Sasol shows pitfalls of once-empowered rule

The government’s fervent refusal to allow “once empowered, always empowered” is working greatly to the disadvantage of those it is seeking to empower, as the experience of Sasol Inzalo and Sasol shareholders shows.

Mining companies are seeking a court ruling to allow them to retain permanently the empowerment credits they earned on past deals in which beneficiaries have sold out. The government wants mining firms — and all other firms — to keep topping up their black equity ownership levels to the minimum levels in industry charters and the BEE codes.

The result is that companies put in place 10-year lock-in structures, such as Inzalo. Measured from the outset of Inzalo in 2008 until the present, Sasol’s shares have barely moved. But in 2014, when oil prices peaked, Sasol’s shares hit R652.99. If they had been allowed, perhaps some Inzalo shareholders would have sold shares at that point to repay debt and make a profit. That opportunity would also have relieved the rest of the shareholder base from now having to pay R12bn-R13bn, in one way or another, to settle the Inzalo debt.

It’s easy to point fingers at the lending banks, who are the only ones not taking a loss. But they lent money to people who were able to benefit from a dividend stream over 10 years without laying out any money of their own. The money banks lend is derived from the savings of ordinary South Africans, who should not be penalised for the government’s obstinacy.

Steinhoff Africa Retail (Star) got off to a good start as a listed entity on Wednesday. It not only hit a high of R22.46 — up from its initial public offering price of R20.50 — on its first day out, but the price held reasonably well after heavy trading, which suggests a longterm commitment to the share.

At this early stage, it seems investors are happy that Christo Wiese’s initial plans, in which Steinhoff would have gobbled up all of Shoprite, were unsuccessful. His plan B, in terms of which Steinhoff acquires a controlling stake in Shoprite and the group’s African assets get a separate listing, looks like a real winner for South African investors starved of quality investment opportunities.

Star’s portfolio doesn’t have the glitz of some of Steinhoff’s recent international acquisitions, but they are better known and have been part of the Steinhoff family for a reassuringly longer period. It will take a few years to see what happens about synergies between Star and Shoprite. Perhaps there is scope to combine grocery-distribution facilities with those of furniture and clothing across Africa but full-on synergies are likely to be rare.

And then there’s the crossmarketing opportunities. As CEO Ben la Grange indicated, these are more likely to be in the many services provided to their customers than the actual merchandise sold. This prospect should worry the likes of Capitec given that much of those services are finance-related.

La Grange says Star has no interest in banking, there’s far too much regulation; but the provision of financial services could be a nice money-spinner.

Perhaps Star will learn to be less hostile to the media. This week’s interview offerings were a little too precious. The instruction that journalists could make no reference to Steinhoff International (and its legal woes) was like Angelina Jolie agreeing to an interview on condition there could be no mention of Brad Pitt, children or drugs.