By: Sibonelo Radebe
Petrochemicals giant, Sasol, seems to be headed for a big political blow up, festered by the under-performance of its broad based black economic empowerment (BBBEE) transaction called Sasol Inzalo. It could be ugly and expensive!
Established in 2008 as part of the bigger R30 billion empowerment transaction, Sasol Inzalo (Public) is maturing in September next year (2018). Latest figures suggest that it will go down as a financial disaster. This will cause pain for more than 200 000 black investors most of which are poor people who struggle to make ends meet. These people were lured to invest money in Sasol Inzalo on a promise of redressing apartheid injustices. And now many are crying: ‘We was robbed’.
Politically toxic environment
In the prevailing political and economic environment this blow up can become politically toxic for Sasol. The failure of the post 1994 dispensation to produce economic dividend for the black masses is causing political angst. It has propelled the rise of hardliners, mixed with political opportunism, who are calling for ‘radical economic transformation’.
Given its history of Afrikanerdom and its exposure to the regulated and licence anchored mining and energy sectors, Sasol is particularly vulnerable to the hardening of attitudes within the ruling party, ANC.
Sasol will have a serious problem of a political nature if 200 000 black people it had promised to empower petitions it as a BBBEE fraud. They would do this if the financial status of Sasol Inzalo does not improve significantly between now and maturity date, 8 September 2018.
Sasol Inzalo Public is currently under water by about R1 billion. Prospects of turning this around are not looking good. That is, unless Sasol digs deep into its coffers to save the deal.
If there is a business which must excel in BBBEE, it is Sasol. The business comes out of a history of Afrikanerdom. Alongside names like Naspers, Iscor (Arcelor-Mittal SA) and Absa, Sasol rose out of the Broederbond driven South African industrial revolution, using the blood and sweat of black workers. Sasol’s pedestrian BBBEE record does not help the situation.
The debacle comes just in time. South Africa is experiencing radicalisation of the movements for democracy. Slow pace of addressing the country’s historical inequalities has led to increasing calls for ‘radical economic transformation’ in a movement that has many faces. The posture taken by Julius Malema’s Economic Freedom Fighters (EFF) feeds from this movement. The same movement has grown stronger inside the ruling party, the ANC, partly as a result of a realisation that it is losing some considerable ground to the EFF, following years of shoddy economic transformation work.
An ANC that is desperate to prove that it has not abandoned the economic transformation agenda is bound to react harshly to the on-coming Sasol Inzalo debacle. Sasol is particularly vulnerable to political rhetoric due to its history and also due to the fact that it operates in regulated sectors of the economy where the state commands enormous power to make or break a business. Sasol’s petrochemical business is anchored by coal mining and petro trading licenses which are issued by the department of mineral resources.
Faltering BBBEE credentials can put Sasol’s licenses in jeopardy as sanctioned by the BBBEE Codes of Good Practice, Mining Charter and the Liquid Fuels Charter. Activities involving Eskom versus Exxaro and Glenco-Xtrata shows that this South African government is prepared to shake things up if to benefit people with friends in high places, like the Guptas.