6 - Expressing Local Content through Black Economic Empowerment in the South African Petroleum Industry

Summary

South Africa’s path to strengthening its industrial base and promoting the development of new industries - what would typically be the objectives of a local content policy - is implemented by and large through its policy of Black Economic Empowerment. This represents a particular species of local content requirements: one that focuses not only on enabling local participation for the benefit of extractive activity, but also specifically on providing benefit to particular, identified groups, the HDSAs.

The South African Constitution of 1996 mandates the state to achieve Black Economic Empowerment, to address the country’s historically skewed socio-economic structure, a consequence of past injustices and discrimination. In the country’s extractives industries such empowerment programmes embody the local content requirements, which are linked to the government’s goals of promote transformation through legislative and other measures.

The petroleum industry has seen the proliferation of both industry-specific and generic laws in the wake of the 1996 Constitution. It contributed to creating a framework for empowerment of especially for Historically Disadvantaged South Africans (HDSAs). This chapter focuses on the relationship between Black Economic Empowerment (BEE) and local content requirements, specifically local ownership or holding in the petroleum industry in South Africa. It explains the genesis of South Africa’s skewed social structure and the need for socio-economic transformation. The main argument is that the policy of Black Economic Empowerment has influenced the understandings of what it means to promote local content. The chapteris critical of the ability of policy statements, such as that comprised in the Petroleum Charter, to effect meaningful changes where implementation is weak. It focuses largely on the black ownership provisions, and how this is dealt with under the BEE process. The chapter criticises the unduly heavy reliance on transformation of ownership patterns to address the socio-economic challenges referred to as the ‘evil triplets’ of poverty, unemployment, and inequality.