gas Transmission Synfuels Synfuels Refining Distribution Export Domestic Marketing & Distribution Distribution ANCILLARY 12 Strictly Private and Confidential

29. The Worldwide value drivers and business model OUR COMPANY CREDENTIALS • Value adding partner Exploit investment climate to create sustainable shareholder value SECTOR FOCUS ORGANISATIONAL CAPABILITY • Diverse portfolio • Oil and gas • Coal • Electricity • Ancillaries • Research & Analysis • Structuring and Execution • Investment Management

30. Worldwide as a partner • Worldwide has a genuine interest in the energy and ancillary sectors • This is Worldwide’s sector of choice • Worldwide is a long term player with a solid track record, spanning some 11 years • The broader energy sector is the next logical step in Worldwide’s growth path • Shareholders • HDSA entrepreneurs with strong reputations in the market • Support from institutional shareholders

31. Worldwide as a partner • Executive team • Diverse • Sector expertise • Energetic and committed to the company’s strategy

32. Worldwide Group Structure Worldwide Afric Energy Resources Worldwide Energy Services Worldwide Coal Holdings Worldwide Power Generation Worldwide Capital 100% 100% 100% 100% 46% Afric Oil Engen SAD-ELEC Worldwide Coal 51%* 26% 55% 20% * Closing will be achieved at the approval of the transaction by the Department of Minerals and Energy

33. Thank you