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Sasol avoids making corporate history

While presenting a ‘good story’ at its AGM.
CEO Fleetwood Grobler. Sasol directors don’t seem to realise they are now the ones on the fringe. Image: Moneyweb

Sasol’s non-executive directors came within 1.77 percentage points of making corporate history at Friday’s AGM, when 23.23% of shareholders voted against paying non-executive directors for financial 2021.

Despite extensive campaigning by the board in the run-up to the meeting, including an undertaking to take a 20% cut in fees, the special resolution needed for the authority to pay the non-executive directors only just managed to secure the necessary 75%.

Reaching below 75% would have made it the first JSE Top 40 company not to be able to pay out non-executive directors’ fees (earlier this year 61% of shareholders in property investment company Safari voted against a similar resolution.)

The resolution on non-executive directors’ fees, which traditionally secures around 99% of shareholder backing, got just 76.77%.

In addition, 56% of shareholders voted against the remuneration implementation report, which deals with Sasol’s executive pay.

The results of the voting, announced at the end of a four-hour AGM, prompted the meeting’s only in-tune response from the board, with chair Sipho Nkosi saying: “We take the message you have conveyed to us by how you have voted on the implementation report on the remuneration policy and some of our other resolutions.” He added: “We get the message”.

It was the first indication anyone on the board was getting any message from shareholders attending the AGM.

Indeed, for most of the previous hours it was difficult to decide whether to admire the Sasol directors for their dogged determination to appear unfazed in the face of an unrelenting challenge from shareholders, or be deeply worried that perhaps they don’t quite understand the extent of the existential threat facing them.

Things are good …

For four hours (five if you include the general meeting held just before the AGM) shareholders questioned the board about Sasol’s environmental destruction, about generous director fees and about its relationship with US-based engineering group, Fluor. And, judging by the directors’ response, everything seems to be in order.

It’s all tickety-boo at South Africa’s national oil champion:

  • Sasol has won awards for its reporting and is compliant with all South African environmental regulations.
  • Directors’ fees are actually on the low-end compared with peer groups.
  • And as for Fluor, well, lawyers and consultants looked into that and found no wrongdoing.

So there you go.

Indeed, at one stage early on in the proceedings finance director Paul Victor gave such an upbeat commentary on Sasol’s operations, a ‘buy’ recommendation seemed in order, until he added, almost as an aside: “… on the downside we did have to book R112 billion of impairments.”

Lake Charles sale

Victor’s upbeat perspective even extended to the sale of a 50% stake in the US Lake Charles base chemicals business for $2 billion. He managed to present the sale, which necessitated R72 billion of the write-off, as a stonking good deal for the group.

It was a view that seemed to be endorsed by CEO Fleetwood Grobler, who said the group’s remaining 50% stake in the joint venture with global chemicals company LyondellBasell Industries meant it would be able to participate “in the upside” if Sasol decided to sell its 50% at some later stage.

Read: Sasol to sell Lake Charles stake for R33.38bn

For five hours (remember the general meeting) the directors responded to questions as though shareholders didn’t quite understand the workings of a remarkably large and complex global chemicals and energy group. Implicit in much of their response was the belief that Sasol was in excellent hands and shareholders – indeed all stakeholders – had nothing to worry about.

Things have changed

Up to about five or so years ago the implicit attitude that the majority of individuals questioning the board were part of some fringe group that could be patronised rather than dealt with seriously worked for the Sasol directors. But somewhere along the line, and apparently unnoticed by the Sasol board, things changed subtly but dramatically. Sasol directors are now looking like part of a fringe group and their interlocutors the mainstream.

For a variety of reasons, including perhaps the receipt of awards and the continued acquiescence by government to Sasol’s calls for regulatory leeway, the Sasol directors appear not to realise they are now on the fringe.

Mike Martin of proxy advisor Active Shareholder told Moneyweb after the AGM that it was evident Sasol’s approach to the environment continues to be that stated in its 2018 integrated annual report: “Sasol relies on obtaining postponements together with other mechanisms such as air quality offsets to address our compliance challenges.”

One environmentalist told Moneyweb that Grobler’s claims to be compliant are disputed by the group’s own reports, which admit to contraventions.

During the AGM Grobler indicated that the board would continue to rely on its importance to the SA economy and SA’s status as a ‘developing’ country to shelter it from any tightening in the regulations.

With its primary cash-pumping operation in Secunda tagged as the world’s single largest source of greenhouse gas emissions it’s unlikely that global players will continue to indulge its ‘developing’ country claims. Equally, it’s likely that the biggest potential source of pressure will cease to be the accommodating SA government.

Financiers across the globe are now more aligned with the environmentalists than they are with the Sasol board.

Any doubts about that will have been laid to rest by news that in the wake of Joe Biden’s election victory in the US, the Federal Reserve has asked to join a group of central banks committed to using the financial system to mitigate climate risk.

Sasol rejects demand for shareholder resolutions on climate
Climate risk continues to weigh on Sasol – Old Mutual

Hopes that a successful Lake Charles Chemicals Project (LCCP) would have provided Sasol with financial shelter have been cruelly dashed and the once cash-flush group is now having to deal with severe balance sheet constraints just as environmental pressure looks set to ramp up.

Listen: Grobler tells Nompu Siziba that Sasol’s committed to new emissions-reduction strategy

The matter of Fluor and Constable

As for the relationship between Sasol and Fluor, which was the lead consultant on the LCCP, Grobler attempted to dismiss shareholder concerns by stating: “We’ve settled all open matters relating to Fluor; Fluor did all it was required to do in terms of our contract. We believe we have finished with that matter.”

On former Sasol CEO David Constable’s role, Sasol executive director Vuyo Kahla told shareholders that a report, undertaken by a team of lawyers and consultants, had found no wrongdoing by Constable and so no action would be taken against him. Constable, a long-time Fluor executive, joined Sasol as CEO in 2012 and led the LCCP investment.

*He became a member of Fluor’s board in 2019 and was recently appointed to become the company’s new CEO, effective January 1, 2021.

Shareholders were not persuaded. Some are calling for details of the fees paid to Fluor each year between 2010 and 2020 as well as the release of the full report by the lawyers and consultants.

About that 20% fee cut …

On the issue of non-executive directors’ fees, which Active Shareholder noted have increased over 300% over the past 10 years, Martin said the statement repeated by remuneration committee chair Mpho Nkeli – that the non-executive directors were taking a 20% fee cut – was a little misleading.

Only the board fees are being cut; committee fees are not being cut.

In addition, the introduction of generous travel allowances is likely to ensure non-executive directors are better off in 2021.

As for US-based non-executives being on the low side of their peers, it’s difficult to determine, given Sasol’s situation, who its appropriate peers are.

Martin said Sasol’s refusal to present a resolution on non-executive directors’ fees every year creates a potential crisis for the group as the Companies Act requires these fees to have been approved within the last two years.

While Sasol’s approach is within the law, it is not best practice.

“It is most unfortunate that Sasol, despite its fine words, only does the minimum required in terms of the law. This is the case with non-executive directors’ fees, it was the case with Sasol’s refusal to put the appointment of auditors to the vote [forcing the JSE to make it mandatory] and is even more disturbing in its approach to the environment.”

Read: Sasol shareholders struggle to keep up with its news

*The first version of this article stated that David Constable left Sasol in 2016 to return to Fluor. We apologise for this error.

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Thanks for the good article. Amazing how listed compaies’ directors act.

The think that they own the company.

Dear Ms. Crotty,
You come across as a very angry person, who dislikes free enterprise and especially Sasol.
Using terms as “environmentally destructive”,” quoting “one environmentalist”,the big hullabaloo about non =executive directors,the bad decisions by the board re Snaplake etc etc,shows that you are simply an activist against private businesess.Your mantra that “you have seen little improvement in corporate and business governance for decades” clearly shows that you have an agenda promoting more restrictions,regulations, bigger government,and less free enterprise.
Without Sasol fuel, the jobs it provides, SA will be energy compromised.You should rather write about the theft of taxpayers money by a corrupt government than trying to break down great businesses like Sasol that was built by hard working, honest men and women of South Africa.

Dear Veritas56

While you hide behind a pseudonymn and enjoy the luxury of making scathing anonymous comments against someone with Ms Crotty stature and reputation, you might want to educate yourself some more. Sasol was built and supported mostly with Taxpayer money in SA .

Absolutely correct!!!

Dear Mr. Cilliers,
Thank you for replying to my anonymous comment.
Money does not create visions that build companies.
Only people do.
Ms. Crotty will do well to uphold your endowed “stature and reputation” of her, by providing readers with a balanced perspective, instead of the trite narrative that directors and business are bad for shareholders and the environment.

Veritas56’s comments have some substance. Ann Crotty’s language and attitude indicate emotional and agenda-driven journalism. This has long been a problem with her work. This particular article is particularly undisciplined – it borders on diatribe. A business audience is better served with relatively objective journalism.


NONSENSE comment was directed at Veritas.

“Snaplake” a De Beers issue, “Lake Charles” is the Sasol issue.

Activists do not care about shareholders or the companies survival. Ludicrous to be posing environmental questions when the company is in a financial crisis.

Actually no. Sasol wants to hold on to ancient ways of doing business. Most of what made Sasol as big as it is today was innovation. We all know that innovation at Sasol is dead. Pushing for greener ways to do business can only be good for the future of Sasol. Norway runs a $1 Trillion fund that only funds green projects. If Sasol wants to attract such high calibre investors to return the share price to its former glory days, it needs to make a push into innovative green ways of making fuels.

“ Any doubts about that will have been laid to rest by news that in the wake of Joe Biden’s election victory in the US, the Federal Reserve has asked to join a group of central banks committed to using the financial system to mitigate climate risk.”

One of the reasons a Biden presidency is bad for SA.

…or not.

Joe Biden’s controversial son, Hunter, is married to South African filmmaker Melissa Cohen. With her positive influence on the life of Hunter, should lead to positive views (of certain South Africans) from Americans 😉

Just hope the marriage lasts!

Let’s hope Melissa acts as a pillar of stability is this presidential family.

(..the above comment is based on the ASSUMPTION that Biden has won presidency)

Another example of incompetent boards of directors looking after themselves and the executives and screwing over the wider stakeholders (particularly shareholders). Sad that this continues unabated.

Hands off Ann Crotty!

I find her comment generally very insightful, complete, and useful. She does her homework properly, doesn’t mince her words, and tackles her subject head-on and even-handedly, without fear or favour.

This may be what is simply “expected” of a financial journalist, but these qualities are in VERY short supply in the reality! Ann Crotty has those qualities in spades!

Which, in my opinion, is a LOT more than can be said for some (all!) of the useless “Economists” I have crossed swords with in these columns!

One only has to look at the very poor quality of the analyses by these “Economists” of the root causes of SA’s economic and other problems (and specifically, what to DO about fixing them!) in these columns.

More important it seems, for these Worthies (not!), is to be “politically correct”, than to relentlessly acknowledge the unvarnished facts because the country’s “management” find it unpalatable.

Sasol is undoubtedly one of SA’s major industrial accomplishments. And there is much to be celebrated here. In its past. And also now.

But no situation is forever static. Or stable.

Right now, it is becoming ever more stark that the consequences of the massive Human Industrial Development and Pollution of the past 100 years are FAR exceeding the natural capacity of the the planet’s biosphere to self-rectify this imbalance.

And that Planet Earth (and more particularly mankind as we know it) is facing an EXISTENTIAL crisis threatening ALL of our future.

And this new – unprecedented – environmental situation COMPLETELY rewrites the rulebook for what can be acceptable future industrial (and human) behaviour on this planet.

The PARADIGM has changed!

Sasol needs to adjust accordingly. Simple as that.

My sentiments are with you Albie and lllphil especially with regards to the matter of pollution. When comes to matters of climate change I tend to be a centrist in my views. I am all for cleaning the environment up but am not convinced that pollution is necessarily responsible for climate change. There appears to be a lot of holes in the climate change theory and what makes it even more suspicious is that left-wing activists and politicians are in the main purveyors of the so-called “consensus” that climate change is upon us.

Yes, clean the pollution up at Secunda for the sake of the people living there but do it in an economically sensible way. Not the other way round due to political pressure.

I found this article to well balanced and informative. I would hate to think what would happen when journalists are not allowed to question corporates like SASOL. Massive value destruction has taken place here. And the board has been lied to at best and at worst have been complicit in the Lake Charles adventure which as seen massive cost overruns. And then there is this matter of David Constable and the Fluor connection..

I suspect Veritas 56 is not quite living up to his pseudonymn and if the ‘veritas’ be told he could have a close connection to SASOL..

Somebody got the Lake Charles project budget wrong, e g about the funding provisions, something dropped on the floor between Sasol and Fluor while all the “project controls” boxed were nicely ticked, besides the time and cost overruns.

Find it difficult to get rid of that feeling that Fluor – who created and built there lucrative South African business on Sasol since decades ago – are being let off lightly about the Lake Charles project’s failed project controls. A re-read of the reports and media releases in the past few years about this project which year after year reported all good, and then fell apart towards the last 20% of the project. America first, perhaps?

How can selling half a $13bn asset for $2bn be a great deal? Constable got Sasol in the mess and all dealings with him and Fluor should be terminated – I would also like to see the report. The Sasol board are too arrogant and actually need to start listening. Ann did a great job in getting this message across

You know why South African companies fail on the international stage….because they are arrogant, ignorant and stubborn…..
SASOL is a disappointment for South Africans, as they simply struggle to understand simple things. I don’t understand why they would even suggest/think about salary increases for top management, after shareholders lost so much….from R500 a share to R115.

End of comments.





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