The Department of Trade, Industry and Competition (the dtic) and Vivo Energy (a subsidiary of Vitol) signed the public interest commitments agreed as part of the transfer of ownership of the Engen business in South Africa.
The provisions of the agreement contain significant commitments that have been made as conditions of the sale.
“The transaction involved a change in ownership of a company operating in South Africa. In line with the provisions of the Competition Act, we considered the impact the transaction would have on jobs, suppliers of oil, procurement and empowerment. Two competitors who are also suppliers of product to Engen, raised their own concerns regarding the impact on local refineries. Government engaged both the merger parties as well as the competitors to fully understand these implications and to consider ways to mitigate these. Today, the dtic and Vivo Energy signed the Framework Agreement, confirming the public interest terms that Vivo/Engen will be implementing,” Minister of Trade, Industry and Competition, Ebrahim Patel said.
The agreement commits Vitol to investing R9.85 billion over the next five years in its retail and fuel infrastructure, as well as in the development of renewable energy generation capacity.
This investment may increase by a further R4 billion subject to the outcome of feasibility studies in areas such as marine infrastructure, as well sustainable and biofuel production, which could see the capital commitment increase to nearly R13.85 billion over the five-year period.
In addition, Vitol has committed to continue its off-take agreements for petrol, gasoline and diesel from Astron’s refinery in Cape Town and Sasol’s refineries in Sasolburg and Secunda, with an estimated R100 billion of locally-refined product to be bought by Engen.
A further R240 million will be contributed to the Localisation Support Fund (LSF), bringing the total capital committed for localisation by partner firms to more than R800m, to be used for technical and market studies in support of localisation and export promotion.
On transformation, Vitol has committed to establish a worker ownership trust for the benefit of the 2 100 employees of Engen, which will hold an initial 5% stake in the company, rising to 9% over the next seven years.
The trust will be entitled to one nominated appointee to the board of Engen; and will further benefit from a minimum annual dividend over the next 5 years, irrespective of the profit performance of Engen, which will equate to R10 500 per annum per worker in the company.
Jobs protected
Vitol has further committed to no merger-related retrenchments going forward; and to maintain aggregate employment for a period of no less than four years. Vitol will also ensure that its subsidiary, Vivo Energy, will bring a number of managerial jobs to South Africa, and establish South Africa as the hub of its pan-African business.
Patel, said that the commitments made by Vitol are a strong and clear signal of investor confidence in South Africa’s growth story and prospects. It builds on the work by Government and the dtic to boost investment, industrialisation and economic transformation.
“The challenge of addressing inequality has become a global policy concern. In South Africa, addressing both asset and income inequality is a major policy objective. Worker share ownership and the flow of dividends provide an important means to do so. The share ownership provision of 9% worker equity in the company, builds on a number of similar agreements, including with Shoprite-Checkers, Pepsico, Dubai-World in the Imperial deal, and other transactions. This now brings the total number of workers covered by share-ownership arrangements in the economy to 553 000 employees. Three of the oil majors will now have worker share ownership, namely Engen, SASOL and Astron, owned by Glencore when they bought the Caltex assets in South Africa,” Minister Patel said.
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