Business Day: Grindrod, BP and Shell in R350m BEE deal
By Lynn Bolin
30 June 04
Listed South African shipping group Grindrod Ltd (GND) and its subsidiary Unicorn Shipping have teamed up with global oil giants BP and Shell to facilitate a 350 million rand empowerment deal for black empowerment shipping group Southern Tankers.
The deal includes the purchase of a new 250 million rand oil tanker and a three- year charter contract valued at R100 million to transport oil along the south and east African coasts.
Southern Tankers is 50% owned by Grindrod and 50% owned by black empowerment group Dudula Shipping, and was set up in 2001 to provide a platform to offer shipping transport services to the South African petrochemical and marine industry.
As the country's first black-owned shipping company, founded in 1997, Dudula Shipping has partnered Smit Marine South Africa, Afromar (a subsidiary of ship broking group Clarksons plc), and CSX World Terminals, in several ventures to date.
Unveiling the empowerment transaction, which is the largest-ever single oil industry procurement deal, at the new oil tanker naming ceremony in Cape Town on Tuesday, Grindrod managing director Ivan Clark said that Royal Bank of Scotland had provided financing for 70% of the transaction, a standard percentage in the global shipping industry, with the remaining equity provided by Grindrod and Dudula.
Grindrod had arranged the financing and provided financial guarantees, and had also supervised the design, construction and
delivery of the new ship from South Korea.
The ship, a state-of-the-art 370,000 deadweight tonne tanker with many new safety features, was christened "Southern Unity" by the first lady Zanele Mbeki. The name was the winner of a national competition between students at maritime schools.
The Southern Unity will distribute fuels and refined petroleum products from the joint BP- and Shell-owned Sapref refinery in Durban along the African coast, from Namibia all the way north to Kenya and Tanzania.
According to Shell supply project manager Mike Scott, the ship's size and bow specifications had been especially commissioned to allow it to fit into all of Africa's harbours, which are somewhat smaller than many globally, carrying a maximum load.
The new ship will replace an ageing tanker jointly owned by BP and Shell.
In 2001 Southern Tankers won a joint tender for the time charter of a product tanker to Shell and BP with the understanding that the ownership would involve black empowerment, as well as create new jobs, and train and transfer new skills to previously disadvantaged individuals.
From 2003, Southern Tankers had contracted Unicorn Shipping to provide the necessary technical, crewing management and training services for the 29 members of the ship's crew, over 90% of whom were black.
Speaking at the naming ceremony, Rams Ramashia, head of country for BP in South Africa, said that the award of the coastal shipping contract to Southern Tankers illustrated how empowerment should be done.
"What we have is a normal commercial agreement between a service supplier and a client, packaged in a manner that gives practical expression to the spirit and the letter of the black economic empowerment agenda.
"The uniqueness of this historic deal lies in the fact that it covers all the key pillars of empowerment, namely ownership, skills development, procurement and management."
Shell South Africa CEO Benny Mokaba added that the contact fully met both the aspirations of government in developing black economic empowerment in the oil industry, and at the same time also conformed to the rigorous standards of Shells sustainable development framework business strategy.
"Our alliance with Southern Tankers.... is proof that participation in black economic empowerment can be tweaked into the fabric of the way we do business every day."
"We can leverage existing partnerships and form new alliances that will grow our business and profits whilst contributing to the equal distribution of wealth in our country."
The deal will help BP and Shell reach the BEE target set out in the Liquid Fuels Industry Empowerment Charter in 2000 for 25% ownership of the local fuels industry to be in black hands by 2010.
Grindrod subsidiary Unicorn Shipping had also ordered a further six tankers from the South Korean builder of the Southern Unity, Shina Shipyard, with the first just having been delivered, Clark confirmed.