Expert Insight: Sasol – Local Content in Mozambique

March 2018

By Charlotte Mokoena
Sasol 

Background to Sasol in Mozambique

Sasol established our presence in Mozambique through the Natural Gas Project (NGP) in 2004, which was a watershed for all stakeholders in realising the country’s untapped potential. This landmark project monetised previously “stranded” Pande and Temane natural gas fields, bringing significant value to this nation and its citizens. It has contributed to enhancing energy and infrastructure development in Southern African by broadening the energy supply mix in the region, further enabling industrial development in both the Mozambican and South African economies.

Meaningful relationships with stakeholders of our host countries underpins our approach to delivering value. We are proud of our relationship with Mozambique and its people, particularly as we contribute to enabling the vision of the Government of Mozambique through a multi-faceted approach, which includes boosting local power generation capacity and local content, enabled by our existing asset base and growth projects.

Sasol’s strategic approach to Mozambique

Mozambique is blessed with an abundance of natural resources that inherently stand to unlock the country’s growth potential. As one of the first companies globally to recognise this potential, we are proud to have played our role in catalysing the local hydrocarbon industry. Our existing asset base ideally positions Sasol to continue the development and exploration of hydrocarbons, which places Mozambique at the centre of our Southern African growth strategy.

A core outcome of our strategic objectives in Mozambique is stimulating socio-economic development that will meaningfully improve the quality of life of Mozambican citizens. To achieve this, our ongoing partnership with the Mozambican government is paramount and we are committed to strengthening our relationship. Strategically, this relationship exists through key partnerships in core assets held by Sasol and the government, and we are grateful for government’s leadership role. For example, we are currently underway with a process for ENH, the state-owned oil company, to transfer 30% of the rights in our Production Sharing Agreement (PSA). This creates the appropriate space for government, through ENH in this case, to more effectively enable its vision for the Mozambican people. We anticipate to conclude this transaction shortly.

Since 2004, at the time of the initial investment made by Sasol and our partners in Mozambique, over US$3 billion has been invested in developing the country’s hydrocarbon industry. Across our businesses in Mozambique, we have sustained over 300 permanent jobs, while over 600 additional job opportunities have been created for communities around the Central Processing Facility through our contractors. More than 90% of the staff at our Temane operations are Mozambican.

Over US$1 billion has been contributed to the government of Mozambique during this time. Beyond this, however, to date, US$1,2 billion in goods and services have been procured from Mozambican suppliers, which has driven capacity building of local SMMEs

Accelerating the development of local content

Since the inception of the NGP in 2004, the benefit of time and experience has shifted all stakeholders on the maturity curve. Together with our partners, we were and we remain committed to promoting local content. It is not just about meeting legislative requirements or ticking a box – it is a strategic imperative that will lead to Mozambique’s long term growth trajectory, as businesses thrive and industries develop in an environment conducive to growth.

Although we have made some progress in assisting the development of small, medium and micro-sized enterprises (SMMEs), more must be done to substantially build this capacity. There is untapped potential in this space to unlock opportunities for local citizens, particularly around our operations. The development of Mozambican hydrocarbon resources comes with the challenge of inadequate infrastructure. However, herein lies the opportunity.

Practical steps

Sasol is committed to driving a concerted effort in supporting the SMME sector. We have established an Enterprise and Supplier Development programme that will better enable SMMEs to access Sasol’s supply chain. The initial phase focused on developing SMMEs in Inhambane who accessed over US$2,7 million in opportunities. The next phase will be launched in the coming months. Furthermore, we will establish a SMME Fund that will provide competitive financing to Mozambican-owned SMMEs

As we expand our in-country footprint, we recognise the potential  of unlocking our greater demand for goods, services and skills.

Currently, about half our local content spend across our businesses is with Mozambican-owned companies. To increase our spend on local businesses, we have taken a number of steps to promote and accelerate local content. These include:

  • Driving preferential procurement of local content through our supply chain process and contractual requirements;
  • Unbundling our goods and services requirements in a manner that provides smaller businesses with work opportunities;
  • Creating “set aside” categories of spend for Mozambican companies;
  • Paying a 10% premium to Mozambican companies for goods or services that are identical to those supplied by international companies;
  • Widely communicating Sasol tender and business opportunities through various media and directly at our Community Liaison Forum, close to the CPF in Temane, the Youth Development Centre and Provincial Directorates; and
  • Capacity building.

To scale up businesses to be sustainable, simply being locally owned is insufficient. We see great opportunity in providing support to businesses and SMMEs that is specific to their requirements. For example, certain businesses may require support in their financial management systems and safety protocols.

Beyond the factory fence

The value unlocked by the extractive industry lies not only in the technical ability to monetise hydrocarbons and minerals. Beyond this, it is the development of human capital both inside and outside the immediate locus of any business. Development and support initiatives must be designed and implemented in a manner that meets the needs of citizens.

We are prioritising capacity building of Mozambicans through various skills development and training programmes. Specifically, more than 460 artisans have been trained; more than 60 candidates have benefitted to date from a bursary programme for specialised oil and gas disciplines; and over 140 youth are being trained through our youth entrepreneurship programme.

We have technical expertise in developing natural resources, which we leveraged to develop more than 80 boreholes and install water reticulation systems. This has provided the communities around our Temane operations with access to fresh water. We have also built seven health centres that benefit more than 90 000 people.

This approach, we believe, leads to constructive cooperation with local government, communities and the relevant institutions that enable society. It will lead to more agility in addressing the country’s needs and effective delivery to its citizens.

Looking ahead

Sasol not only recognises the role it has played in Mozambique’s development since 2004, we are grateful for the opportunity the government and our partners have provided us to do so.

As a key oil and gas player in the country, we understand that we need to do more in realising the nation’s vision so that its citizens are the ultimate beneficiaries. Mozambique has established itself as an attractive investment destination, particularly for the hydrocarbon industry.

Although we have articulated a wide range of investments and initiatives currently underway, and commitments going forward, to stimulate economic growth, there is no short cut to realise sustainable value. It requires dedication, planning and coordination, to aim for the improvements and benefits our stakeholders seek. If open and honest dialogue is the lifeblood of any successful partnership, collaboration on solution-seeking is the air it breathes.

Sasol is excited for our future with Mozambique and we look forward to playing a constructive role in stimulating growth, creating opportunities and enabling the communities near our operations to flourish.

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