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This document might have been superseded since printing. Refer to SAP DMS for the latest revision. CONTROLLED DOCUMENT NO. REVISION ORIGINAL DATE PAGE PWT/PO/PRC/001 04 2018/05/092018/05/0 9 1 of 25 POLICY NUMBER : PWT/PO/PRC/001 REVISION : 04 ORIGINAL DATE : 2018/05/09 AUTHORISED BY K Zono ACTING GROUP CHIEF EXECUTIVE OFFICER AUTHORISATION DATE ORIGINATOR C Bunting GROUP SUPPLY CHAIN MANAGER APPROVED BY G. Motau GROUP CHIEF FINANCIAL OFFICER (FTC) TITLE PetroSA GROUP PROCUREMENT POLICY PURPOSE As described and detailed in clause 2 of this policy. This policy supersedes PWT/PO/PRC/001 REV 03

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Page 1: CONTROLLED - procurement.petrosa.com Po… · REVIEWER 2 EXCO Members Various REVIEWER 3 Board Members Various REVIEWER 4 REVIEWER 5 REVIEWER 6 REVIEWER 7 REVIEWER 8 REVIEWER 9

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POLICY NUMBER : PWT/PO/PRC/001

REVISION : 04

ORIGINAL DATE : 2018/05/09

AUTHORISED BY K Zono

ACTING GROUP CHIEF EXECUTIVE OFFICER

AUTHORISATION DATE

ORIGINATOR C Bunting GROUP SUPPLY CHAIN MANAGER

APPROVED BY G. Motau GROUP CHIEF FINANCIAL OFFICER (FTC)

TITLE

PetroSA GROUP PROCUREMENT POLICY

PURPOSE

As described and detailed in clause 2 of this policy. This policy supersedes PWT/PO/PRC/001 REV 03

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DOCUMENT CONTROL DOCUMENT NO: PWT/PO/PRC/001

DOCUMENT REVISION CONTROL

PAGE NUMBER/S

CHANGE LOCATED

DATE OF ISSUE

ROUTING SLIP FOR LAST REVISION NUMBER

ROLE NAME POSITION REVIEW DATE

REVIEWER 1 Procurement Committee Members

Various

REVIEWER 2 EXCO Members Various

REVIEWER 3 Board Members Various

REVIEWER 4

REVIEWER 5

REVIEWER 6

REVIEWER 7

REVIEWER 8

REVIEWER 9

QUALITY

RECORDS AND PROCEDURES

I Abdullah Procedures Specialist

I Abdullah

INTERNAL AUDIT K Larkin Chief Internal Auditor (Acting)

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TABLE OF CONTENTS PAGE

1.  STATEMENT OF INTENT 5 

2.  PURPOSE AND SCOPE 6 

3.  OBJECTIVES/ APPLICATION 6 

4.  DEFINITIONS AND INTERPRETATIONS 7 

5.  REFERENCES 11 

6.  DELEGATION OF AUTHORITY FOR THE IMPLEMENTATION OF THE GROUP PROCUREMENT / SUPPLY CHAIN MANAGEMENT POLICY 12 

7.  SUPPLY CHAIN MANAGEMENT UNIT (SCM) / CORPORATE PROCUREMENT DEPARTMENT 14 

8.  THE PROCUREMENT PROCESS 15 

9.  BROAD BASED BLACK ECONOMIC EMPOWERMENT (BBBEE) 15 

10.  PREFERENCE FOR SUPPLIERS 16 

11.  SUPPLIER MANAGEMENT / QUALIFICATION OF SUPPLIERS 17 

12.  PROCUREMENT WITHOUT PRIOR TENDERING 18 

13.  CAPITAL PROJECTS 20 

14.  COMMUNICATION WITH SUPPLIERS 21 

15.  TRANSPARENCY 21 

16.  THE GROUP CHIEF EXECUTIVE OFFICER 21 

17.  PROCUREMENT COMMITTEE 21 

18.  ETHICAL STANDARDS / CONFLICT OF INTEREST 23 

19.  IMPLICATIONS FOR NON ADHERENCE TO PROCUREMENT POLICIES & PROCEDURES 24 

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20.  RECORDS 25 

21.  UPDATING OF POLICY 25 

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1. STATEMENT OF INTENT

This policy is to ensure that goods and services are procured by the PetroSA Group in a manner that shall realise best value for money, minimise risk and safeguard PetroSA’s interests and shall be in accordance with; prescribed standards and specifications;

PetroSA’s BBBEE, Enterprise and Supplier Development, Procurement and

Levels of Authority procedures;

the Promotion of Access to Information Act (PAIA) and recognise the Preferential Procurement Policy Framework Act (PPPFA);

the Public Finance Management Act (PFMA) including the Treasury Instructions

and/or Regulations issued in compliance with the Act.

the Promotion of Access to Justice Act (PAJA);

the National Industrial Participation Programme (NIPP), where applicable;

the BBBEE Codes of Good Practice.

PetroSA’s codes of ethics and other relevant policies and procedures PetroSA’s exemption from the prescripts of the PPPFA including its Regulations

in respect of procurement directly linked to core business (refer to Minister of Finance letter dated 04 June 2014; ref: M4/1/16 (415/14))

In addition PetroSA is intent on: finding reliable and cost effective suppliers;

using goods and services that have a South African content and encouraging

international supplier organisations to establish local representation in South Africa in one form or another;

promoting its role as a responsible corporate citizen in the context of Black

Economic Empowerment, Commercial Equity and Corporate Social Investment;

ensuring that the procurement process is fair, equitable and comprehensive but logical, transparent, competitive and cost effective;

ensuring regional disparities are remedied;

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promoting Broad Based Black Economic Empowerment (BBBEE) companies & other local South African companies by facilitating their entry into Africa and the rest of the World, through procurement;

collaborating with other entities such as State Owned Companies (SOCs), State

Owned Enterprises Procurement Forum (SOEPF), the Oil Industry, etc. to ensure maximum value, both for PetroSA and the State in general.

2. PURPOSE AND SCOPE

The purpose of this document is to: - Outline the manner in which the Statement of Intent is to be effected; Define the rules of conduct to be observed by all officers and employees; Foster greater optimisation of purchasing by all directors, officers and employees

of the PetroSA Group and thereby the creation of value for the PetroSA Group, the shareholders and all stakeholders of the PetroSA Group.

Provide for the establishment of the Procurement Committee, its constitution, functions and authority.

Provide for the establishment of a Supply Chain Management Unit, its functions and authority.

3. OBJECTIVES/ APPLICATION

3.1 Objectives

This document sets out the general policy applicable to the purchasing process in all PetroSA Group companies.

3.2 Application and Responsibility

3.2.1 This Group policy applies to PetroSA and to all companies directly or

indirectly controlled by PetroSA, including any joint ventures entered into with any third party/ies, wherein PetroSA is confirmed as the operator. In respect of joint ventures, where PetroSA has a minority interest, the joint venture agreement governs the extent to which this policy applies.

3.2.2 It is the responsibility of the Managers of the Group and Subsidiaries to

ensure that this policy is observed by introducing the appropriate processes and deploying appropriate resources thereto, in accordance with the corporate procurement procedure.

3.3 Exclusions of certain trading and upstream activities from standard

procurement procedures

As a rule, this policy applies to all purchases of goods and services, including trading transactions, and to all PetroSA’s activities. Only the following trading and upstream related categories are excluded from compliance with the

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standard PetroSA procurement procedures. The Group Executive Manager (Vice President) responsible for Trading, Supply & Logistics and New Ventures Upstream shall develop a product specific procurement policy (to be approved by the Board) and procedures, substantively in the same scope and form as that of the corporate procurement policy and procedures, for the procurement of the following items: 3.3.1. Purchase of crude oil 3.3.2. Purchase of feedstock 3.3.3. Purchase of blendstock 3.3.4. Purchase fuel and fuel exchange arrangements (hospitality) 3.3.5. Business development opportunities, such as an acquisition of an

exploration block and/or acquisition of producing or near producing assets and/or trading entity or business.

4. DEFINITIONS AND INTERPRETATIONS

4.1 Definitions For purpose of the policy, the following words and phrases shall have the meaning hereby assigned to them:

4.1.1. BEE

Black Economic Empowerment. 4.1.2. Black People

Black People is a generic term which means Africans, Coloureds and Indians.

4.1.3 Blendstock

A semi-finished or intermediate product that is blended to other similar intermediate products to produce a final product capable of sale to the market, eg, butane, reformate, alkylate and penexate are blend stocks produced from our GTL Refinery. These blend stocks are subsequently blended in the correct ratio to produce gasoline or petrol of the required quality.

4.1.4 Broad Based Black Economically Empowered Supplier

A BBBEE supplier is a supplier which complies with the requirements of the BBBEE Act and its codes of good practice.

4.1.5 Business Development

Business Development is the creation of long-term value for the organisation from customers, markets, and relationships. It entails

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tasks and processes to develop and implement growth opportunities, such as an acquisition of an exploration block and/or acquisition of producing or near producing assets and/or trading entity or business. Procurement of goods and services are specifically excluded from this definition.

4.1.6 Confidential

Means any information or data which by its nature or content is identifiable as confidential and/or proprietary to PetroSA and/or any third party, and specifically refers to sensitive information relating to PetroSA’s strategic objectives and planning for both its existing and future business needs.

4.1.7 Employee

Means any person including a fixed term contractor, but excluding an independent contractor, who works for PetroSA and who receives, or is entitled to receive, any salary.

4.1.8 Emergency Purchases

Emergency purchases relate to purchases of an urgent nature that may give rise to: threats to human life or safety or security and/or environment threats to interruptions in the provision of product to customers the threat of major expense and/or loss to PetroSA purchases in respect of breakdowns of a serious nature that relate

specifically to the continuous production and/or safety of PetroSA’s operations.

4.1.9 EPMO Refers to the office that manages the enterprise wide project portfolio to enable visibility, planning, resource allocation, in support of the execution of the Corporate Plan.

4.1.10 EXCO Means the Executive Committee of the PetroSA Group of Companies. 4.1.11 Feedstock

Means raw material used as the primary component in a process that converts the raw material into another (usually higher value) finished product (e.g. crude oil is a feedstock used to produce petroleum products, sugar cane is a feedstock used to produce sugar, wood is a feedstock used to produce paper, etc.).

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4.1.12 FEED

Means front end engineering design.

4.1.13 Fruitless and Wasteful Expenditure

Means expenditure that has been made in vain and would have been avoided had reasonable care been exercised.

4.1.14 Goods "Goods" are the raw materials or commodities that are available for purchase and/or general sale.

4.1.15 Group Executive Manager

Means any Vice President and/or the Chief Financial Officer and/or the Chief Operating Officer of the PetroSA Group who reports directly to the Group Chief Executive Officer.

4.1.16 Head of Procurement

Means the official responsible for the strategic and operational management of the procurement or supply chain management department / unit of the PetroSA Group of companies. Group Procurement Manager or Group Supply Chain Manager shall have a corresponding meaning.

4.1.17 Irregular Expenditure

In relation to PetroSA, means – an expenditure incurred by PetroSA in contravention of, or that is not in accordance with a requirement of this policy.

4.1.18 LoA

Level of Authority 4.1.19 Local

In the case of PetroSA’s South African operations, local means the Western Cape. In the case of subsidiaries and joint ventures operating outside South Africa, local refers to the country or province in which they operate.

4.1. 20 Major capital project

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Means a project or a series of related packages involving the construction, alteration, extensions, refurbishment or the rehabilitation of infrastructure on a single site having an estimated budget of more than R100 million. Shutdown, Turnaround Maintenance Projects, Geophysical Data Acquisition and Seismic studies are specifically excluded from this definition.

4.1.21 Trading name PetroSA

Means the parent company known as The Petroleum Oil and Gas Corporation of South Africa SOC Ltd; registration number 1970/008130/30.

4.1.22 PetroSA Group

Refers to The Petroleum Oil and Gas Corporation of South Africa’s group of companies.

4.1.23 Procurement Committee

Is the custodian of the procurement process and is responsible for facilitating the implementation thereof in accordance with this policy and for regularly reviewing such policy.

4.1.24 Services

Services are the provision of labour only, labour and goods or labour and equipment combined and knowledge based on expertise.

4.1.25 SMMEs

SMMEs are Small, Medium and Micro Enterprises. 4.1.26 Subsidiary Executive Manager

Means any General Manager or an Executive Officer who reports directly to the Board of Directors of a subsidiary company of PetroSA.

4.1.27 Supplier

A "supplier" is an existing or potential vendor, contractor or service provider. A supplier may be either a natural person, a legal entity or any other similar entity.

4.1.28 Supply Chain Management Unit

Means the PetroSA group Procurement Department or equivalent, as the case may be. The term Group Supply Chain Department shall have a corresponding meaning.

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5. REFERENCES

NO. DOC NO. TITLE 1 BEE/PO/000/001 PetroSA’s BEE policy 2 FIN/FAC/PR/003 PetroSA’s Levels of Authority Procedure 3 PWT/PR/PRC/002 PetroSA’s Procurement Procedure 4 CEO/PO/SEC/001 PetroSA’s Code of Ethics 5 Act 5 of 2000 The Preferential Procurement Policy Framework Act. 6 Act 2 of 2000 The Promotion of Access to Information Act 7 Obligatory since

September 1996 Endorsed by Cabinet 1997

The National Industrial Participation Programme of the Department of Trade and Industry

8 Act 108 of 1996 Constitution of the Republic of South Africa 9 Act 1 of 1999 The Public Finance Management Act 10 Act 53 of 2003 The Broad Based Black Economic Empowerment Act 11 Act 3 of 2000 The Promotion of Administrative Justice Act

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6. DELEGATION OF AUTHORITY FOR THE IMPLEMENTATION OF THE GROUP PROCUREMENT / SUPPLY CHAIN MANAGEMENT POLICY

6.1 Delegation

The Board of Directors hereby delegates the following powers and duties (in writing) to the Group Chief Executive Officer of PetroSA –

6.1.1. To discharge the Supply Chain Management responsibilities in line with LoA in terms of:

Section 217 of the Constitution of the Republic of South Africa; Section 51(1) (a) of the Public Finance Management Act; The Procurement / Supply Chain Management Policy of PetroSA; Any other relevant legislation;

6.1.2. To maximize administrative and operational efficiency in the

implementation of the Policy;

6.1.3. To enforce reasonable and cost-effective measures for the prevention of fraud, corruption, favouritism and unfair and irregular practices in the implementation of the Policy.

6.2 Sub Delegations

The Group Chief Executive Officer of PetroSA, hereby sub-delegates in writing, the following Supply Chain Management powers and duties to maximize administration and operational efficiency and provide adequate checks and balances in financial administration to:- 6.2.1 The Group Chief Financial Officer

The Group Chief Financial Officer for the implementation of Supply Chain Management procedures and processes in terms of this Policy and applicable legislation;

6.2.2 The Procurement Committee

The Procurement Committee the power to procure goods and services for PetroSA and to arrange the hiring or letting of anything or the acquisition or granting of any right for or on behalf of PetroSA, and to dispose of movable PetroSA property.

6.2.3 The Head of Procurement

The Head of the Procurement / Supply Chain Management Unit the power to implement and administer the procedures and processes in terms of this Policy. This includes inter alia the administration of quotations and tenders, drafting of tenders and procurement contracts, pre-qualification of Suppliers, negotiation of contracts with Suppliers,

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conduction of due diligence audits on high risk Suppliers and Contractors, drafting and approval of work practices, drafting and approval of purchasing documents and letters of invitation and engagement, the power to procure goods and services within LoA, issuing of purchase orders, documentation and reporting requirements in terms of the procurement policies and procedures.

6.3 Procurement management systems

PetroSA makes use of a committee and a procurement management system to ensure that the adjudication process for goods and services is open, fair and transparent. The system ensures that objectivity, value for money and cost effective principles are espoused in all phases of the adjudication process. PetroSA will make use of the following:

Committee / management

system

Function Composition Delegation of Authority (*) –

Rand Value Procurement Cross Functional Team

Review of specifications, evaluation of quotations and tender bids, compilation of reports & making recommendations

User department; Any assigned Procurement Official and/or external specialist advisors. Other functionaries (such as SHEQ, Legal, Finance, Risk, BEE, etc.) participate based on the complexity of the tender.

Makes recommendations to the Head of Procurement, Vice Presidents, GCEO, and Procurement Committee for the award of any contract. Any value

Procurement Department

Review and approval of the quotation and tender recommendations and final review and approval of contracts awarded

Head of Procurement and or the Procurement/Supply Chain Officials

R1 - R5 million

Procurement Committee

Review and approval of the quotation and tender recommendations and final review and approval of contracts awarded

Chaired by an Executive Manager (at Vice President Level). Membership includes The Head of Procurement/Supply Chain as well as at least 7 other Senior Officials representative of the

R5 000 001- R150 million

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Committee / management

system

Function Composition Delegation of Authority (*) –

Rand Value divisional make up of PetroSA (as approved by the Executive Committee from time to time).

Executive Committee

Review and approval of the preferred quotation and tender recommendations and final review and approval of contracts awarded

PetroSA’s Executive Committee chaired by the Group CEO.

R 150 000 001- R 300 million

Board of Directors

Review and approval of the preferred quotation and tender recommendations and final review and approval of contracts awarded

Board of Directors Above R 300 million

7. SUPPLY CHAIN MANAGEMENT UNIT (SCM) / CORPORATE PROCUREMENT

DEPARTMENT

The SCM Unit or Corporate Procurement Department shall endeavour to increase return on capital employed and maximise BBBEE initiatives by employing the following purchasing strategies: 7.1 Global purchasing/contracting strategies

In order to promote South African BBBEE Suppliers internationally, the Corporate Procurement Department shall establish framework contracts or conventions and make these available for use by Subsidiaries and Joint Ventures which are controlled directly or indirectly by PetroSA.

7.2 Local/country specific purchases/contracting

These are managed by the local/subsidiary procurement departments in the case of subsidiaries and joint ventures controlled directly or indirectly by PetroSA. The Corporate Procurement Department shall assist subsidiaries and joint ventures with the identification of goods and services that should be procured locally/country specific.

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8. THE PROCUREMENT PROCESS

8.1. The Supply Chain Management Unit / Corporate Procurement Department shall develop a comprehensive procurement procedure that will define, in detail, the procurement process for the PetroSA Group. The procurement procedure shall be binding to all employees and must be consistent with the provisions of this policy.

8.2 In the case of subsidiaries and joint ventures controlled by PetroSA, PetroSA’s

corporate procurement procedure shall apply, unless the Board of that subsidiary/joint venture approves a company specific or local procurement procedure, which procedure shall be substantively in line with this Policy. In all instances, any company specific or local procurement procedure shall be consistent with this policy as well as the corporate procurement procedure.

9. BROAD BASED BLACK ECONOMIC EMPOWERMENT (BBBEE)

9.1 BBBEE is a deliberate socio-economic process or intervention strategy

designed to redress the imbalances of the past and to facilitate the participation of Black people in the economy.

9.2 PetroSA shall apply the provisions of the Broad Based Black Economic

Empowerment Act, it’s Codes of Good Practice and the latest Preferential Procurement Regulations (where applicable) in the procurement of goods and services.

9.3 PetroSA shall fulfil its corporate responsibilities regarding BBBEE through

affirmative procurement, Enterprise / Supplier Development and other interventions by, inter alia: -

9.3.1 ensuring that preferential procurement is included in the performance

contracts of all cost centre holders, where applicable;

9.3.2 giving effect to the principles encompassed in the PetroSA policies;

9.3.3 relating thereto in all its commercial activities;

9.3.4 facilitating the development of BBBEE enterprises by making opportunities available through its own operations;

9.3.5 assisting in the development of SMMEs and Local South African

Enterprises;

9.3.6 ensuring that pre-qualification criteria for preferential procurement is included in certain tenders

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10. PREFERENCE FOR SUPPLIERS

10.1 Order of preference

PetroSA shall deal with suppliers in accordance with the BBBEE Codes of Good Practice and the latest Preferential Procurement Regulations (where applicable).

10.2 Support initiatives

10.2.1 PetroSA may, inter alia, assist BBBEE enterprises by setting tenders

aside, either entirely or partially, for such enterprises (PetroSA's BBBEE policy refers).

10.2.2 Joint ventures between BBBEE and non-BBBEE organisations will

be actively encouraged in order that the transfer of skills may be effected to BBBEE organisations, but only if such skill will be transferable i.e. the black partner must have the required level of expertise and/or aptitude.

10.2.3 PetroSA will from time to time determine the cut-off value in terms of

percentage of acceptable tenders from BBBEE suppliers. 10.2.4 Permit price matching for set-aside portions of certain tenders. 10.2.5 Subcontracting and unbundling will also be utilised to assist BBBEE

suppliers that lack capacity for the entire service required. 10.2.6 Arranging for expedited payment to BBBEE suppliers. This may

include advance payments. In all instances the risk should be evaluated by the procurement department.

10.2.7 Any other reasonable assistance that could be provided which does

not conflict and compromise PetroSA’s overall objectives. 10.2.8 The assistance provided can only be given where BBBEE suppliers

meet certain criteria which shall be spelt out in the corporate procurement procedures, e.g. well established BBBEE suppliers would not qualify for some of the assistance.

10.2.9 The following additional assistance will also be provided: -

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Assistance with tendering; Financial assistance, through the supplier/enterprise

development initiatives or any other initiative aimed at providing assistance to Black Suppliers;

Training, Skills and Technology transfer

10.2.10 PetroSA will, where practical, use pre-qualifying criteria in tenders to advance certain designated groups.

10.2.11 PetroSA will require tenders to comply with the specific minimum

threshold for local production and content that have been designated by the Department of Trade and Industry, in consultation with National Treasury.

11. SUPPLIER MANAGEMENT / QUALIFICATION OF SUPPLIERS

11.1 PetroSA shall maintain a comprehensive register of qualified suppliers.

Qualification criteria shall, inter alia, include BBBEE ratings based on defined criteria.

11.2 Compliance with BBBEE constitutes a material condition of a PetroSA contract

and as such implementation of BBBEE programmes and initiatives by suppliers shall be monitored and audited for compliance.

11.3 PetroSA may, at its discretion on approval by the Executive Committee,

Procurement Committee or Head of Procurement remove a supplier from the register if the supplier:-

11.3.1 has been proved on a balance of probabilities to be a front;

11.3.2 gives false declarations in order to gain some advantage;

11.3.3 does not fulfil his/her promises of transferring skills to the satisfaction of PetroSA;

11.3.4 becomes insolvent;

11.3.5 behaves unethically from a business perspective in its operations or to the detriment of PetroSA (obligatory removal)(PetroSA's Code of Ethics policy refers);

11.3.6 does not perform in respect of contracts awarded;

11.3.7 Is found to have been practicing unfair labour practices;

11.3.8 the supplier is an employee of PetroSA or a close relative (i.e. parent, spouse, lifelong partner and child) of a PetroSA employee, as defined in paragraph 17;

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11.3.9 Is blacklisted by an organ of the state;

11.3.10 has unfairly influenced the process of award and have been found guilty of improper conduct, on a balance of probability;

11.3.11 has been convicted for fraud or corruption during the past 5 years;

11.3.12 has neglected, reneged on or failed to comply with any government, municipal or other public sector contract during the past five years;

11.3.13 has been listed in the Register for Tender Defaulters in terms of section 29 of the Prevention and Combating of Corrupt Activities Act No 12 of 2004;

11.3.14 has a poor safety culture and/or performance that does not meet

PetroSA’s requirements

11.4 The guilty Supplier and / or any of its members in the above cases will be blacklisted and PetroSA may refuse to register any new companies in which they are involved.

11.5 If a supplier is to be removed from the list such supplier shall be given written

notice of the proposed removal together with reasons thereof. Such supplier may, at the sole discretion of PetroSA, be given an opportunity to justify its actions before such removal is effected.

11.6 Where an application for qualification is refused, the reasons for the refusal

and the action required in order to qualify will be given to the supplier in writing. 11.7 PetroSA may from time to time publish advertisements inviting suppliers to

register with PetroSA and thereby be included on the supplier database. 11.8 Should a supplier with whom orders have been placed employ sub-

contractors, that supplier shall comply with PetroSA's BBBEE guidelines in respect of the appointment of such sub-contractors who in turn must conform in like manner.

12. PROCUREMENT WITHOUT PRIOR TENDERING

12.1 The tendering process referred to in PetroSA's Procurement Procedure will be

effected prior to the placement of an order for goods or services, except in the circumstances referred to in paragraph 12.4 below.

12.2 A mandate may be obtained from the Group Chief Executive Officer,

Procurement Committee or Head of Procurement that permits negotiation with a supplier or suppliers without first calling for tenders (see 12.4 below).

12.3 Negotiation may not be effected without tendering in order to: -

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avoid competition

discriminate among suppliers, or

give unwarranted assistance to particular suppliers 12.4 PetroSA may procure without tenders being invited with the consent of the

Group Chief Executive Officer, Procurement Committee or the Head of Procurement , where: -

12.4.1 Procurement is for immovable property, proprietary items and specific

expertise which, needs to be justified on a performance basis, as to why only the special goods or services are required;

12.4.2 No suitable responses are received in respect of an advertisement or

enquiry; 12.4.3 An emergency purchase, as defined, arises; 12.4.4 Additional work is to be undertaken in respect of a particular contract,

which work is within the objectives of the original enquiry and tender documents and the cost of which can be reasonably negotiated and reduced to writing. The total value of such negotiated contract extensions may not exceed 10% of the amount of the original contract without the prior approval of the Group Chief Executive/Procurement Committee;

12.4.5 Goods or services that are required are available on exceptionally

favourable terms only in the very short term; 12.4.6 Goods or services are procured from another organ of state, which

was (a) secured by that other organ of state by means of a competitive bidding process applicable to that organ of state; and (b) there is no reason to believe that such contract was not validly procured; and (c) there are demonstrable discounts or benefits to do so; and (d)the other organ of state and the Supplier has consented to such procurement in writing; and (e) the goods or services required by PetroSA are similar to those on contract;

12.4.7 Only one supplier manufactures or renders goods and services due to

the unique nature of the requirements;

12.4.8 Goods and services are procured from a supplier that was identified through a Supplier Development Process, initiated by the National Treasury, Department of Trade and Industry, Department of Economic Development, Department of Small Business Development or any State Owned Company affiliated to State Owned Enterprises Procurement Forum (SOEPF) to support Governments strategy for industrialisation;

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12.4.9 PetroSA is required to comply with licensing conditions and/or other

legal requirements 12.4.10 Procurement is for advisory services for the Board and is not directly

linked to business operations (such as evaluation of management, confidential advisory services, etc.). In this instance, the services shall be procured through the office of the Company Secretary supported by the Group Supply Chain Manager.

12.4.11 PetroSA needs to respond to an external bid invitation and is required

to identify a technical partner/s essential to the success of the bid. 12.4.12 PetroSA decides to procure materially discounted or distressed goods

and/or services (excluding items listed in paragraph 3.3) in order to take advantage of market conditions that enables or profits the business.

In all instances, the final contract award shall be subject to the normal approved delegation of authority, listed in paragraph 6 above, and subject to applicable National Treasury requirements from time to time.

13. CAPITAL PROJECTS

13.1 PetroSA has adopted the Project Lifecycle Process (“PLP”), also referred to

as the Gated Framework or Enterprise Project Management Office Framework (EPMO), as the standard methodology for the development and execution / implementation of all projects. All major projects shall follow the PetroSA approved EPMO model, in line with applicable National Treasury Instructions from time to time.

13.2 All major capital projects (as defined in paragraph 4.1.17) must be subjected to an independent gateway review prior to acceptance. As a standard, PetroSA shall appoint a Managing Contractor or Managing Agent “Contractor” (i.e. an Engineering, Procurement and Construction Management (“EPCM”), Project Management Contractor (“PMC”), Engineering, Procurement & Construction (“EPC”) Contractor) to manage major capital projects, unless directed otherwise by the Procurement Committee.

13.3 For all major capital projects, a Managing Contractor or Managing Agent shall be appointed at Phase 3 (FEED). It is not necessary for the same Contractor to be utilized over the entire lifecycle of the PLP. However, the same Contractor may be utilized for Phase 3 (FEED) and Phase 4 (Execution) in order to minimise the risk to PetroSA. The selection of a Contractor must follow the normal procurement process. The appointment of the Contractor, who was appointed for several phases of the Project, will be reviewed at each gate and may be terminated at PetroSA’s discretion.

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13.4 The planning, design, procurement, execution and close out of all major capital projects shall be executed in accordance with National Treasury’s Standard for Infrastructure Procurement and Delivery Management.

14. COMMUNICATION WITH SUPPLIERS PetroSA shall communicate with suppliers on the following issues:

14.1 Notification

The award of the contract shall be communicated to the successful tenderer in writing by an authorised PetroSA Procurement Official. No verbal or telephonic awards shall be valid. Unsuccessful tenderers shall be notified in writing by the relevant PetroSA Procurement official.

14.2 Complaints

If a supplier complains that PetroSA has not acted in accordance with its procurement and/or related policies the supplier must communicate the details of the complaint to the Head of the Procurement Department or the Group Chief Financial Officer, in writing. Should the complaint relate to the Chief Financial Officer the Complainant may refer the matter to the Group Chief Executive Officer. The complainant shall be advised in writing of the outcome of the complaint after it has been fully investigated. Should a complainant feel that his/her complaint is not being satisfactorily resolved, the complainant may report the issue to the PetroSA fraud prevention hotline.

15. TRANSPARENCY

PetroSA’s procurement and related policies shall be made available to suppliers and any other interested parties upon request. Other relevant information may also be made available if the business interests of PetroSA and/or other parties concerned will not be adversely affected thereby.

16. THE GROUP CHIEF EXECUTIVE OFFICER

The Group Chief Executive Officer shall be accorded the power to enact and enforce decisions in accordance with the provisions as detailed in this Policy. The Group Chief Executive Officer may use the Executive Committee (EXCO) to assist him/her in this regard.

17. PROCUREMENT COMMITTEE

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The Procurement Committee shall be responsible for the rules and practices for the adjudication of tenders in respect of the award of contracts. 17.1 Authority The Committee is empowered in terms of the Procurement Policy

17.1.1. To independently manage, regulate, and control the procurement of goods and services for PetroSA on behalf of the Group Chief Executive Officer and the Board.

17.1.2. Investigate, review, accept, reject and approve matters concerning the procurement of goods and services within its scope of responsibility.

17.1.3. Adjudicate tenders with a rand value of up to one hundred and fifty million rand (R150 000 000).

17.1.4. To review and present all recommendations on any tender matters (including tenders with a rand value above one hundred and fifty million rand (R150 000 000).

17.1.5. To delegate any of its authority to the Head of Procurement.

17.2 Proceedings of the Procurement Committee

17.2.1 Details of Procurement Committee proceedings, decisions and

relevant documentation and minutes will be regarded as strictly confidential and will be disclosed to non-members of that committee on a need-to-know basis only.

17.2.2 Should any members of the Procurement Committee be placed in a

conflict of interest situation (PetroSA’s Code of Conduct refers) they must excuse themselves from the relevant Procurement Committee proceedings and their alternates attend in their stead, at the discretion of the Chairperson.

17.2.3 All Procurement Committee meetings to be minuted. Minutes of

meetings to be authorised at the following meeting.

17.2.4 There should be full and transparent disclosure made to the Group Chief Executive Officer and Executive Committee of details of Procurement Committee proceedings, decisions, relevant documentation and minutes.

17.2.5 Details of all Procurement Committee proceedings, decisions, relevant

documentation and minutes to be reported to the Group Chief Executive Officer and Executive Committee in a timely manner.

17.3 Membership

The Membership shall be representative and members shall be appointed by the Group Chief Executive Officer/Executive Committee from time-to-time.

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17.4 Independence

To provide for the independence of the Procurement Committee, the Committee shall be accountable to the Group Chief Executive Officer and/or the Executive Committee (EXCO).

17.5 Decisions / Quorum

17.5.1Formal Meetings

In principle, Committees shall endeavour to operate by consensus. All decisions of the Committee shall be on a majority basis of members present at the meeting.

17.5.2Quorum

Any seven members present, one of whom shall be an Executive Manager shall form a quorum. Any member may, with the approval of the Chairperson, appoint an alternate, not already on the Committee, to attend Committee meetings in his/her stead.

17.5.3 Round Robin

The Committee may take decisions on a round robin basis. A decision taken by round robin is valid if all (100%) members or their nominees approve.

18. ETHICAL STANDARDS / CONFLICT OF INTEREST

The purpose of this ethical code of conduct is to ensure that all business transactions take place in an environment of honesty, integrity, fair competition and respect for South African Laws. This code outlines PetroSA’s expectations from all its employees and suppliers who participate, directly or indirectly, in procurement activities.

18.1. Suppliers

Supplier’s interest in relation to PetroSA must be included with the quotation/tender documents. A quotation/tender shall be excluded from further evaluation if a supplier fails to declare any interest or potential conflict of interest.

18.2. PetroSA personnel (a) All employees have a duty to promote the reputation and business of

PetroSA and not to make any personal gain at the expense of or as a result of their employment by PetroSA. Decisions and functions carried out in the

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course and scope of employment must be directed at what is in the best interests of the PetroSA. Personal interests must not conflict with those of PetroSA.

(b) An employee of PetroSA (including long term contract workers) and their

immediate family (i.e. spouse, life long partners, parents and children) may not participate in or benefit directly or indirectly (i.e. through shareholding, profit sharing etc) from tenders / contracts with PetroSA. This provision specifically excludes shareholding and/or profit sharing which is immaterial (as defined in the Companies Act) in a public and/or listed company.

(c) When a conflict of interest arise after a contract is awarded or in the case

of a sole source supplier, the Procurement Committee shall deliberate the merits of each case and recommend to the Executive Committee and/or Board for a final decision.

(d) Where a possible conflict of interest (other than the above) arises, the

interest must be declared in writing to the Procurement Committee as soon as it arises and the employee must recuse him/herself from participating in any way in related business dealings. Written disclosure is effected by the employee.

18.3. Non-Executive Board Members of PetroSA

In respect of non-executive board members, the provisions of the companies act in respect of declaration of interest shall be strictly observed.

19. IMPLICATIONS FOR NON ADHERENCE TO PROCUREMENT POLICIES &

PROCEDURES

19.1. Abuse and failure to comply with the provisions of this policy and its procedures is not acceptable and PetroSA shall take disciplinary action against any person found to have violated and/or abused this policy or any of its procedures.

19.2. Employees found guilty of conniving with suppliers or contravening PetroSA’s

policy and its related procedures shall be subject to PetroSA’s Disciplinary Code and Procedure.

19.3. Suppliers and their directors who have been found guilty of abusing this policy

and its procedures shall be barred / suspended from doing business with PetroSA.

19.4. PetroSA reserves the right to criminally prosecute any person found to have

violated or abused this policy and its procedures. To this extent the South African Law Enforcement agencies shall be informed and the case handed over to them for processing.

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20. RECORDS

Title Location Retention Period

Purchasing Documents SAP System 10 years

21. UPDATING OF POLICY

The policy document will be reviewed every 3 years by the Group Supply Chain Management Department.