We got no state help — Sasol unit

SASOL Chemical Industries told the Competition Tribunal yesterday that its position in SA had come about largely due to innovation and risktaking, and not because of state support.

SASOL Chemical Industries (SCI) told the Competition Tribunal yesterday that its position in SA had come about largely — if not entirely — due to innovation and risk-taking, and not because of any state support.

SCI said in its closing arguments, which the parties have presented to the tribunal over the past two days, that Sasol was privatised more than 30 years ago and that the group, at some point, had to be released from the legacy of state support.

The Competition Commission accused SCI, a subsidiary of Sasol, of abusing its dominant position in the markets for propylene and polypropylene to the detriment of its customers by charging excessive prices. It argued SCI leveraged off its state support and not because of any risk-taking.

“That time has long since passed. Indeed, the state and, through it, South African citizens and consumers, have earned an enormous return on their investment in Sasol,” SCI said yesterday.

According to the commission, SCI’s propylene business enjoyed an “astonishing average return on capital” of about 162% per year over the complaint period, which covers 2004 to 2008.

“SCI recovered the full capital invested in this business eight times over.”

SCI said: “The commission’s suggestion that the entry into the propylene and polypropylene markets was risk-free and merely a spin-off of state support has all the hallmarks of the armchair critic blessed with hindsight.”

SCI said the state had received through direct payments — not tax — about R18.5bn from Sasol, compared with investment by the state of about R9.3bn. State benefits from Sasol would have been nearly R58bn by 2006.

The commission argued SCI could charge domestic customers the highest possible prices because of a history of state support for its fuels business, which Sasol had leveraged to create its position of dominance in the domestic market for propylene and polypropylene — used in the production of plastic goods.

SCI argued that it was not a dominant firm in any of the markets it stood accused of pricing excessively, as the commission itself held the markets to be global and not national. SCI said that at the time of the complaint it held 1% of the global market.

It said the case could never be about prices. “SCI’s propylene prices to Safripol during the complaint period were nondiscriminatory and reflected internal transfer rates. SCI’s polypropylene prices were only about 16% above the cheapest polypropylene in the world,” it said.

The commission is asking the tribunal for an order that will see SCI selling both products on an ex-works basis without discriminating in price based on location, and is asking for an administrative penalty of 10% on SCI’s 2009 turnover.

SCI said the behavioural remedy would amount to inappropriate price-setting by the tribunal, and it would not secure the “price outcomes that are tailored to the excessive pricing complaint the commission wants to address”.