Engen LTD Integrated Annual Report 2015 Final
Engen LTD Integrated Annual Report 2015 Final
Engen LTD Integrated Annual Report 2015 Final
Engen Limited
Integrated Report
2015
Our Vision
To be the oil company of choice in sub-Saharan Africa and the Indian Ocean
Islands.
Our Core Business
Engen is an African-based energy group focused on the refining and marketing of
petroleum and petroleum-based products, and the provision of retail convenience
services, through an extensive network of service stations across 17 countries in
sub-Saharan Africa and the Indian Ocean Islands. Engen also exports its products to
more than 30 other territories.
Our Values
At Engen our corporate values are the standards of excellence we strive
to achieve as a successful business and responsible corporate citizen. The
values driving our actions are:
Integrity
We demonstrate ethical, fair and transparent behaviour. Our actions earn trust and respect from others.
Performance
We actively pursue, define, measure and recognise excellence in all business activities.
Teamwork
We work together as one team to realise Engens vision to the benefit of the whole organisation.
Ownership
We are responsible and accountable for our actions and performance. We are committed to continuously
finding new and better ways to deliver value to the business.
Empowered
Employees have the capability, authority and resources to act and perform in their jobs. Employees have
developed to be competent in their current jobs and their potential is developed to meet the current and
future needs of the company.
Contents
ABOUT THIS REPORT
CHAIRmans review
CEOs Statement
OUR HIGHLIGHTS
14
OUR BUSINESS
16
Company Ownership
16
Our African Presence
16
Our relationship with PETRONAS
17
The Engen Brand
18
Our Operational Divisions
20
Refinery 20
Supply, Trading and Optimisation (STO)
20
Engen Sales and Marketing (ESM)
20
International Business Division (IBD)
20
Engen Value Chain
22
BUSINESS CONTEXT
Global Environment
Sub-Saharan African Environment
24
24
26
31
Compliance 36
Health, Safety and Environment Management System (HSE-MS)
RISK MANAGEMENT
Our Approach
Our Risk Governance Framework
HSEQ Risk Management
Engens Top Risks
37
39
39
39
40
40
SUSTAINABILITY IN CONTEXT
42
45
OUR PEOPLE
45
46
48
Contents
OUR RELATIONSHIPS
59
Stakeholder Engagement
59
The Process to Determine Materiality
62
Engaging our Stakeholders
62
Community Engagement - Refinery
62
Involvement in External Initiatives
63
Corporate Social Investment (CSI)
63
Educational Support to External Stakeholders
64
Health and Safety Support to External Stakeholders
65
Community Outreach
66
Employee and Dealer Partnership Project
67
Sponsorships 68
71
71
71
72
73
74
76
77
TRANSFORMATION 79
Our B-BBEE Performance
Key Initiatives
79
80
84
84
84
85
85
88
Chairmans Review
Mr Md Arif Mahmood
CHAIRMAN
As an Africa-based oil company concentrated on the refining and marketing of petroleum and
petroleum-based products, we as Engen remain focused on our vision to be considered the oil
company of choice in sub-Saharan Africa and the Indian Ocean Islands. With this clear vision,
dedicated employees and distinctive assets, we are well placed to take full advantage of the many
growth opportunities in the markets in which we operate, to the benefit of all our stakeholders.
As a company we are mindful of the fact that our stakeholders expect us to conduct business
ethically and in an environmentally and socially responsible manner. As such, we place a
strong emphasis on individual and organisational integrity. While operating as a profit-oriented
business, we recognise the need to balance our commercial objectives with that of contributing
to the socio-economic development of the countries in which we do business.
Engen is unique in the refining and downstream marketing industry. We own and manage
a nameplate 135 000 barrel per day refinery in Durban, South Africa and we operate
over 1 500 service stations of which approximately 1 000 are located in South Africa and the
remainder in 15 countries across sub-Saharan Africa and the Indian Ocean Islands. Distributor
agreements exist in a further eight countries. We also operate a vast convenience network in the
region offering an extensive range of products and services.
Meaningful Black Economic Empowerment in the South African oil industry remains central to
the future of the industry. As Engen we firmly recognise that our participation is an essential
part of our future success. Accordingly, we have developed strategies and plans that are being
executed to progress this important issue.
Reflecting on our 2015 performance, I am pleased to share our journey with you.
Delivering world class service and products have enabled Engen to maintain the position as
industry market leader in South Africa and we are steadfast in leveraging opportunities to
strengthen our business in sub-Saharan Africa and the Indian Ocean Islands. Operational
Excellence, and effective Health, Safety, Environment and Quality (HSEQ) and Risk Management,
along with the continuous effort to optimise the supply chain, have been a critical focus in
ensuring that our business is both sustainable and profitable.
However, the global economic landscape once again proved challenging in 2015. Slow economic
recovery and low commodity prices impacted global GDP, which registered at 0.2% less in
2015 compared to 2014. This, together with weakened African currencies and infrastructure
constraints, resulted in slower growth for sub-Saharan Africa, as was forecasted. In South Africa,
still our biggest market, the Consumer Confidence Index decreased to multi-year lows. This is
indicative of the harsh market conditions and intermittent repurchase (repo) rate increases.
A great deal of quality work has been carried out over the past few years at our Refinery, particularly in the area of operational efficiency
and reliability. The low crude prices in 2015 did have an impact on improving global refining margins. The Engen Refinery benefited from this
upswing due to the assurance of record mechanical availability of 97.68%. Our exceptional execution of the Maintenance Turnaround, which
was safely and successfully concluded ahead of schedule, deserves part of the credit for this outstanding accomplishment.
In our continued pursuit of excellence, noteworthy capital investments were made across the supply chain to optimise safe operations and
expand Engens quality service, products and convenience offerings. With continued focus on defending market share, our position as the
leading petroleum marketer in South Africa was proudly reaffirmed by three prestigious accolades. In 2015, Engen was presented with the
Sunday Times Top Brands Award in the Petrol Station category and was also named the Coolest Petroleum Brand by young South Africans
in the Sunday Times Generation Next survey. These two awards were both bestowed upon us for a record fifth consecutive year. We
also received another award when South African motorists named us South Africas Favourite Fuel Brand in the Standard Bank Peoples
Wheels Awards. These are all noteworthy achievements and indicate that we are achieving our stated purpose of meeting the needs of our
customers.
As we continue our journey towards being the oil company of choice in Sub-Saharan Africa and the Indian Ocean Islands, we will leverage
key and influential relationships to enable effective stakeholder engagement.
As a responsible corporate citizen, we conducted various social and community projects over the course of 2015. These broadly focus on
education, health and safety, and community outreach. Our social investment ensures that the fruits of our efforts are returned in a manner
that will improve the lives and well-being of both present and future generations. Furthermore, Engen service station owners are encouraged
to discharge their role as a responsible and caring citizen by supporting their local communities. It is something they continued to do proudly
in 2015.
The year under review was challenging. I am however optimistic that we will continue to forge ways to remain relevant and sustainable in
the volatile economic environment. In anticipation of the increasing challenges ahead, we will remain focused on expanding our network of
facilities across sub-Saharan Africa and the Indian Ocean islands, improving the quality of our products and services, optimising costs and
developing our human capital even further. I look forward to sharing improved success with you as we implement strategic initiatives to
mitigate challenges and enable enhanced sustainability.
As we welcomed Mohd Farid Mohd Adnan to the helm of the Engen Management Committee in August 2015, a special thank you is given
to outgoing Managing Director and CEO, Datuk Ahmad Nizam Salleh. His leadership over the past five years will remain a part of Engens
notable legacy.
On behalf of the Engen Limited Board, I extend sincere gratitude to all Engen employees, who remain our greatest asset. Your ongoing
commitment, loyalty and perseverance ensure that we continue to Make GREAT Happen.
I would like to thank our shareholders, dealers and customers for the unwavering support extended to Engen.
Mr Md Arif Mahmood
CHAIRMAN
South African
future of the industry
CEOs Statement
Our corporate values and good business ethics continued to inform all of our business decisions
in 2015. The goal of adding value in a balanced manner remained our driving force.
The year under review saw Engen weather a stormy economic climate. A confluence of low
growth, interest rate increases and high inflation affected household income. Despite some
relief from lower fuel prices, weakened currencies negated the impact of the falling oil price to
the consumer.
Our Business Value (Financial Capital)
We reported a gross financial profit increase of R4, 983m for 2015 due to the significant decrease
in inventory revaluation losses. Inventory revaluation losses were incurred in the prior year due
to the downswing in the crude price which commenced toward the end of the 2014 financial
year.
Our expenses increased by 6%, which was mainly as a result of higher staff costs and depreciation
due to the supply chain and retail site investments in our Engen Sales and Marketing (ESM)
division and to a lesser extent in our International Business Division (IBD). This also included the
Refinery depreciation charge on stay-in-business capital. In addition, foreign exchange losses
also had a significant impact. Our realised and unrealised foreign exchange losses increased by
R154 million in 2015.
Our statement of financial position is currently largely ungeared and this presents an opportunity
for the funding of significant projects over the longer term. The aim is not to exceed a gearing
ratio of 20% (debt to equity), defined as the ratio between our total equity attributable to parent
equity holders and non-current interest bearing debt, over extended periods.
Our total assets increased year-on-year by R3,383 million to R37,002 million at the end of
2015. This was driven mainly by an increase in our cash and cash equivalents balance from
R1,699 million to R4,222 million.
Our Equipment and Infrastructure (Manufactured Capital)
The Engen Refinery continued to deliver outstanding performance in 2015. Improved refining
margins as an outcome of lower crude prices coupled with a mechanically reliable and safe
operating plant, positively contributed to our profitably. The success of our refinery is attributed
to, amongst others, the execution and completion of the Maintenance Turnaround safely and
ahead of schedule. This served to support the record mechanical availability that was achieved
in 2015.
Furthermore, our refinery recorded Overall Equipment Efficiency (OEE) of 98.56% far surpassing our planned target of 92.33%. The plant
reliability target was 94.30% but the actual OEE performance was recorded at 97.68%. These results were not without the great effort,
collaboration and commitment from the Refinery team and a keen focus on preventative maintenance.
We also continued to improve product quality and manufacturing standards in the year under review. This included interventions at our
Refinery that resulted in the manufacture and supply of ultra-low sulphur 50ppm diesel. To support the introduction of this 50ppm diesel into
the South African supply chain, we constructed and commissioned a 16 million litre ultra-low sulphur diesel storage tank. As a company
which historically purchased ultra-low sulphur diesel via inland purchases or oversees imports, this is a notable achievement.
To address storage constraints, we sought to optimise our assets. In one instance, tanks in Durban, South Africa were converted to support
the containment and movement of manufactured Bunker Fuel Oil for the supply of local demand at the Durban Port. Another of our high
priority investments was the piping and loading arms at our facilities in Island View, Durban, which will enable the loading of Bunker Fuel
Oil via barges.
In addition, to secure adequate capacity for the local fuel supply in South Africa and for neighbouring states, the Engen Fuel Capacity
Optimisation programme was initiated to enable sustained growth in demand over the long term.
In order to bolster our supply chain into southern, central and eastern Africa, we completed a storage facility in Namibia, a terminal in
Mozambique and a pipeline in Zambia. We also commenced construction of storage facilities in two other areas of Namibia.
The facility in Grootfontein, Namibia was commissioned in the first quarter of 2015. It will support sales in the country as well as with the
countrys major trading partners of Botswana, Angola and Zambia. In the west of Namibia, in the town of Swakopmund, we are in the process
of installing another bulk fuel facility, which will service key industries located in the area. The facility will be commissioned in 2016. A third
major investment in Namibias fuel supply the Ondangwa fuel depot - was started in late 2015 and is expected to be completed by mid-2016.
We also significantly increased our supply capacity to southern African countries with the launch of a 24 000m Terminal in Mozambique
in early 2015. The Beira Terminal will supply petrol, diesel and lubricants to the main hubs in Mozambique, as well as to other countries in
Southern African where Engen has operations, including Zimbabwe. The depots strategic value is to ensure we meet our growth and future
market share targets and to establish another supply corridor into Southern Africa.
In Zambia our vision for growth reached another milestone following the construction of a new pipeline linking the Engen depot in Lusaka to
the government facility in the city.
Considering our customer needs, the focus to always deliver the best service with signature convenience offerings remained a priority. In
South Africa we expanded our quality service and partnerships by converting and installing seven new Woolworths Foodstops, 17 new
Quickshops and six new Fastfood outlets. We also had 20 new 1Plus outlets installed and eight 1-Stop outlets that were revitalised. With
the objective of increasing our footprint in the country, seven brand new retail sites were built with 18 upgrades and 10 rebuilds in 2015.
Site upgrades are however not restricted to South Africa. In our International Business Division, we continued to drive the growth strategy in
our retail network and push sale volumes. This served to further cement our presence in sub-Saharan Africa and the Indian Ocean Islands by
providing petroleum products and convenience services to consumers.
Across our affiliate operations we completed 24 new service stations, and six total demolition and rebuilds in 2015. A further six services
stations were upgraded.
Our affiliate operation in Reunion is currently constructing a retail site that will incorporate energy-friendly technology, which is another
milestone initiative for Engen. The installation will include rain water harvesting, 80% water recycling at the car wash, a solar canopy, and
no air conditioning, with temperature managed without an air conditioning system. The station will feature endemic plant species. Engen in
Reunion is also preparing to install an ISO 50001 energy management system. These innovations are indicative of our commitment to energy
efficiency.
10
11
Overall Equipment
Efficiency of 98.56% far surpassing
the planned target of 92.33%
12
13
Our Highlights
Natural Capital
Vapour Recovery Units installation for key
facilities complete.
Three-fold decrease in hazardous and non-hazardous
waste disposal.
78% decrease in volume of product from major LOPC
incidents (Loss of Primary Containment).
Human Capital
60% workforce benefitted from development processes
for the past three years.
Women in Leadership programme launch.
Successful Disability Awareness Campaign.
Significant improvement in health risk factors.
Zero fatalities.
Social Capital
200 employees engaged in voluntary community
development initiatives.
More than 2000 individuals reached through Driver
Wellness and Phambili roadshows.
Manufactured Capital
98.56% refinery OEE and 97.68% refinery reliability
VRU installations at our facilities.
Successful and incident-free incorporation of SAFOR
into refinery.
Recognition
At Engen we are focused on our vision of being the oil
company of choice in sub-Saharan Africa and Indian Ocean
Islands. This means we have to touch the hearts of our
stakeholders and earn recognition through our services
and products that are focussed on customer needs.
The recognition we receive from our various stakeholders is
important to us and it sends a signal of the impact we have had
on our stakeholders.
We received the following Awards in 2015:
Sunday Times Top Brand Award (Petrol Station category):
Engen first won this prized award in 2011 and we have
since won it for a record five successive years.
Sunday Times Generation Next Award:
- This is the tenth year of these awards and for the fifth
consecutive time, Engen was declared The Coolest
Petroleum Brand by young South Africans.
Standard Bank Peoples Wheels Award:
- For the 5th consecutive time, Engen was named
South Africas favourite Fuel Brand by South African
motorists.
14
15
Our Business
Engen is an African company that operates in the Oil and Gas sector. Our focus is on the downstream business of refined petroleum and
related products. We do this through our integrated value chain comprising a refinery, a network of storage facilities, distribution facilities,
blending facilities and a retail network. All these are supported by marketing and trading expertise. We have operations across 18 countries
in sub-Saharan Africa and the Indian Oceans Islands where we offer product and convenience services to our stakeholders.
Our refinery, located in Durban near the port facilities, has a nameplate capacity of 120 000 barrels of crude per day. Refinery finished
products together with imported refined products are sold through our distribution network which includes commercial facilities and 1504
retail outlets of which 1057 are located in South Africa, Lesotho and Swaziland. A further 447 retail sites are in our International Business
Division affiliate operations.
Our logistics network is supported by 50 main depot terminals across sub-Saharan Africa and the Indian Ocean Islands. We also have access
to storage infrastructure through collaboration with partners.
Company Ownership
The Malaysian national oil company Petroliam Nasional Berhad (PETRONAS), holds 80% of Engens equity. Pembani Group (Pty) Ltd owns
20% equity.
4
13
3
6
2
16
17
11
8
18
10
12
14
16
15
1) BOTSWANA
2) BURUNDI
3) DRC
4) Gabon
5) GHANA
6) KENYA
7) LESOTHO
8) MALAWI
9) MAURITIUS
10) MOZAMBIQUE
11) NAMIBIA
12) RUNION
13) RWANDA
14) SOUTH AFRICA,
15) Swaziland
16) TANZANIA
17) ZAMBIA
18) ZIMBABWE
17
We continue strengthening our brand and introducing new value-adding branded products to meet key market demand. Engen has developed
strength in our strong leadership and we have developed strong brand leadership and governance at the highest level of the business.
Primax
Dynamic Diesel
Laurel Paraffin
Quickshop
TruckStop
1-Stop
18
1-Plus
Fluidlink
Engen IPS
Innovative Packaging Solution (IPS)
fluid bags are designed to reduce
cost-to-serve to customers with
intermediate bulk lubricants.
1-Card
Hydrokin ESF
Oil-on-Tap
19
Sourcing of Crude
and finished product
Crude Processing
Supply, Trading
and Optimisation
(STO)
International
Business Division
(IBD)
All infrastructure
in our affiliate operations
(e.g.: storage, retail,
lubes, bulk transport)
Refinery
Storage
Bulk transport
Commercial Fuels
Retail
Chemicals
Lubricant plants &
Distribution centres
Refinery
The Refinery manufactures a range of products required to meet customer requirements. We have coupled 60 years of refining experience
with continual investment in technology to maintain refinery competitiveness and international certification such as ISO 9001 and 14001
certifications. We are currently working towards the implementation of ISO 17025.
The key role of the Supply, Trading and Optimisation (STO) Division is to support the growth of ESM and IBD with the supply of optimal
petroleum products. In carrying out that role, STO has the responsibility to plan for maximum supply efficiency and coordinate strategies
and operations to balance supply and demand for fuel in the system. Trading is the activity undertaken to close the gap between supply and
demand in the system and carried out within the context of optimisation.
The Engen Sales and Marketing (ESM) division is responsible for the promotion, sales and distribution of our products in South Africa,
Swaziland and Lesotho. This includes all our service offerings through our convenience retail centres.
ESM also manages the supply of lubricants designed for specific customer needs. This is done in partnership with parent company PETRONAS
International Lubricants (PLI) through the trading arm of PLI Africa, which is responsible for all PETRONAS lubricants operations on the African
continent and in Australia. Engen operates two lubricants blending facilities, the Engen Lube Oil Blend Plant (LOBP) and the Zenex Blend Plant
(ZBP) both located near the port facilities in Durban. There are also four distribution centres that are part of the South African supply system.
The rest of our operations throughout Sub Saharan Africa and the Indian Ocean Islands are managed by International Business Division (IBD),
who provides petroleum products and convenience services to our customers.
20
21
Sourcing
Inbound
Logistic
Inbound Logistics
Processing
Shipping Tanker
Crude Source
Refinery
Import
Shipping Tanker
Product
22
Depot Terminal
Processing /
refining
Fue
and p
prod
from
Dur
els, lubricants
petrochemical
ducts produced
m crude at our
rban refinery
Outbound
Logistic
Storage facilities,
rail, pipeline, ships
and road transport
used to take product
to customers
Outbound Logistics
Pipeline Transfer
Sales and
Marketing
Customer
Aviation
Retail
Convenience
Centres
Road Transfer
Mining
Depot Terminal
Rail Transfer
Industry
Shipping Transfer
Customer Storage
23
Business Context
Global Environment
The Global Risks report by the World Economic Forum (WEF) identified key risks. The oil and gas sector is intrinsically
linked to stresses presented by these risks and we witnessed a few of them exerting themselves during the
reporting period.
The agreement reached at COP 21 (the 21st Conference of Parties) in Paris in December 2015 marks a key
achievement in the fight to halt global warming and the consequential climate change and its effects. It is expected
that the signing of the agreement will take place in April 2016 paving the way for implementation by the parties. All
18 countries in which Engen operates are signatories to the agreement and have prepared their Intended Nationally
Determined Contributions (INDCs). These INDCs point towards a number of critical activities covering infrastructure
builds, skills programmes and evolution of the regulatory framework. The targets have been set for 2030.
The Southern Africa region suffered a severe drought in 2015 triggered by the abnormal El-Nino weather pattern.
Countries affected include: Namibia, Zimbabwe, Zambia, South Africa, Botswana, Lesotho and Malawi. The
socioeconomic impact is expected to last past 2016 especially impacting food prices and a number of water
dependent products across the region.
The two themes that characterised the global environment during 2014 were the weak economic recovery and a
drop in commodity prices. These continued through 2015, exacerbated by weak Chinese economic performance
(GDP growth rate of 6.9%), financial market volatility and weakening capital trade flows. Global GDP registered
2.4% in 2015 down from 2.6% in 2014.
24
The World Bank and IHS projected modest growth in advanced economies of between 2.8% and 2.9% in 2016
(World Bank forecast shown in the table below). The World Bank, however, marked down their growth forecasts
in light of the effect on the US dollar appreciation and the impact on Japan of slowing trade in Asia. On the other
hand, the IHS Economics lowered their forecast by 0.1% owing to weaker outlooks for Brazil, Canada, the United
States, and the United Kingdom.
The slowdown in Chinas economic growth, due to imbalances in credit, equity, housing, and industrial outputs,
has put additional downside risk into the market. The IHS considers the recent declines to be a partial resetting of
unjustified stock market growth in 2015 and expects Chinese GDP growth to exceed 6% in 2016.
Forecasts are subject to substantial downside risks. A more protracted slowdown across large emerging markets
could have substantial spill overs to other developing economies, and eventually hold back the recovery in advanced
economies.
Global Real GDP Growth Rates and International Capital Flows
2013
2014
2015
(estimate)
2016
(forecast)
World
2.4
2.6
2.4
2.9
1.2
1.7
1.6
2.1
USA
1.4
2.4
2.5
2.7
EU
-0.2
1.9
1.5
1.7
Japan
1.6
-0.1
0.8
1.3
UK
2.2
2.9
2.4
2.4
Russia
1.3
0.6
-3.8
-0.7
Developing Countries
5.3
4.9
4.3
4.8
China
7.7
7.3
6.9
6.7
India
6.9
7.3
7.3
7.8
SSA
4.9
4.6
3.4
4.2
RSA
2.2
1.5
1.3
1.4
Nigeria
5.4
6.3
3.3
4.6
Angola
6.8
3.9
3.0
3.3
3.3
3.6
3.6
3.6
-0.9
-0.75
-46.5
-8.5
-.72.
-4.6
-14.8
-1.8
Developing Countries
5.9
5.3
3.1
3.7
SSA
5.0
5.1
4.0
4.0
25
Worsening prospects for developing countries have coincided with a sharp slowdown in global trade, a rise in
financial market volatility, and a substantial decrease in capital inflows (see table above). In anticipation of tighter
U.S. monetary policy, currency pressures have intensified and borrowing costs have increased, particularly for a
number of commodity exporters. Significant nominal currency depreciations against the U.S. dollar are straining
balance sheets in countries with elevated dollar-denominated liabilities.
Global Crude Oil
By December, dated Brent was trading around US$39/bbl compared to the 2015 average of US$52/bbl. The IHS
expects prices to average US$38 by quarter one 2016 and recover during the second and third quarters. Current
prices will lead to a further decline in onshore US production, helping to move the global oil market to balance by
the second half of 2016 (although stocks are expected to remain at high levels).
The agreement on Irans nuclear programme in July 2015 signalled the return of Iran to global oil markets. This
happened at a time when the oil price was already under pressure. The impact is expected in our next reporting
cycle. The IHS Energy expects an increase of only 400,000 b/d due to Iran crude by the end of 2016.
Downstream Refining & Marketing
Global refining looked better than the previous reporting cycle buoyed, in part, by the fall in crude oil prices. This
had a positive effect on 2015 refining margins and is likely to translate to lower pump prices to the consumer. When
the oil price eventually reaches stability, it will exert significant pressure on the refining margins. This is expected
in 2016 and its impact would be enhanced by an agreement by OPEC on output controls.
The US crude export ban was lifted in December 2015, a measure that was opposed by the US refining market. In
response, Congress also passed a provision that allows independent refiners to deduct a portion of their domestic
crude transportation costs from their taxable earnings. However, this incentive is unlikely to encourage more
domestic crude processing by refiners, particularly with US production in decline and inland prices gaining strength
relative to global prices.
In Europe, price spreads over crude for all products recovered in November 2015. Gasoline spreads rose the
most, helped by high export levels. Diesel and heating oil spreads also increased in both markets, but gains were
much weaker, as middle distillates continue to be under pressure from very mild temperatures and high primary
inventories. Fuel oil prices recovered relative to crude, helped by eastbound arbitrages.
Refinery margins in Asia increased by November 2015, supported by seasonal demand. The gasoline market
remained positive, driven by ongoing demand growth, and the middle distillate and fuel oil market recovered
with the onset of winter demand and despite high regional inventory levels. The naphtha market also improved,
supported by seasonal demand and lower arbitrage supply.
26
8%
7%
6%
Y-O-Y % Change
5%
4%
3%
2%
1%
0%
-1%
-2%
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
South Africa has a host of appealing competitive advantages. It remains the continents second-largest economy
benefitting from a large manufacturing base, more than US$2.5 trillion worth of metal and mineral deposits, and
one of the most robust financial sectors in the world and also boasts strong investment and trade ties with a
range of key emerging and advanced economies.
However, falling commodity prices, high unemployment and a weak currency made 2015 a particularly difficult year
for South Africa, leaving a degree of uncertainty over the countrys 2016 outlook. The weakening currency negated
the impact of the falling oil prices to the consumer. This was further exacerbated by further rand weakness in
December after the reshuffle of the Finance Ministry, which was thought responsible for the 10-year bond yields
being up by a full percentage point, putting downward pressure on the rand. The South African economy continued
to feel the effects the global economic pressures associated with the Asian economy slowdown. The impact was
more notable in commodities, particularly the minerals sector.
The energy sector is expected to get a sizeable boost as a host of new renewable energy projects come online
under the REIPPP (Renewable Energy Independent Power Producer Programme). The winning bids for the fourth
round of REIPPP were announced by the Minister of Energy, Tina Joemat-Pettersson in April 2015.
Including the fourth round REIPPP awards, 5 423 MW of projects have been approved in the last four years, resulting
in US$12.5Bn worth of private investment. According to a spokesperson for state-owned utility company Eskom,
as of September 2015 the company had concluded power purchase agreements with 30 renewable independent
power producers, accounting for 32 projects and up to 1.9 GW of new capacity.
Overall economic performance was marked by a slow GDP growth rate of 1.3%. The slowdown in the global
economy, particularly in China, was thought instrumental in South Africas poor economic performance. Even the
significant decline in international oil prices did not produce enough lift for the South African economy.
The low GDP growth rates are significantly below the 5%, required for South Africa to reverse high unemployment
poverty and gross income inequalities as described in the National Development Plan (NDP). Various forecasts
for 2016 paint a difficult future with International Monetary Fund (IMF), Bureau for Economic Research (BER),
South African Reserve Bank (SARB) and World Bank forecasting 0.7%; 1.3%, 0.9% and 1.4% GDP growth sates
respectively.
Y-O-Y % Change
6%
4%
2%
0%
-2%
-4%
-6%
2006
2008 2010 2012 2014 2016
8%
27
Jan 2010
An independent
consultant appointed
by industry to look at
fuel specifications,
makes a presentation
resulting in the
cleaner fuels roadmap
to the Minister of
Energy.
Nov 2013
Industry, through
SAPIA, shares a
proposal to DoE on
CF2 cost recovery.
28
March 2011
Draft amendment
regulations on
fuel specifications
and standards
published by DoE for
comment . Industry
investigates funding
options to meet the
new specification
through an
independent study.
Jun 2014
Minister of Energy
remarks at a
breakfast meeting
that new dates are
required.
Jun 2012
New fuels
specifications for
implementation from
1 July 2017 gazetted
by DoE.
Feb 2015
Treasury budget
vote. Reiteration of
the implementation
date of 2017 /18
in the Finance
Ministry budget
vote documents for
energy.
Feb 2013
Minister of
Finance Budget
Speech: ..support
mechanisms for both
biofuel production
and the upgrade
of oil refineries
to cleaner fuel
standards will be
introduced.
March 2015
Establishment of
Joint Task Team to
tackle oustanding
issues: Debate
on clean fuels
implementation
process.
May 2013
In general, the confluence of regulatory measures in South Africa has a potential to significantly push the local cost
of producing liquid fuels. These costs are largely unrecoverable since the industry is regulated both in price and
product specification.
On the other hand, there is ample evidence that the South African fuels market is increasingly shaping the type of
fuels grade and composition that will be required going into the future. There has, consequently, been a significant
increase in 50ppm diesel imports into South Africa. The market has also seen a significant increase in local demand
for unleaded RON95 Octane Petrol despite the 10 cents per litre DSL (Demand-Side Levy) in the pump price of this
fuel.
The low crude price, however, provided somewhat of a relief for local refiners, relieving pressure on the margins.
This relief would have been more pronounced if it was not for the weakened currency. Looking forward to 2016,
the oil price is expected to stabilise, if not start to increase. This will reduce the consumer spending appetite, which
will make 2016 a significantly challenging year for the industry.
29
30
The Board
The responsibilities of the board are outlined in the Board Charter and they cover all key aspects including the boards involvement in directing
the business strategy that creates value for our shareholders in an ethical and socially responsible manner.
The Board Charter is reviewed and adopted by the board annually. All the board committees operate under board-approved mandates and
terms of reference, which are also reviewed annually to keep them aligned with current best practice. In 2013, we adopted a Memorandum
of Incorporation which further addresses the responsibilities of the directors.
Composition
Our board members at the end of the financial year comprised;
Non-executive directors (5)
Mr. Md Arif Mahmood: PETRONAS Executive Vice President and CEO: Downstream Business
Mr. Amir Hamzah Azizan: PETRONAS - VP Downstream Marketing & Group MD/CEO of PETRONAS Lubricants International Sdn. Bhd
Mr. Mohamed Firouz Asnan: PETRONAS Vice President: Oil Business
Mr. Aman Jeawon: Pembani Group - Financial Director
Ms. Zellah Fuphe: Pembani Group
Company Secretary
Ms. Fiona Gumede
Board Committees
There are three board committees, namely the Board Audit Risk and Compliance Committee (BARCC), the Remuneration and Nomination
Committee and the Social and Ethics Committee.
31
Meetings
Minimum of 4 meetings per year
Additional meetings may be held
Key focus
Reviews and oversees:
- Engen groups finances
- Integrated reporting
- System of financial controls
- The governance of risk
- Compliance with legal and regulatory requirments
- Oversees the internal audit function
- Oversees the effectiveness of the combined
assurance plan and outcomes
- Reviews all audit findings (internal and external)
Composition
All independent non-executive directors
Standing invitees with no vote:
- The CEO
- General Manager: Financial Services
- General Manager: Enterprise Risk and
Assurance
- Senior Manager: Enterprise Risk and
Assurance
*Chairperson
32
Committee Members
Ms. Dawn Mokhobo (C*)
Ms. Nosipho Molope
Mr. Amir Hamzah Azizan
Meetings
Minimum of 4 meetings per year
Additional meetings may be held
Key focus
Assists the Board with oversight on
remuneration matters with the following
key roles:
- Assists the board by ensuring that Engens
Composition
Majority of members of the committee are
independent non-executive directors.
The CEO and General Manager:
Human Capital Division are standing invitees
to any committee meetings, but have no vote.
Meetings
Minimum of 4 meetings per year
Additional meetings may be held
Key focus
Assists the board with the oversight of social
and ethical matters relating to the Engen Group.
It performs an oversight and monitoring role in
terms of: - Embedding a culture of ethical behaviour in Engen
- Activities with regard to any relevant legislation or
codes of best practice
- Good corporate citizenship
- Performance in terms of the environment, health
and public safety, including the impact of our
activities on our products and services
- Consumer relations
- Promotion of equality, prevention of unfair
discrimination, reduction of corruption,
transformation policies and strategies and social
responsibility policies and strategies
Composition
The committee is chaired by a non-executive
director
The other members of the committee are:
Composition
Our board members at year end comprised;
Non-Executive Directors
Executive Directors
33
Internal Audit
Outgoing members
Datuk Ahmad Nizam Salleh - Managing Director & CEO
Lungile Dumse - GM: Human Capital Division
Accordingly, the system can only provide reasonable and not absolute
assurance against the occurrence of any material misstatement or
loss. It is therefore supplemented by a business continuity system
to ensure continued business resilience during times of unavoidable
significant events.
Through integration of information technology and modern tools, the
organisation is engaged in continuous efforts to improve the control
systems.
34
35
Compliance
In conducting its business operations, Engen is committed to complying with legal requirements, including all applicable regulatory
requirements in the jurisdictions in which it operates.
In our last report we provided detailed information on our efforts to develop the Engen Compliance Framework. The main objective of this
framework is to outline our entire regulatory universe, particularly legislation that has a material impact on business and operations. It also
identifies roles and responsibilities for all key parties to ensure they are properly informed and empowered to take the necessary steps to
maintain business compliance with legislation.
The framework is now firmly in place and we have now embarked on a rollout and awareness campaign by engaging all employees through
various communications tools, including: posters, IT-based systems and focussed discussions. We are preparing to run system audits to test
the integrity of the system over time. This is planned for the year ahead and it will join an already running audit, which we conduct for the
competition law compliance.
The current reporting year was also a year in which we started the rollout of the Anti-Bribery and Corruption (ABC) plan. The plan, developed
in 2014, details minimum expected standards for preventing bribery and corruption within our organisation.
This plan is in line with our corporate values which include, among others, integrity. It also aligns the business with the Prevention and
Combating of Corrupt Activities Act legislation in South Africa. Employees across the organisation are being trained on ABC. We are also
installing internal control systems that will maintain and enhance the system going forward.
The commencement date for the Protection of Personal Information Act (POPI), signed into law in November 2013, has not been announced.
The act also comes at a time when cybercrime is fast becoming a global challenge with incidents of ransomware being reported and a
number of high profile organisations seeing their accounts being leaked online. After the development our POPI action plan, we are now in
the process of developing internal controls and rolling out the action plan to the business.
We continue to rollout our internal compliance standards, the PETRONAS Mandatary Control Framework (MCF). The year under review saw
the implementation of updated MCF standards coupled with the assurance of our corporate HSEQ systems and processes by PETRONAS. The
closure of gaps identified as part of this exercise has helped strengthen our system and enhance our ability to prevent and reduce occurrence
of incidents.
To further enhance our assurance systems, we also embarked on a systems audit, which was completed in 2015. This was to ensure that
all prescribed systems are uniformly applied across the organisation and that the interpretation and understanding of these systems is
aligned throughout the organisation. Looking forward, we will now be conducting our normal risk-based assurance to ensure practice reflects
systems and procedures.
The Engen Refinery, Durban Terminal, Engen Lubricating Oil Blend Plant (LOBP) and Richards Bay Bunkering Services retained their ISO 14001
environmental management system certification in 2015.
The following Engen facilities retained their ISO 9001 certification:
Cape Town Distribution Centre (Solvents)
Johannesburg Distribution Centre (Solvents)
Lube Oil Blend Plant (LOBP)
Refinery
Zenex Blend Plant (ZBP)
Durban Chemicals
Richards Bay Bunkering Services
Durban Terminal
36
Leadership and
Commitment
Policy and Strategic
Objectives
Organisation,
Responsibilities and
Documentation
Assurance
Management Review
Capability
Health
Environment
Safety & Transportation
Process, Safety & Asset Integrity
Management of Change
Safe Operations
Contractor HSE Management
Design, Engineering & Construction
Incident Management &
Emergency Response
MCF Elements
HSEQ-MS Elements
37
38
Risk Management
Our Approach
Engen has adopted an effective Enterprise Risk Management system to identify, assess, monitor, report on, and mitigate against the impacts
of the ever changing business risks associated with value creation processes in a globalised economy.
Our goal is to protect and create value through our business activities and supporting activities. This drives us to objectively manage
exposure and risks in all areas of the value chain.
To achieve this, we have made all the necessary resources available to key people within the business. This includes the development of
key systems and processes, the training of key personnel, and company-wide communication to ensure that Enterprise Risk Management is
continuously improved and institutionalised across the organisation.
Our Board of Directors oversees the Enterprise Risk Management process at Engen. The Boards Audit, Risk and Compliance Committee
ensures that the Enterprise Risk Management process complies with the relevant standards and industry norms and that it is applied
effectively across the business to achieve an acceptable risk profile for the business.
Measurement
Methodologies and
Techniques
Risk
Organisation
and Structure
Risk
Measurement
Risk
Operations
and Systems
Process Controls
and Reporting
Mechanisms
39
40
Risk
Detail
Financial Capital
Strategic Risk: Commodity prices have fallen significantly
during the year of reporting. Also, the global economic
outlook has been negative and African currencies have
weakened. A number of sectors are facing negative
growth. This can eventually have social impacts and
complicate labour relations within industry.
The impact is industrywide and for many businesses it is indirect. The mining industry, who are our
customers, face difficult market conditions with the
falling commodity prices. Those exposed to imports,
of raw materials for example, face increasing costs
due to the weakening currencies. This may affect
their spend, and ripple through the supply chain.
Natural Capital
Environmental Risk: This risk consists of two related risks.
Risk of negative impact to the environment and risk posed
by the effects of climate change.
Ref.
Page
59
Page
84
Page
45, 48
Page
71
41
Sustainability in Context
Our view of sustainable development is informed by the importance of creating and protecting value across five sustainability capitals,
namely: Social and Relationship, Human, Manufactured, Natural and Financial. In our effort to provide high quality products and services to
our stakeholders, we strive to continually enhance our value creation and address the negative impacts across the five capitals.
The oil and gas industry, being dependent of non-renewable fossil fuels, has environmental impacts through the production and use of
its products. It is therefore critical that these impacts are continually minimised through improved efficiency and better management of
emissions, wastes and effluents. A healthy environment provides critical ecosystem services for all, which include disease regulation, clean
and sufficient water resources and a healthy environment for crops, livestock and eventually strong communities.
We also aim to make continual improvements towards sustainable social capital in sub-Saharan Africa and the Indian Oceans Islands
where we operate. There are challenges with access to affordable energy, skills development and job creation and we believe it is critical
for business to make a positive impact by being an active participant in community development. These eventually contribute to poverty
alleviation and lead to vibrant communities.
We also value our employees and we strive to protect them from hazards and exposure to harmful substances. We aim to achieve this
through our processes and systems. We also train and develop our people into leaders that can make all these aspirations possible.
Ultimately, the sustainability of our financial capital depends on how we perform on all the other four sustainability capitals.
Operational
excellence
Human capital:
Developing and retaining talent. Creating an
environment for performance and creativity
Great people
and great
leaders
Social capital:
Strong relationships and proactive engagement with
our stakeholders
Natural capital:
Protecting the environment. Mitigating against and
adapting to effects of climate change
Financial capital:
Sustainable financial performance through value creation
across human, social, natural and manufactured capitals
42
Through our
value chain,
business model,
strategy, and
value system,
we create value
across the five
sustainable
development
capitals
Strong
stakeholder
relationships
Protected
natural
systems
Long term
financial
sustainability
Furthermore, our activities are guided by the seven key results areas in line with our parent company PETRONASs sustainability framework.
Biodiversity
Shareholder Value
Sustaining our
profitability through
value creation, efficient
extraction and
manufacturing
processes.
Climate Change
Sustainability
Framework
Societal Needs
In this report we provide information on Engen Limiteds operations, how governance drives sustainability in our organisation and our
performance in the five capital areas.
43
44
45
46
Woolworths
Steers
Wimpy
47
Our People
The global oil and gas industry continues to be beset by a shortage of skilled and experienced personnel. This is why we continue to increase
our efforts in building capability to ensure the efficiency, reliability and safety of our operations.
Engen continues to invest in developing our own pool of talent to meet our workforce needs. In striving to deliver excellent results for
the company, Engen employees are supported by structured professional and leadership development programmes to strengthen key
competencies and cultivate a proactive mind-set and behaviour to deliver breakthrough performance.
Our employees are guided by our five corporate values Integrity, Ownership, Performance, Empowered and Teamwork and the PETRONAS
Code of Conduct and Business Ethics (CoBE), which stresses each individuals responsibility to uphold integrity in their day-to-day operations.
We believe that a strong foundation of integrity is crucial in enabling us to deliver outstanding performance, and to leave a legacy for future
generations.
Our people have been instrumental in influencing our financial capital during this reporting period. Happening at a time of notable global
economic unease, this underscores the critical role that capable leaders and a capable workforce play in achieving sustainable goals. Human
capital continues to form a critical part of our sustainability roadmap. Our vision in this respect is to develop strong leadership supported by
capable teams.
Permanent
Grand Total
2012
2013
2014
2015
2012
2013
2014
2015
2012
2013
2014
2015
25
37
34
30
623
573
564
643
648
610
598
606
SA
475
481
473
374
2914
2908
2951
3298
3389
3389
3424
3528
Total
500
518
507
404
3537
3481
3515
3941
4037
3999
4022
4134
Non SA
Developing Talent
An Operations Academy was established in 2015 to assess and develop our core skills over a two to three-year period. The focus in the first
year has been on up-skilling managers and supervisors on how to assess employees against their required competencies. 102 managers and
supervisors have been trained and 26 have been accredited as Master Assessors.
Our graduate programme is aimed at exceptionally talented young individuals from previously disadvantaged groups. Our graduates get to be
mentored by dedicated and committed leaders within our business to hone their business acumen. Due to the cyclical nature of the business
environment and the difficult economic conditions, which are forcing some sectors to shed jobs instead of generating them, we were unable
to absorb graduates this year. However, we have maintained our tradition of developing highly capable individuals who will become a critical
input towards addressing the structural nature of unemployment.
27
25
18
20
15
13
18
14
12
Total
Absorbed
13
10
5
0
48
0
2012 2013
2014 2015
Our talent management programme continues to equip our employees with the necessary skills and competence for their current roles. It also
prepares them for potential future positions. For the past three years, 60% of our employees have benefited from the programme.
Skills development provided from 2012 to 2015 for South African employees
1600
1400
1410
1353
1200
1000
800
587
600
508
455
400
427
380
290
200
0
A C I W
Group
2014 2015
Our learnership programmes, developed to respond to the identified scarce skills within the sector and hard to fill vacancies in the business,
is producing great results. In 2015 we had different programmes aimed at both our employees as well as to unemployed learners. During the
reporting year, a total of 217 individuals participated in the programme, 170 of them being unemployed. Apart from contributing to national
skills development efforts, these programmes enhance the skills of unemployed young people, increasing their chances to find employment.
They also address the challenge of access to training due to lack of funds. The programme also takes into account employment equity. In
2015, 63 of the participants were women, 212 were black and 47 were people living with disabilities.
The skills covered in the learnership programmes included:
Chemical Operations Learnership
Instrument Apprenticeship
Fitting Apprenticeship
Electrical Apprenticeship
Electrical Learnership
Fitting Learnership
Instrumentation Learnership
Welders Learnership
Diesel Mechanic Apprenticeship
National Professional Driver
Production Technology Learnership
ABET
Business Administration -People Living with Disabilities
In 2014 we launched the Business Administration Learnership programme. The programme was launched in partnership with the Project
Management Institute (PMI) and is initially targeting people living with disabilities. This programme focuses on enabling currently unemployed
individuals and is rated an NQF level 2. The objective is to take participants to NQF level 4 and use the programme as a talent pool for future
Engen recruitment. For 2015 a total of 23 Black females were enrolled.
49
50
Top Management
40
Senior Management
36
35
30
25
25
23
20
15
10
0
A
1
C
Foreign Nat.
800
Professionally Qualified Middle Management
Skilled Technical Junior Management
700
590
600
Semi Skilled
528
500
Temporary Employees
400
300
274
272
223
200
60
100
198
124
26
217
167
15
0
A
117
68
27
W
17
20 1
Foreign Nat.
51
These efforts, coupled with our focus on training our employees, can be seen in how we have transformed the organisation at leadership
levels. We have maintained a diverse senior leadership and have been steadily increasing the representation of black and female employees
at all levels of our business. While the rate of change is dependent on transformation opportunities, we have been constantly implementing
programmes and improving existing programmes to support our transformation objectives.
Female
White
Black
Female
White
Black
Female
White
Black
Female
White
Black
100
90
80
70
60
50
40
30
20
10
0
1200
2012 2013 2014 2015
1000
800
600
400
52
Female
White
Black
Disability awareness
To promote and sensitise our people on living with disability, we
have embarked on an organisation-wide awareness campaign. The
campaign involved engaging our employees through interactive
sessions including external speakers and a handing out of artefacts.
We also adopted a logo which featured on disability awareness
button badges distributed to all employees. Our slogan for 2015 was
Embracing Ability and Talent.
Female
White
Black
Female
White
Black
Female
White
Black
200
1,9 %
2,00%
1,6 %
1,50%
1,25%
1,00%
0,50%
0,25%
0%
31 July 2014
31 July 2015
Collective Bargaining
Our relationship with our people remains the critical pillar on our journey to greatness. We are happy to report that in 2015 there were no
labour actions associated with our facilities. We are keenly looking towards new wage negotiations in 2016. These are managed through our
stakeholder engagement process which is governed by our value systems and the corporate strategy, which places people as an important
element of success.
Our engagement with employees covered under collective bargaining takes place through centralised bargaining in South Africa and Gabon.
In Namibia and Tanzania, we have decentralised engagement with employees and their affiliated unions. In Tanzania we communicate with
the Employee Association of Tanzania. For affiliates that are not unionised, we have open engagement with employees.
Within Engen we have three platforms for discussing material employee issues. The Operations Consultative Forum (OCF) focuses on
operational issues for our outbound supply chain employees and the Refinery Consultative Forum (RCF) which deals with issues affecting our
refinery employees. Lastly we have the National Consultative Forum (NCF) which discusses issues that affect the whole business.
Organisational Health
Engens organisational health service comprises a wide collection of health related activities across the entire organisation, linking with risk
management, legal compliance, human resources and industrial relations; hence the use of the term organisational health, as opposed to
simply occupational health.
The key objectives of Engens Organisational Health Service are to:
Satisfy Occupational Health related compliance requirements
(legal and quality)
Maximise productivity and quality of life of Engen employees
through health initiatives aimed at optimising their health and
wellbeing
Reinforce Engens position as an employer of choice by providing
a tangible expression of the companys care for its employees,
thereby encouraging employee engagement and attracting the
best talent available.
Our Health and Wellness programmes are arranged into the Occupational Health Programme and the Employee Wellbeing Programme.
53
54
Exposure measurements by Similarly Exposed Groups (SEGs), enabling improved integration with medical surveillance
Application of internationally accepted exposure standards (which are more rigorous than South Africas outdated statutory values)
Application of international best practice statistical techniques to ensure high quality data interpretation
Intelligent reporting to optimise outcomes management and integration with medical surveillance
Rigorous corrective action management
We continued our mandatory medical testing programme, with its double objective aimed at fitness to work assurance in safety sensitive
work, and screening for early signs of occupational disease. Note that all Engen employees are offered annual health screening, but not
all screening is mandatory. For those who do not perform safety-sensitive work, or who are not exposed to significant occupational health
hazards, the screening is aimed at personal health risks, and this is discussed in the section covering the Employee Wellbeing Programme
later in this report.
Employees with medical problems impacting on their fitness to work are case-managed by the occupational health staff, until they are fit to
return to work, or alternative work is found. Those with chronic disease are referred to the Employee Wellbeing Programmes chronic disease
risk management plan, where they are followed up by Engens occupational health staff and are covered by specific provisions of the Engen
Medical Benefit Fund.
This close interaction between employees, occupational health staff, line managers, a network of selected service providers, and the Engen
Medical Benefit Fund administrators is a significant contributor to Engens sustainability with regard to employee health.
Employee Wellbeing Service
Our Employee Wellbeing Service consists of the following initiatives:
Engens operational footprint is predominantly in emerging economies, where the double burden of chronic disease remains a significant
business risk. The double burden refers to the adverse phenomenon faced by emerging economies in which both communicable diseases
(HIV, TB, malaria; traditionally in poor economies) and non-communicable disease (diabetes, heart disease and cancer; traditionally in
wealthy economies) play a role.
Research shows that smoking, lack of exercise and non-balanced nutrition are three key lifestyle behaviours that have the greatest
contributions to causing the four most common non-communicable causes for premature death or disability (coronary heart disease, diabetes,
respiratory disease and cancer).
Engens integrated approach to employee health risk management addresses issues across the wellness continuum. The outcomes of the
personal health risk screening programmes, as well as the statistics related to causes of incapacity, disability and premature death, provide
useful guidance to the education and awareness drives. Our efforts to improve employee health linked to lifestyle behaviour heave resulted
in significantly better results from our employees compared to the SA Benchmark. The only area of concern remains the raised BMI and we
have implemented programmes to address this. These programmes include sensitising employees to eating habits, inviting external speakers
and developing a culture of healthy living.
55
Smokers
Raised
BP
Raised
Gluc.
Engen
Raised
Chol.
Raised
BMI
HIV
Positive
SA Benchmark
Note: This plot shows employees found to have risk factors, not necessarily diagnosed with chronic disease.
An analysis of the chronic diseases prevalent in Engen illustrates the double burden of chronic disease very well, and is in keeping with the
World health Organisation (WHO) statistics for South Africa. The profile of dominant chronic diseases for 2015 was as follows:
For employees who have shifted to the left of the wellness continuum, and who now have established chronic disease, the focus is on
preventing disease progression through effective control, which is exercised through the chronic Disease Care Plans available through the
Engen Medical Benefit Fund.
The majority of employees with a chronic disease, or who are HIV positive, have registered on a plan, or are not yet required to do so. The
employees who are HIV positive and unclear whether or not to register on the HIV (ARV) programme are generally those who are well, and
those who are not sure if they have actually been registered.
Engen monitors cases of incapacity very carefully, and has systems to try to intervene when employees at risk are identified. Notwithstanding
all these efforts, some employees progress to incapacity then disability, and even premature death. For these, the objective is to optimise the
access to disability and death benefits for the affected employees and their families.
From July 2014, Engen introduced a change to the sick leave policy for South African operations. This was aimed at better alignment with
legislated basic conditions of employment in South Africa. To ensure that adequate cover was still available for employees with unexpected
events requiring significant periods of sickness absence, additional health insurance was procured, where an affected employees salary for
lengthy sickness absence (30 days up to 6 months) would be covered, subject to certain conditions (known as Insured Sick leave, or ISL).
These absences were previously covered by Engen payroll, so the uptake and effective management of the benefit was of great importance
to both Engen and its employees.
In addition, Engen also introduced a benefit for employees who, despite responsible and reasonable utilisation of their BCEA (Basic Conditions
of Employment Act) sick leave benefits, experience a serious medical event that requires extended absence from work, not covered under
the insured benefit option. This is known as Extended Sick Leave, or ESL, and is authorised through the organisational health staff. For
this benefit, strict criteria are applied, in accordance with a written procedure. The maximum duration for which this benefit may be applied
is 44 working days.
56
Profile of claims under the various extended sickness absence benefit options:
18%
9%
16%
26%
34%
10%
42%
24%
28%
39%
30%
24%
< 35
45 - 55
35 - 45
> 55
From the above graphs it can be seen that the utilisation of the three benefits shifts from a younger age group claiming ESL and an older age
group claiming PHI, whilst the ISL claimants are in between. Given the nature of the claims for these three categories, this is what would be
expected. The important findings from this analysis are that Engen has been able to shift the costs from payroll to the insurer, and also enable
employees to get back to work. Previously, the employees in the middle group above (ISL) would either have been put on PHI, and therefore
lost to the business, or the return to work process would have been funded by payroll.
Safety
Our efforts to create a safe working environment throughout our facilities continued to bear fruit in 2015. We report zero fatalities and we
had an LTI-free refinery maintenance turnaround as well. Our focus during the course of the year was on improving our road transport related
safety performance. We reviewed third party contracts and made significant changes to improve safety. We also bolstered the Health, Safety,
Environment and Quality (HSEQ) section of our procurement by developing training material for prospective suppliers who meet B-BBEE
requirements but need assistance meeting our strict safety requirements.
We make concerted effort to prevent safety incidents. This includes heightened awareness initiatives which form part of our business
culture, including safety, as a topic in all meetings across the business. We also continued with an awareness initiative started in 2014 which
aimed at creating a culture of ownership and care with respect to safety. In 2015 the programme involved extensive leadership engagement
sessions for depot supervisors. The objective was to equip them with tools and techniques to enable them to cascade key HSEQ messages
across their teams in field. The real benefits of this exercise are expected to be observed during the 2016 performance year while the
employees get familiar with their new skill sets.
Another important development of 2015 was the Tier 3 audit conducted by PETRONAS on our corporate HSEQ. While the outcome of
the audit was fair, there were still areas identified where significant improvements can be realised. Most of these improvements were
implemented before the end of the year. We, however, continually seek new ways and methods in which we can enhance the culture of safety
within the organisation and with the stakeholders we interact with.
Safety Performance
2010
2011
2012
2013
2014
2015
Lost Time Injury Frequency (LTIF) (per 200 000 man hours)
0.24
0.25
0.24
0.18
0.12
0.14
0.63
0.69
0.34
0.36
0.44
0.50
Work-related fatalities
The table above shows a slight increase in LTIF and TRR during the reporting period. We have identified key initiatives for 2016 to improve our
performance in these areas. These include reinvigoration of our Zero Tolerance rules across the business and a continuation of our focus on
incident investigation. In 2015 we spent a great deal of time developing capacity to ensure stronger bench strength for incident investigators.
This is a critical preventative element since we use the outcome of investigations to identify weaknesses in our systems and then move to
strengthen it going forward.
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58
Our Relationships
The foundation for managing and building relationships with all our stakeholders is rooted in our stakeholder engagement policy. We remain firmly
committed to engagement with our stakeholders and we continue to have many interactions, often partnering and collaborating with a broad
spectrum of groups.
Engen operates in a complex industry within equally complex societies. We therefore place emphasis on ensuring that our operations and social
interventions contribute meaningfully to socioeconomic development across all our markets. As a company, we strive to have mutually beneficial
relationships with all our stakeholders to help ensure our sustainability and a prosperous future for broader society.
Stakeholder Engagement
It is widely accepted that organisations which have a strategic, uniform and co-ordinated approach to engagements are well positioned to demonstrate
effective Stakeholder Engagement, resultant compliance with good corporate governance principles and consequently, substantial benefits across
the triple bottom line. This approach not only results in the protection of the reputation and interests of the organisation, but also recognises and
manages the interests and objectives of the Stakeholders that could be impacted by the organisations operations.
Engen has a wide stakeholder base. This includes government departments, regulatory authorities and civil society, as well as our shareholders,
suppliers, business partners, customers and employees.
The broad nature of our stakeholders means that many different views and expectations exist. We manage this by favouring regular engagement with
all of our stakeholders. This is conducted in an open and honest manner, with frank discussion of issues that matter to our stakeholders and those
that are material to our business operations.
Our engagement with stakeholders continued to take centre stage during the reporting period. With the adoption of the stakeholder engagement
policy and framework last year, we developed a plan that covered all key stakeholders. This plan was informed by material issues (see below the
Process to Determine Materiality) and it includes elements of company responsiveness to stakeholder issues.
We continue with our practice of embedding stakeholder engagement as part of the performance scorecard for executives. As part of the cascading
scorecard, this filters throughout the organisation leadership structure and is linked to performance-based remuneration.
The Engen Stakeholder Engagement Forum, formed in 2014, continued to provide a platform for the consolidation of stakeholder engagement
activities across the business. We also provided internal quarterly updates on key market developments that influence the relationship between the
organisation and stakeholders.
As part of our stakeholder engagement process, we have clustered stakeholders into four high level categories. These include:
Authorisers: Stakeholders who have direct control on what business does in their respective spheres of influence;
Partners: Stakeholders who participate and are key to our service offerings and products as part of our value delivery
to customers;
Associations: Organised business, industry bodies and national/international initiatives; and
Influencers: Stakeholders who generally have nothing to gain from the business, but have an interest in the affairs of the business,
usually on behalf of other interested and affected parties.
Within each category are various stakeholder groups, as shown in the figure on next pages:
59
Engagement Channels:
Material Issues
Shareholders:
- Quarterly reviews
- Direct reporting by CEO
- Executive committee meetings
- Regulatory compliance
- Transformation
- Good governance and business ethics
- Protecting the environment
Authorisers
Shareholders
Government
Regulators
Influencers
60
Engagement Channels:
Material Issues
Engagement Channels:
Material Issues
Suppliers:
- Supplier Extranet
- Service Level Agreements
- Supplier Audits
Partners
Employees:
- Culture surveys
- Meetings
- Roadshows, annual events
- Internal media
- Formal platforms and forums
Engagement Channels:
Material Issues
-
-
-
-
Business Partners
and Customers
Suppliers and Service
Providers
Employees
Associates
Industry Bodies &
Organised Business
Professional
Associations
Regulatory compliance
Customer and business partner value creation
Safe and secure work environment
Regional business climate
61
62
63
In South Africa our focus on Education aims to drive the development of a growing pool of technical and commercial human resources,
providing supplementary support to government efforts to promote Maths and Science education. Our investment is aligned to the Engen
bursary programme and skills development scheme to ensure continuity and to maximize Engens investment on all fronts.
Currently, Engen supports nine Maths and Science Schools across South Africa, including four in the areas around our refinery in South Durban:
The Engen Maths and Science School (EMSS) programme exposes learners from grades 10 to 12, who show potential in maths and science,
to high-quality teachers and educational materials.
For the 2015 programme, a total of 1 894 learners were accepted into the programme. The programme incorporates elements of Black
Economic Empowerment (BEE) and gender diversity with 1 030 (54%) of the learners being female and 97% of the total learner population
being black. Engen Maths and Science Schools matric pass rate for the past five years has been over 90%, which is well above the national
average. The EMSS programme benefited from a total of 42 currently practicing educators who develop lesson plans, deliver lessons, develop
and mark term tests for the students. There is a co-ordinator appointed for each centre to support the educators. Furthermore, the educators
are empowered not only through additional financial resources, but from the experience of teaching a broad range of learners from various
social backgrounds.
The EMSS programme has produced significant social value and we are always looking at new ways to improve. We have also introduced
a buddy system across all centres. This system assists learners in forming study groups that can continue between learners beyond the
programme. This helps ensure learners maintain their focus on their studies beyond the programme and creates a sense of support and
camaraderie in respect of their common goals.
South Africa Schools for children with disabilities
In 2015 Engen gave ad hoc financial assistance to various schools, places of learning, and places of safety that focus on children with
disabilities. This serves to empower these learners, contributing to their self-development and independence, and increasing their likelihood
of entering the workplace, thus enhancing their overall quality of life.
The following organisations received assistance:
Western Cape:
Gauteng
disabled children.
Eastern Cape:
64
The Centre for the Education and Development of Mauritian Children (CEDEM) is an NGO assisting various categories of vulnerable children,
including those with disabilities, orphans, victims of abuse, the poor and street children. It provides a range of services and socio educational
project activations. One of its primary objectives is to provide vulnerable Mauritian children with a complete education that is not only based
on academic knowledge but also on life skills. CEDEM also actively campaigns in the areas of survival, protection, development and childrens
rights. In 2015 Engen provided monetary support to improve the recreational area, playground and garden of the centre.
Mauritius Caritas Nursery Project
Engen is helping finance the Caritas Nursery Project at Crche Ste Anne in Port Louis. The aim of the project is eventually to demolish an
existing building and build a new one complete with music, video and playground facilities that are required to ensure early childhood
development of infants.
Botswana Library at Kgomodiatshaba Primary School
Engen assisted with the provision of library services for Kgomodiatshaba Primary School. This helped facilitate a learning environment
which will improve learner performance through the provision of educational materials, shelves, chairs, tables, educational posters, rugs
and bean bags. Children who attend Kgomodiatshaba Primary School have limited access to educational facilities like books and computers.
Air-conditioning was also installed in the library with Engens assistance.
Engen was inspired to help Kgomodiatshaba Primary School because one of the seven pillars of Botswanas 2016 Vision is to have an educated,
informed nation. In collaboration with the Ministry of Education, Skills and Development, Engen heeded the Botswana governments call for
the Adopt a School programme whereby the private sector and the community are urged to assist government to achieve its goal of having
an educated and informed nation.
Engen and Trucking Wellness, an initiative of the National Bargaining Council for the Road Freight and Logistics industry (NBCRFLI), joined
hands for the fifth consecutive year in 2015 to facilitate the annual Driver Wellness programme. Driver Wellness is an annual initiative aimed
at educating long distance truck drivers about the importance of maintaining a healthy lifestyle.
Engen believes that by raising the awareness of professional drivers regarding their health and chronic disease will encourage them to make
positive lifestyle changes. This is something we believe will have a direct impact on road safety.
In 2015 our Driver Wellness programme continued its focus on the wellness of employees in the road freight business, including many
employees of our third party contractors. Over the course of the year we were able to reach targeted stakeholders through events held at 20
venues across four provinces in South Africa, namely: KwaZulu-Natal, Eastern Cape, Gauteng and Western Cape.
The Driver Wellness programme conducts voluntary assessments for drivers for chronic diseases that are manageable with proper medical
attention. The tests conducted include assessment for:
Total Cholesterol
Total Glucose
BMI
Blood pressure
HIV status
TB symptoms
STI symptoms
A total of 8 659 tests on 1 504 individuals were conducted during the course of 2015. This is more than the 7 181 tests on 1 329 individuals
achieved in 2014 and shows a growing interest in the programme.
65
The Phambili Roadshow focuses on medical/wellness screening for our forecourt attendants in South Africa. For 2015 the focus of the
programme was on glucose, blood pressure and cholesterol levels. A total of 574 individuals participated in the programme across five
venues, namely: Port Elizabeth, East London, Bloemfontein, George and Nelspruit.
This attendance was much smaller than in previous roadshows that were done in bigger centres and metros. Regardless, 2015 served to take
this programme away from large cities to communities that usually do not receive as much attention as their metro counterparts. A number
of participants were also familiar with the Driver Wellness programme, suggesting that even though the Driver Wellness programme was
targeted at professional drivers, it has attracted interest beyond bulk truck operators.
South Africa - Paraffin Safety
The Engens KlevaKidz campaign educates rural and township communities about safe handling and storage of paraffin. Launched in 2008,
KlevaKidz employs a unique form of industrial theatre that takes the form of an interactive educational stage drama. The format uses a
television quiz show environment as a vehicle for relaying the message in the learners mother tongues - combined with a jingle to reinforce
the theme.
Over a period of three years since 2013, a total of 284 schools in eight provinces where the household use of paraffin is widespread and
paraffin-related accidents are common, have been visited by the Klevakidz campaign. During this period, 105 000 learners were part of the
experience.
A survey conducted before the show revealed that an average of 23,3% in 2015 would offer milk to a victim of paraffin ingestion. A survey
conducted after the show saw this number decrease to 3.3%. An average of 96.6% indicated that they would practice the safest method by
not offering anything but seek emergency medical assistance.
After research conducted in our previous reporting cycle, the age group targeted for the Klevakidz campaign in 2015 was lowered from age
groups between 9 and 13 to those between 7 and 11 years of age. This followed engagement with educators and school principals who
indicated that younger children were handling paraffin in households.
The Klevakidz campaign remains the same in featuring an interactive theatre show that features a cast of multilingual performers. It is
performed in the mother tongue of the target school. Children are also taught the Klevakidz jingle which summarises the core message of
paraffin safety.
Malawi Diesel to Malawi Police Services
In 2015 Engen provided diesel to the Malawi Police Services to support their efforts to sensitize members of the public on the dangers of
criminal activities involving the abduction and murder of people with albinism.
Mauritius Cancer Support
Engen again supported Link to Life an NGO focused on the provision of counselling for cancer patients from vulnerable groups. Our
assistance in 2015 helped launch a second therapy centre in the north of the country, where free cancer screening and group therapy is
provided. The decision to partner with Link to Life came from the recognition that cancer has an increasing impact on many people across
the broader Mauritian society.
Community Outreach
Engen strives to be a caring and responsible corporate citizen. As such, we support deserving initiatives that endeavour to enhance peoples
lives in meaningful ways on an ad hoc basis.
South Africa - Artisan skills training
In 2015 we continued our support of artisan skills training through equipment donations to local organisations working in the field. We
also supported a variety of non-governmental organisations, particularly in the area surrounding the Durban Refinery where we have been
involved in capacity development initiatives for members of NGOs to better understand the requirements of B-BBEE and the Non-Profit
Organisations Independent Code of Practice. This serves to facilitate a better understanding of both the governance requirements and
operational requirements.
66
The Engen Community Computer School offers credits towards nationally recognised certificate (NQF Level 3) computer courses to members
of the South Durban community. Attendees learn how to operate personal computer systems and other basic computer literacy. The school
currently provides computer skills to approximately 300 students annually. Over 700 learners have graduated from the school and over 250
students have subsequently gone into permanent employment since its inception.
Mauritius Poverty alleviation
Engen continued to support Caritas, an organisation that aims to rehabilitate the poor, the excluded and the oppressed by welcoming,
listening to, visiting and accompanying them, so that they can recover their dignity and together build a fair and supportive community.
Currently, 50,000 marginalised people benefit from the assistance Engen provides to Caritas.
67
Sponsorships
Engens sponsorship portfolio continued to focus on its three core strategic pillars of brand stature, product relevance and brand engagement
in the activation of its sponsorship programmes in 2015.
Football
Sponsorship activations within football remained a key driver in delivering brand stature attributes. Engen continued its sponsorship of South
African Premier Soccer League team, Supersport United. The club finished fifth in the 2014/2015 Premier Soccer League (PSL) and performed
well in cup competitions progressing to the final of the prestigious Telkom Cup. The partnership delivered numerous stakeholder engagement
opportunities which included youth coaching clinics, community CSI activations and staff interactions.
In the year under review, Engen celebrated another successful staging of the annual Engen Knockout Challenge (EKOC) under-17 football
tournaments. This was the 12th year of our investment in youth football development through the EKOC.
Activated in five provinces across South Africa between June and August, the EKOC has established itself as one of the countrys premier
youth football programmes. It has also been acknowledged as a key football programme within the South African Soccer Associations (SAFA)
technical youth master plan.
Since its inception in 2004, the Engen Knockout Challenge has seen over 22 000 young football hopefuls participate. In this time, over 100
talented players have progressed into professional and semi-professional structures within the sport.
The second staging of the Engen Champ of Champs youth football tournament also took place in 2015. This saw the regional Engen Knockout
Challenge Champions battle it out for the coveted national title. Engen Champ of Champs has fast established itself as an essential scouting
ground and has generated interest from national selectors and talent spotters from professional clubs both locally and abroad.
Our football sponsorship generated R94.7 million in media value which constituted 52.1% of Engens overall sponsorship media value return.
Motorsport
Engens long and successful association in Motorsport continued in 2015 with sponsorship of the Xtreme Audi team and the Engen
Volkswagen Cup series, the latter having strategic commercial partnership linkages to Volkswagen South African and the supply of product
to the automakers production plant.
The Xtreme Audi team continued to contribute to the awareness of the Brands top tier automotive lubricant and its proof-of-performance
positioning. It was also an influencing force in the retention of present service franchise dealership customer business.
The team repeated their 2014 performance by finishing second in the 2015 National Production Car Championship, having won the countrys
premier saloon car accolade between 2011 and 2013.
Both programmes remain valuable contributors to Engens product relevant attribute and generated R 27.5 million in media value in 2015.
Cycling
Sponsorship of the Engen Cycle in the City events continued in 2015 in both Durban and Cape Town. The criterium cycling festivals promoted
cycling in a controlled and safe environment. In 2015 it included a new focus on entertainment and exhibitions for the family.
Engen staff participation and engagement in the events was added, which was a particular success in Cape Town.
The sponsorship continues to play a key role in brand engagement with the motoring market through regional retail in-store promotions.
68
69
70
Environmental Management
The PETRONAS Mandatory Control Framework (MCF) remains a critical internal standard on how we conduct our business. It allows for
a consistent application of systems and processes across our operations and it provides minimum compliance requirements across the
following six environmental elements for the business:
Water
Energy
Climate change
Atmospheric emissions
Water Withdrawal
60 000
3 500 000
40 000
2 500 000
2 000 000
20 000
1 500 000
1 000 000
10 000
Groundwater (kL)
3 000 000
500 000
0
2012
2013
2014
2015
0
Refinery Groundwater
Refinery Total
71
The Refinery has continued to show improvements in systems efficiency and reliability, as well as better water management during 2015.
Decreases in fresh water withdrawal are attributed to a reduction in throughput and successful water efficiency initiatives such as improved
management of cooling water blow downs and increased use of borehole water. This resulted in significant water savings for the 2015
reporting year and consistent with the positive trend in water saving over the past four years.
We have also decreased the amount of treated municipal water into the refinery and supplemented the difference with groundwater.
Effectively, this makes more municipal water available for other municipal users in the area and it also reduce cost of water to the refinery.
The Durban catchment is one of the most affected by the drought event. Optimal water use initiatives for facilities in the area will continue
to unlock better water efficiency.
The Engen Sales and Marketing division data quality and improvements drives has led in water data accuracy and addressed minor
overestimation of water consumption. This, together with optimisation of water use during equipment and surface washing and water
restrictions have resulted in our reported water use showing a consistent reduction over the past four years of 10681kL. Our Lubricants
Oil Blend Plant (LOBP) implemented good resource use reduction initiatives, which included the reduction of the number of wet firefighting
exercises. Over the past four years, water use as a part of lubricants production decreased by 17147kL.
Our focus now is in developing adaptation systems for high risk facilities and completing data quality assessment for our International
Business Division (IBD) affiliates.
In response to significant challenges presented by the drought conditions in South Africa, we built 6 bioreactor plants to treat waste water
effluent from some of our Engen 1-Stop sites. The sites where the treatment has been complete include:
Waterside site
Swartland 1Stop
Grasmere 1Stop
The installation of these plants is in line with our objectives of efficient resource use while maintaining high levels of quality of service to
our customers.
Energy Management
Energy supply has become an important topic for a number of states in sub-Saharan Africa. It has become a critical requirement that business
finds new ways to decouple growth from energy consumption. The landmark signing of the COP21 agreement late in 2015 underscores the
importance of this and emphasises the importance of developing lean organisations for a sustainable future.
In managing our energy consumption, we partner with external stakeholders and leverage resources whenever possible. It is for this reason
that we have maintained our role as an active participant of the Energy Efficiency Leadership Network (EELN). During the reporting period our
energy efficiency activities featured in a report published by the National Business Initiative as part of the EELN programme where our 2014
performance was discussed.
Energy Consumption
14
14
12
Energy (GJ) x 1 000 000
16
10
8
13
11
11
10
8
6
4
2
0
72
One of our key focuses has been data quality and we have conducted a number of audits, including independent assurance, to test for weaknesses
in our control systems and improve data accuracy. The results of these efforts have been positive and we are now a participant in the first phase of
the carbon budgets submission, which will run until 2020.
Greenhouse gas emissions are intrinsically linked to energy consumption and our efforts to improve energy efficiency will ultimately reduce scope 1
and scope 2 emissions.
The data quality improvement initiative, which started in the 2012 performance year had an impact on our scope 2 emissions data, which increased
slightly due to changes in calculations and boundary settings. However, since then the trend has been stable, particularly between 2014 and 2015
despite a slight increase in refinery throughput. This is mainly due to improvements in process efficiencies.
3.0
2.5
2.86
2.29
2.21
2010
2011
2.82
2.69
2.69
2014
2015
2.0
1.5
1.0
0.5
0
2012
2013
As a continuation of our energy efficiency at our retail sites, all new developments feature energy efficient LED lights as standard. In instances
where we upgrade sites, we also include an LED package as part of the upgrade. Installations would vary for different upgrades and circumstances.
In Reunion, we started the development of an eco-friendly service station to service the community of Beausejour as part of the Eco-city development.
73
Having already converted from fuel oil to fuel gas, the refinery scope for greenhouse gas reduction is limited to high cost engineering
options and scope 2 energy efficiency initiatives (mentioned in the energy management section). Currently scope 1 emissions are coupled to
throughput and can be affected by shutdowns depending on the length of the shutdown and operating units involved.
10.00
CO2e (Tonne) x 100 000
9.00
8.00
7.00
8.33
6.59
6.59
2014
2015
7.57
6.78
5.59
6.00
5.00
4.00
3.00
2.00
1.00
0
2010
2011
2012
2013
During the reporting period, we participated in the voluntary carbon budgets programme managed by the South African Department of
Environmental Affairs. This programme will run until 2020 and will see the Department of Environmental Affairs allocating carbon budgets
to participating companies. The companies will then report annually on their efforts to stay within the allocated budgets over the duration
of the programme. The programme is designed to identify real-life impacts of the system. Its outcome will eventually inform Phase 2 of the
carbon budgets programme planned for implementation post 2020.
Atmospheric Emissions
At Engen we recognise the important of the natural capital and we are keenly aware that production activities, while producing value
and access to affordable energy, can have a negative impact on the atmosphere. We therefore invest resources and time to ensure we
meet all applicable regulations and reduce our impacts to the natural capital. We also apply international guidelines, with assistance from
PETRONAS, to monitor and track our performance against key performance indicators. In our previous report we detailed the independent
assurance we initiated to assess our atmospheric emissions.
One of the outcomes of this process was a need to review and update our emission factors. We have done this and some of our 2015 figures
(presented in the table below) have been recalculated based on the revised factors. The largest impact of this can be seen in the particulate
matter which was reported at 2017 tonnes in 2014 and is now reported at 83 tonnes. The new factors are based on USEP-AP42 where
applicable as well as studies in the event that the AP42 does not have factors specific to our conditions.
2012
2667
241#
2013
2480
251#
2014
2240
1044
217#
2015
2150
1054
83*
To further reduce VOC emissions, we have installed VRUs at some of our operations, this also improves our material efficiency by capturing
carbon that would have, otherwise, escaped operations into the atmosphere and brings it back into circulation.
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75
Waste Management
The majority of our waste originates from our refining process. Waste from refining ranges from inorganic to organic waste consisting of
spent catalysts, contaminated soil, off-spec product and waste that comes from clean-up operations and shutdowns. We have continued
our efforts to reduce waste production which saw the total amount of hazardous and non-hazardous waste disposed decreasing despite a
decrease in waste recycled. These improvements can be partly attributed to the completion of legacy waste clean-up from decommissioned
tanks and has resulted in an almost threefold decrease in hazardous waste disposal and a threefold decrease in non-hazardous waste
disposal compared to 2013.
Non-hazardous
Total disposed to landfill
2011
2012
2013
2014
2015
Generated
10 386
14 256
20 349
9 462
5 278
Recycled
6 871
10 737
10242
3 766
1 685
Disposed
3 515
3 519
10 107
5 696
3 593
Disposed
1 343
2 734
10 221
1 778
3 124
4 857
6 252
20 328
7 474
7 717
The reduction of legacy waste related to soil contamination has resulted in a reduction in both hazardous and non-hazardous waste generated
for the year. Our efforts to reduce the disposal of hazardous waste have seen it drop from above 10 000 tonnes at its peak in 2013 to 3 593
tonnes in 2015, a decrease of 64.5% over the three years.
76
2012
2013
2014
2015
20
11
124
157+
257
56.6
58
105
17
27.4
The number of major LOPC and spills have remained unchanged at 7 and 4 respectively compared to the previous reporting period. We have,
over the years, made significant gains in keeping these incidents at a minimum and our vigilant attitude is beginning to bear fruit. We have
also increased our efforts to prevent the occurrence of high impact LOPC where large volumes can escape containment. This is seen by the
significant reduction in volume from major LOPC decreasing from 257kL to 56.6kL. Our spill response programme has, in part, contributed in
maintaining a low conversion of LOPC into spills. We still saw an increase in spillage volume from 17kL to 27.4kL. We are in the process of
implementing corrective actions to reduce this going forward.
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78
Transformation
Meaningful Black Economic Empowerment and transformation in the South African oil industry remains central to the future of the industry. We
do not view it as a legislative requirement but as the right thing to do. Engen firmly recognises that our sincere participation is an essential part
of our future success. Accordingly, strategies and plans have been developed and are being executed to progress this important issue.
Engens transformation agenda is influenced by business, ethical and legislative imperatives. Fair access to opportunity is the driving force behind
our transformation efforts. We are also keenly aware that this is a journey that will require time and patience.
Our Black Economic Empowerment Policy states that We will promote and develop an enabling environment in which Engen will deliver on its
transformation strategy. This policy extends to Engens employees, dealers, suppliers, business partners and the wider community.
Our transformation programme is also governed by the Broad-Based Black Economic Empowerment (B-BBEE) Act (Act 53 of 2003) and other
relevant legislation, as well as the Liquid Fuels Charter and the Mining Charter.
Engens corporate reputation, business growth and sustainability are strongly linked to how progressive our policies are. We would like our
employees to see the value proposition in our fair and equitable employment policies. Business BEE enterprise development and socio-economic
initiatives have enhanced Engens position as a company of choice.
Effective and meaningful transformation requires a focused cultural shift, and Engens transformation strategy forms part of an integrated
business plan. Since transformation objectives have been incorporated into the Engen Balanced Scorecard they have been expressed and
cascaded down and throughout the business which leads to more effective planning and execution of each B-BBEE element by the organization.
It is worth noting that the recent amendments to the B-BBEE Codes of Good Practice as published in the Government Gazette on 11 October 2013
have raised the bar on B-BBEE implementation in line with priorities of the South African National Development Plan. While these codes come
into effect in 2015 and the impact on business is only expected in 2016, we continue preparing the business for their implementation and where
necessary, steps have been taken to align policies and procedures with the spirits of the codes.
Another new introduction brought by the new codes is the discounting of the overall scorecard level if the measured entity fails to achieve
subminimum targets in any one of these elements.
For the current reporting period, Engens B-BBEE report addresses all the areas in the B-BBEE scorecard as per the 2007 B-BBEE Codes of Good
Practice as shown in the table below.
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Key initiatives
Engen Pitch and Polish
This successful programme continues to unearth talented young entrepreneurs and 2015 was no exception. This programme is aligned with
the National Development Plan which identifies small, medium and micro enterprises as critical for job creation. The ultimate outcome of this
is highly capable small businesses that become a catalyst in job creation, innovation and poverty reduction. Below is the table of the top 3
businesses that made it to the finals from different provinces.
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Sanele Shabalala
Strawberry Mphore
Hercules Kgaphola
Wildlands Greenpreneurs
The Wildlands Greenpreneurs is a social programme built around the growth of indigenous trees and recycling of municipal waste.
For 2015, the programme focussed on the communities of Bushbuckridge working through schools. Learners from various schools were sensitised
on environmental awareness and how to grow trees and recycle waste. The Wildland Trust then develops a nursery at the school and the
learners become the provider of indigenous trees as well as recyclable waste to the programme. In return, they receive bicycles, food parcels,
books or any other need identified as important for their development.
The trees are used to restore endemic vegetation, which contributes to reduced soil erosion, stable soil structure, revival of biodiversity and
reduced intensity of flash flooding events and reservoir siltation. Some of the trees are sold to companies with the proceeds used to procure
items to support the batter system that keeps the programme going. The recyclable waste is taken to recycle centres, which were part of our
focus for support in our previous reporting cycle. They get recycled and sold to various interested parties.
The programme started with 9 schools in 2014 and has grown to a total of 17 schools now. The value is not only what the learners receive as part
of the batter system, they also become aware of the environmental challenges we face and they become part of the solution.
The programme also employs 33 facilitators of which 27% are women, many from rural and indigent communities. The schools involved have a
combined total of 422 greenpreneurs involved in propagating more than 190 962 trees. The Moringa tree, a vitamin enriched tree used as part of
the nutritional food sources constitutes 35% of the trees that are propagated.
Engen Prosperator
As part of our transformation agenda and in pursuit of contributing to Socio Economic Development, Engen partnered with Raizcorp on a business
incubation programme. We believe that by supporting the advancement of small and medium sized businesses and creating a sustainable
entrepreneurial culture, our contribution will go a long way towards creating much needed jobs and help curb down high levels of unemployment
in South Africa and most importantly in the communities where we do business.
The Engen Prosperator is located in Durban providing support to 25 small businesses that are undergoing intensive Supplier Development under
the guidance of Raizcorp and Engen employees. Twenty new companies joined in 2015 while 16 completed the programme and graduated in 2015.
Currently the incubator is being used as a pilot site for Supplier Development initiatives as per the requirements of the Revised B-BBEE codes of
good practice. The rationale is to ensure that companies move beyond simply developing suppliers, only to see them becoming redundant, but
ensure their real integration into the supply chain and ensuring business activities with the empowered companies.
2012
2013
2014
2015
Total
Total Intake
19
27
50
20
116
Graduations
44
16
66
Drop Outs
12
The total intake over the past 4 years is 116 businesses with an average intake of 29 businesses per annum. To date the Engen Prosperator
programme prides itself with 66 business graduates, and a current balance of 25 beneficiaries.
Out of all the current suppliers Development beneficiaries, Engen estimates more than a third would be eligible for consideration for procurement
opportunities within Engens refinery in 2016. Three (3) of the Supplier Development beneficiaries have already been absorbed into the Engen
supply chain for Preferential Procurement and have been awarded contracts and jobs for the refinery.
In summary, to-date the programme has:
A 52% success rate of businesses that have successfully graduated from the programme;
10% businesses have dropped out of the programme;
The turnover growth for the beneficiary companies indicates an average of 15% over the last 4 years;
Job creation ranging between 5%- 14% from the different programmes offered through the programme.
Socio-Economic Development
We have retained our full B-BBEE points for socio-economic development through our carefully selected programmes managed through our CSI
programme. Some of the key programmes (reported under the Social and Relationship Capital section) are:
The Klevakids programme
Engen Maths and science Schools programme
81
82
83
2015
2014
5y Average
83 494
108 249
92 169
(9%)
3 462
(847)
2 011
72%
2 126
(960)
1 190
79%
Total Assets
37 002
33 619
32 274
15%
19 536
16 664
15 148
29%
9 396
9 475
9 319
0,8%
5,6
-2,5
1.6x
1.5x
Current ratio
10,9%
-5,4%
0,69%
0,92%
36,89
62,68
12,77
10,85
Gross profit increased by R4,983 million from the end of 2014 to 2015 due to the significant decrease in inventory revaluation losses, which affects
Cost of Sales. Inventory revaluation losses were incurred in the prior year due to the downswing in the crude price which commenced toward the
end of the 2014 financial year.
Expenses increased by 6% in the 2015 financial year. This arose mainly as a result of higher staff costs and higher depreciation due to the capital
expansion programme in the Engen Sales and Marketing Division and to a lesser extent in our International Business Division (IBD), as well as
Refinery depreciation charge on stay-in-business capital. In addition, the realised and unrealised foreign exchange losses increased by R154 million.
Operating costs in 2015 also included a loss of R458 million, due to a release of the foreign currency translation reserve (FCTR) on deregistration of
Engen Offshore Holdings (Mauritius) Limited (EOHL), a foreign intermediate holding company which was no longer required in the Group structure.
EOHL previously held certain investments in the IBD group of companies and was registered in Mauritius as a USD denominated holding company.
On deregistration, and in line with accounting practice, cumulative FCTR effects were recycled through the statement of profit or loss to retained
income but have no effect on shareholder equity or cash. The prior year included a release of FCTR of R326 million on the deregistration of Engen
African Holdings.
The statement of financial position is currently largely ungeared and this presents an opportunity for the funding of significant projects over the longer
term. The aim is not to exceed a gearing ratio of 20% (debt to equity), defined as the ratio between total equity attributable to parent equity holders
and non-current interest bearing debt, over extended periods. This level may change due to volatility in uncontrollable factors such as currency and
commodity price fluctuations. Long term funding is earmarked for capital expenditure, whereas the overnight markets are accessed for working
capital requirements.
84
Total assets increased from the prior year by R3,383 million to R37,002 million at the end of 2015. This was driven mainly by an increase in
the cash and cash equivalents balance from R1,699 million to R4,222 million due to the significant increase in deposits. Property, plant and
equipment increased mainly due to additions in the ESM division.
Capital Investment
Engen continues to roll out signature convenience offerings across our network, including fast food and restaurant partnerships, franchise
bakeries, franchise coffee, alternate payment partnerships and a range of other innovations. In parallel, Engen has steadily overhauled the
networks it acquired from its competitors in recent years.
2500
(Rm)
2000
481
495
1500
1000
1 604
1 815
500
0
2015 2013
Growth
Sustenance
We continue to make significant capital investments across our value chain. Capital expenditure at the Refinery has a clear focus on the
environment; maintenance and reliability; infrastructure, buildings and equipment; future fuels; and profit generating interventions.
31 December 2014
6 386
1 364
215
88
6 602
1 452
2 203
2 052
684
159
88
142
Government
1 324
436
1 324
436
Rm
Value Added
Income from investments
Total value created
Value Distribution
Employees
CSI
Retained for future growth
- Depreciation and Amortisation
- Retained Profit
- Deferred Tax
Total value distributed
20
19
2 282
(1 356)
752
675
1 486
(1 575)
44
(456)
6 602
1 452
85
Customers
R83 494
Investment
R215
Retained for
future growth
R2 282
Communities
R20
Engen
Government
(Taxation)
R1 324
Employees
R2 203
Equity
Providers
R684
86
Finance
Providers
R88
NOTES
87
Page number(s)
Brief description
GENERAL STANDARD DISCLOSURES
Strategy and analysis
G4-1
7,9
G4-3
G4-4
G4-5
G4-6
16
G4-7
16
G4-8
Markets served
16
G4-9
16
G4-10
Employee numbers
48
G4-11
53
G4-13
G4-15
External initiatives
63
G4-16
Membership of associations
63
Organisational profile
1
18 - 19
G4-18
16, 20
G4-19
G4-20
G4-22
G4-23
62
60 - 61
Stakeholder Engagement
G4-24
60 - 61
G4-25
59
G4-26
59
G4-27
G4-28
Reporting period
G4-29
G4-30
Reporting cycle
G4-31
G4-32
G4 in accordance option
G4-33
60 - 61
Report Profile
88
Governance
G4-34
31
G4-36
Board procedures for overseeing the organisations management of economic, social and environmental performance
32
G4-39
32
40, 73
G4-EC7
63, 80
DMA
Energy
72
G4-EN3
72
G4-EN6
72
DMA
Water
71
G4-EN8
71
DMA
Emissions
74
G4-EN15
74
G4-EN16
73
G4-EN19
72
G4-EN21
74
Environment
DMA
Waste
76
G4-EN23
76
G4-EN24
77
G4-LA6
57
G4-LA7
56
G4-LA9
Employee training
48
G4-LA10
48
G4-LA12
51
89
90
91