Sasol’s past should haunt it – dti

2013-05-26 14:00

The apartheid-era state support for Sasol and its eventual privatisation is emerging as a major theme in the competition commission’s case against the petrochemical giant in a marathon hearing at the competition tribunal in Pretoria.

The significant state resources poured into the company over half a century forms the moral argument made by the department of trade and industry (the dti) for it now delivering “developmental” benefits to local industry, but is of uncertain importance in competition law.

“Sasol believes that the question of state support bears little, if any, relevance at all to this case,” the company told City Press.

The case revolves around the pricing of polymers, with Sasol accused of charging excessive prices for propylene and polypropylene, which are used in the manufacture of plastic moulded goods.

The commission and Sasol have offered up different interpretations of this slice of South African history through their experts and witnesses.

The competition commission called former dti director-general Zavareh Rustomjee to present his understanding of how Sasol Limited came to be the petrochemical giant that it is today.

Rustomjee held the position of dti director-general from 1994 to 1999, and also served on the board of Sasol (2001-2002) and PetroSA (2010-present).

He was also the chairperson of the task team appointed in May 2006 to consider possible reforms to the fiscal regime applicable to windfall profits in South Africa’s liquid-fuels sector.

Rustomjee gave a detailed testimony on the history of Sasol’s formation from the establishment of the synthetic-fuel industry in South Africa

in 1937, to the Liquid Fuels Act of 1947, which he said established the sector as “strategic” in terms of public policy and led to Sasol 1 being built in the late 1940s.

“The construction of Sasol 1 in the late 40s was financed by the state and the state was Sasol’s sole shareholder,” states Rustomjee’s witness statement.

Rustomjee also testified about the decision in 1973 to increase Sasol’s capacity to “safeguard South Africa’s fuel security”, and how in 1979 Sasol 2 and Sasol 3 began construction on the back of increased levies on the fuel price.

Sasol at this time also benefited from the state “coercing” other oil companies into purchasing all of Sasol’s additional output, even going so far as paying other oil refiners to decommission parts of their refineries.

Rustomjee then testified about how Sasol was privatised in 1979, with 100% ownership of Sasol 1, and 50% of Sasol 2 and Sasol 3 being transferred to a new entity, Sasol Limited.

The state kept a 30% share of this new entity and 70% was sold to private shareholders when Sasol Limited was listed on the Johannesburg Stock Exchange in 1979.

Rustomjee testified this 70% stake was sold in tranches to “selected institutions in what appears to have been primarily a move to support existing Afrikaans and English business interests”.

“The shares were sold at a significant discount to their value and the private shareholders were not required to take any operating risk in relation to Sasol 2 and Sasol 3,” says Rustomjee.

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