5 months ago
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In his address at the SA-US Interactive Business Forum held last month, President Cyril Ramaphosa remarked that the new path for the seventh administration is to prioritise “inclusive growth and job creation, reducing poverty and tackling the high cost of living, and building a capable, ethical and developmental state”.
In attendance were trade, industry and competition minister Parks Tau, and ministers of key economic sectors in SA and representatives of business from the US and SA.
Poised to attract and scale up investment, Ramaphosa elevated energy and renewable energy as priority investment areas in the country’s efforts to ensure an energy secure SA.
Evidently, the energy industry is continually evolving as the shift to green energy transforms the landscape of the country’s energy industry.
The Competition Commission is also actively using several competition regulation instruments to play its part to support the industry to address SA’s energy challenges.
Recently, the commission’s merger and acquisitions division reviewed a proposed transaction through which the Central Energy Fund (CEF) sought to acquire various assets that collectively comprise the SAPREF Refinery.
Let’s unpack what this acquisition entailed and its significance for the energy industry.
CEF is a state-owned company involved in the exploitation, development, distribution, marketing and manufacture of energy solutions, in particular, coal, oil, gas and renewable energy.
This merger is particularly relevant to the two subsidiaries of the CEF, namely, PetroSA and Avedia Energy. PetroSA formally operated a Gas-to-Liquids refinery based in Mossel Bay, which produced petroleum products using primarily natural gas from its offshore fields.
This refinery has not been operational since 2020 due to feedstock challenges.
Avedia Energy was established in 2007 as a liquefied petroleum gas (LPG) company and currently operates a bulk import and handling facility in Saldanha Bay, as well as a bottling plant in Airport Industria, Cape Town.
SAPREF Refinery was jointly owned by Shell Downstream South Africa Proprietary Limited (SDSA) and bp Southern Africa Proprietary Limited (bpSA). SAPREF Refinery is located in Durban, KwaZulu-Natal.
When it was still operational, the refinery produced 10 main products including: petrol, diesel, fuel oil, jet fuel, lubricants, bitumen, LPG, solvents and paraffin.
During 2019, bpSA and SDSA took the decision to shut down the operations of the refinery and commenced with finding a potential buyer.
This shutdown, following the inoperative status of PetroSA and Avedia Energy, led to the reduced production of petroleum products in SA, threatening the country’s economic stability and security of supply of petroleum products.
Furthermore, the premature closure of refineries would have meant vitally needed jobs in the country would have been lost.
The commission recommended the approval of the acquisition with conditions that address employment concerns that arose during the merger and acquisition review process.
The condition ensures SAPREF Refinery employees will be transferred to the Acquiring Group post-merger on no less favourable terms and conditions as the current employer.
This acquisition reinforces the country’s concerted efforts aimed at guaranteeing adequate supply of liquid fuels.
The revitalisation of SAPREF will ensure that SA, through CEF, continues with the development and distribution of petroleum products.
Noteworthy, the minister of mineral and petroleum resources, Gwede Mantashe also welcomed the commission’s approval of the transaction, noting that the assets will form the hallmark of CEF’s investment and growth strategy in the energy value chain geared to lay a solid foundation to address the challenges that lie ahead in the security of SA’s energy future.
Our work also includes a focus on what is called block exemptions.
Block exemptions are a directive from the department of trade, industry and competition that grant energy users and energy suppliers exemption from certain parts of competition laws in order to enable companies to collaborate on energy matters.
The exemption aims to encourage energy suppliers to collaborate with the goal to increase and optimise the supply of energy in the market as well as reduce the cost of energy supply.
Our work in the application of these exemptions are ongoing and I look forward to sharing more insights on these block exemptions in future columns.
In the recent past, I wrote about our research and survey into the renewable energy sector conducted by the commission.
It enabled us to delve deeper into the state of market competition and the use of renewable energy resources by businesses and families for electricity generation.
Some of the survey observations included the perception that the prices of renewable energy products remain high; households utilise personal funds to purchase and install these products; and that renewable energy solutions can be accessible at various budget levels.
The survey results provide us with a greater understanding of the renewable energy industry.
The commission’s array of initiatives and projects in the energy sector like the ones shared in this column, all seek to enable greater participation in the industry by reducing the barriers to entry and promoting regulatory consistency across the energy sector.
- Makunga is spokesperson for the Competition Commission of SA
