retail audit notes - moloto · pdf filetable of contents • overview of retail audit...

Petroleum Retail B-BBEE Audit

Preparation Workshop2016

by

Table of Contents

• Overview of Retail Audit– TOR - Background

– TOR - Objectives

– TOR - Scope

• Methodology and Approach– Retail Audit Process (Steps)

– Audit Population

– Special Consideration for QSE’s

• Audit Pack– Audit Pack Contents

– Element Summary

– Audit Pack Booklet

2016 Petroleum Retail B-BBEE Audit 2


Overview of Retail Audit

Background

• Project Background

– The Petroleum Products Amendment Act, (Act No 58 of 2003) authorises the Minister of Energy to prescribe a system for site and retail allocation to effect economic transformation

– The Liquid Fuels Charter (LFC) as promulgated with the Petroleum Products Act of 2003 calls for the Department of Energy to conduct annual surveys of the petroleum industry in order to evaluate progress in achieving economic transformation in relation to

• Ownership

• Management Control

• Employment Equity

• Skills Development

• Procurement

• Enterprise Development

• Socio-Economic Development

42016 Petroleum Retail B-BBEE Audit

Major Deliverables

• Key Project Outcomes

– To conduct a baseline study of the retail stage of petroleum value chain to ascertain retail ownership and inform the Retail Empowerment Framework

• through an audit of all oil companies retailing petroleum products, to deliver on its mandate in expediting radical economic transformation


Terms of Reference

• Objective– Conduct an independent comprehensive baseline study on

the extent of transformation• To benchmark for system allocation ito Section 2E of PPAA• Produce report with recommendations to inform for the revised

Sectoral Empowerment Framework

– Develop standardised criteria to benchmark, monitor, review, evaluate and report compliance to B-BBEE Act, Codes of Good Practice (COGP) and PPAA imperatives

– Investigate prevalence & high rate of ownership changesand equity transfer of both site and licenses from black Africans to other races, gender

– Investigate high failure rate for black site and license holders across the different oil companies, provinces etc.


Terms of Reference

• Scope of Work

– Undertake a comprehensive audit of all service stations as per TOR Table 1 –National Network Service Stations

– Compile individual reports for the top ten (10) oil companies

– Root cause analysis for the high rate of change of ownership and equity transfers and high failure of black African site and license holders

– Socio-economic impact assessment of all interventions by oil companies and identify causes of the high rate of change of ownership, equity transfers, and high failure

– Develop an empowerment measurement framework to benchmark to monitor, review, evaluate and report compliance

– Recommendations for system allocation for site and retail licenses

– Conduct workshops to enhance the Department’s internal capacity on the implementation of the evaluation and monitoring of B-BBEE


Methodology and Approach


Audit Process

• Detailed analysis to determine key underlying issues

• Retail baseline information

• Detailed report on objectives

• Recommendations for

•Measurement framework

•Non-compliance

• Detailed verification of sampled retailer verification

• Desktop authentication

• Focus groups

• Detailed planning

• Ensure preparedness

• Data Assessment

• Active Retailer Lists

1

Preparation

2

Diagnosis

3

Development

4

Reporting


Audit Process Expanded

STEP 1 - Preparation• Detailed Planning

• Ensure preparedness through– Consultative workshops to solicit

contributions of interested parties also capacitate for completion of audit pack

– Indicate availability of information (YES/NO) whether at oil company (wholesaler) or retail level to ascertain potential audit information gaps

– Provide general site & operation lists as well as shareholder information to ascertain audit population from active licenses

STEP 2 - Diagnosis

• Detailed verification of sampled retailers who are high volume pumpers, interspersed with some average / slightly below par retailers, due to the fact that they represent the majority

• Desktop authentication through comparison of information submitted by them, and information gleaned from secondary sources

• Separate interest groups to tease issues adequately e.g. black owned retailers, small (struggling) retailers etc.


Audit Process Expanded

STEP 3 - Development

• Entails the analysis of the baseline information so as to be able to find solutions to the key underlying findings / problems

• Development and finalisation of required systems specifications to capture transformation information

STEP 4 - Reporting

• Finalize the project deliverables in the form of a comprehensive audit report with recommendations separate the for top 10 oil companies as per findings


Audit Population

• Auditees – All Petroleum Retail Stakeholders

• SAPIA Member Companies, Independent Suppliers (Wholesalers) to both Branded and Non-branded Sites, Petroleum Retailing Agricultural Cooperatives and Petroleum Retail Association(s)

• Survey Population and Sample– 95% of all retailers operating in South Africa translated to

• 200 high pumping sites viz top 10 of top 20 for the majors, independents branded & non branded marketers, & Agri co-ops interspersed with below par retailers for wider coverage

• Being inclusive & representative of type of ownership (COCO, CORO, CLRO,

RORO, ROWA etc. ) & location categories (Urban, Rural, Transient)

– Qualitative inputs by all retailers through e.g. focused groups


Special Considerations

• Ownership Fronting/Misinformation involving trusts– Greater depth will be employed in auditing broad-based ownership

schemes and trusts

• Capacity constraints of all types- financial, human resource, technical and ready information.– Care will be taken to ensure they are not burdened with voluminous or

complex submissions

• Dearth of B-BBEE Verification Information, as is not a requirement for trade in the retail sector– To use special templates/schedules to construct relevant information also

sample-check issued B-BBEE certificates, especially for known weak areas

• Relatively Large Sample and Varying Information formats thus impossible to conduct a 100% audit of all indicators for each retail operator– Process to accommodate different inputs from both primary and

secondary sources



Audit Pack

Audit Pack Contents

• Consists of 3 Annexures per measured entity viz:-

• Annexure A: Retail Audit Pack Quick Guide, Element Summary and Acronyms

• Annexure B: Definitions, Lists (Schedules) and Document Checklist

• Annexure C: Qualitative Questionnaire for Retailers

• Annexure D: Qualitative Questionnaire for Wholesalers


Required Action

• All Auditees

– Complete all schedules as per Audit Pack• Annexure A: for quick reference on audit contents, key dates &

deadlines, key personnel (@ DoE, Moloto & Measured Entity), what to note in the elements, as well as acronyms

• Annexure B: contains applicable definitions element lists/schedule to complete yellow tabs only and in these only fields shaded in blue and which documentary evidence is available and has to be submitted copies for verification

• Annexure C & D: complete own scorecard and also complete narrative questionnaire separate for retailers and wholesalers


Quantitative Questionnaire

• Data from Retailers

– The retail operator must account on all information pertaining to the retail operations for all the elements of B-BBEE codes of good practice.


Qualitative Questionnaire -Retail

• Retailers

– Site and License Operation Narrative

• Ownership, Highlights, Milestones, Challenges incl. failure rate, Support offered/received from oil companies, Recommendation

– Scoring of B-BBEE Elements


Target % Are you

Complaint?

Actual

%

Estimated

%

How are you affected by the

Indicator

What are the challenges

you experience?

Recommendations on how to Improve the

score

How has the requirement to

comply impacted your

business?

State the challenges you

experience in your attempt to

comply.

Recommendations on what you as the business

can do, what the regulator- DoE can do and what

the Oil Company can do to assist.

Qualitative Questionnaire –Oil Co

• Wholesalers

– Site and License Operation Narrative (relating to Black Ownership)

• Highlights, Milestones, Challenges incl. Failure Rate, Transformation Drivers, Support offered esp. to stem the specific problems

– Scoring of B-BBEE Elements


Target % Are you

Complaint?

Actual

%

Estimated

%

How are you affected by the

Indicator

What are the challenges you experience? Recommendations on how to Improve the

score

How has the requirement to

comply impacted your business?

State the challenges you experience in your

attempt to comply.

Recommendations on what you as the business can

do, what the regulator- DoE can do and what the Oil

Company can do to assist.

Element Summary


Ownership

The objective of the ownership element is to measure the percentage rights of ownership accruing to black people and black females (economic interest, voting rights and net value). This should be indicated separately for each demographic representation (African, Indian, Coloured & Chinese) and each shareholder category (Individual, Company, Trust, Special Participant, Designated Groups [i.e. Unemployed, Youth, PWDs, Rural, Military Vets], ESOPs, BBOS, Co-operatives and other categories. Please note the definition of "acquisition debt". Need to achieve sub-minimum of 40% on Net value points to qualify (not be discounted by one level on overall score).


1.Ownership

7 Major Assertions


• The Ownership Element verification objectives:– Obtain sufficient and appropriate evidence proving that

the calculation of net value is accurate and prepare a report detailing the method used in the findings.

Exercisable Voting Rights and Economic Interest in respect of shares carrying preferred rights are properly allocated and classified

calculation of designated group is not misstated by the Measured Entity

ownership in the hands of Black People in relation to complex structures, sale of assets and equity equivalents is dealt with appropriately

transfer or issue of equity rights can be verified through appropriate legal and statutory documentation.

effect of any third party rights that may be attached to the equity instruments held by the black participant.

– For beneficiaries that are listed as black trace the beneficiaries to sufficient and appropriate evidence that the natural people who are beneficiaries qualify as Black People in terms of the codes.

Management Control and Skills Development

The revised codes combine Management Control and Employment Equity under one element called Management Control. The objective of the Management Control element is to measures board participation & executive management by black people and black females. The objective of the Employment Equity element is to determine demographic representation by black people (African, Indian, Coloured & Chinese) and black females at Senior, Middle and Junior Management Levels including black people with disabilities. Semi-skilled and Unskilled employees added to assist with reconciliation to total staff numbers. Use current payroll data.

The objective of the skills development element is to measure the demographic representation of skills development expenditure for black people and black employees with disabilities. This includes training afforded black unemployed people. Further considers the absorption of black people by the measured entity or industry at the end of the Learning Programme. Sub-minimum 40% achievement of targets is required to qualify (avoid discounting)


2. Management

Control & 2.1 EE

3. Skills Development

Enterprise Supplier Development

The revised codes combine the previous Preferential Procurement and Enterprise Development elements under one element called Enterprise Supplier Development. This has 3 distinct broad categories namely procurement, supplier development and enterprise development. The objective of this element is to help enhance South Africa's industrial base in critical sectors of production and value adding manufacturing by incentivising the prioritization and strengthening of local procurement in general and particularly from 51% Black Owned, 30% Black Woman Owned companies, especially QSEs and EMEs and companies and order , and through appropriate local supplier development programmes, particularly 51% Black Owned QSEs and EMEs. Need to achieve sub-minimum requirements being a minimum of 40% of the maximum allowable points on each of the broad categories to qualify - i.e. avoid the overall score being discounted by one level. Considered would be Initiatives or programmes contributing to the development, sustainability and financial and operational independence of these beneficiaries.


4.1Preferential

Procurement

4.2Supplier

Development

4.3Enterprise

Development

Socio Economic Development

The objective of the socio-economic development (SED) element is to facilitate income generating activities for targeted beneficiaries by measuring the annual value of all SED monitory and non-monitory contributions. At least 75% of the contribution to directly benefit black people.


5Socio

Economic Development

Audit Pack Booklet



THANK YOU

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