Petrochemicals group Sasol says it will not be awarding short-term incentives to senior management following revelations of massive cost overruns at its Lake Charles Chemicals Project (LCCP) in the US, which saw the company suffer an impairment amounting to $1bn.
Outgoing chairperson, Mandla Gantsho, said the decision was part of a drive to ensure accountability and reestablish trust in the company and its leadership.
“We just felt that the LCCP shortcomings were so significant that the senior management should receive no rewards," Gantsho told shareholders at the company's Annual General Meeting held in Johannesburg on Wednesday.
“We took extensive remedial actions to strengthen the control environment by awarding no short term incentive or rewards for senior management in FY [financial year] 2019."
The, project located in the state of Louisiana, has been marred by significant cost overruns. These prompted the resignation of the company's joint CEOs, Bongani Nqwababa and Stephen Cornell, who quit their jobs in October with the company insisting that there was no evidence of wrongdoing in their part.
It has emerged that the project, which will produce various chemicals including a plastic variant called polythylene, will cost the company between $12.6n and $12.9bn, almost double the original budgeted amount.
In his opening remarks at the meeting on Wednesday, Gantsho sought to explain the shortcomings that contributed to the cost overruns by highlighting poor management and inadequate cost control measures. He said these prevented the identification of potential cost and schedule overruns and errors.
Gantsho said there was "insufficient experience within the LCCP leadership team" as well as "inappropriate conduct and improper tone at the top of the LCCP management team".
"There were inadequate control procedures ... which allowed for erroneous and unsupported reporting by the LCCP management team and for these to go unchallenged and also not to be properly escalated within governance structures within the organization."
Some of the shortcomings identified by the company included inadequate procedures to ensure that internal complaints were escalated appropriately. The company says it has now committed itself to adopting a culture of openness.
“We take these shortcomings seriously,” said the chair, while reiterating Sasol's "undiminished" commitment to the project which he said was critical to the petrochemical group's near term growth strategy.
Gantsho stressed that the conclusion of an independent review of the Lake Charles project "brought to an end an uncertain period for shareholders" adding that the company was now working to restore its rightful place as a leading international chemical and energy company with a strong South African heritage.
“We realise this will be a long journey but the work to rebuild our reputation is already underway.”