Gets an en­ema

Bet­ter out in the open than in

Finweek English Edition - - Companies & Markets -

SA­SOL HAS NO IDEA just how deep­rooted the prob­lem of col­lu­sion is within the com­pany. To date it’s paid two sub­stan­tial fines amount­ing to more than R4bn to com­pe­ti­tion au­thor­i­ties in Europe and South Africa. The na­ture of col­lu­sive be­hav­iour means it can’t tell whether that bill is go­ing to rise.

De­spite that, CEO Pat Davies has com­mit­ted Sa­sol to ex­pos­ing even the most sor­did truth about pos­si­ble un­der­hand busi­ness prac­tices in the com­pany he’s run since 2005. Davies, an ex­ec­u­tive di­rec­tor at Sa­sol since 1997 and a se­nior man­ager of nu­mer­ous busi­ness units through­out the group for more than two decades, also faces per­sonal scru­tiny to es­tab­lish whether he or any other se­nior man­agers were aware of il­le­gal ac­tiv­ity.

It wasn’t a de­ci­sion taken lightly – but Davies has no choice. Com­pe­ti­tion au­thor­i­ties in ter­ri­to­ries where Sa­sol op­er­ates have made it clear that un­less there’s full co-op­er­a­tion, the con­se­quences of in­suf­fi­cient or non-dis­clo­sure could be con­sid­er­ably worse than they have been to date.

Davies made the pub­lic com­mit­ment to greater trans­parency af­ter a find­ing last year by com­pe­ti­tion au­thor­i­ties in Europe that Sa­sol Wax had been en­gaged in price fix­ing. Two direc­tors of the unit were fired. Sa­sol paid a fine of around R4bn – against which it’s cur­rently ap­peal­ing – and em­barked on a clean-up cam­paign that’s steadily gath­ered mo­men­tum.

Cen­tral to the in­ter­nal process – which is be­ing car­ried out by a num­ber of the coun­try’s top law firms un­der the watch of the group’s non-ex­ec­u­tive direc­tors – is to un­cover not only why col­lu­sion occurred, but to find out whether it was ever en­cour­aged, tol­er­ated or sim­ply went un­de­tected. Cru­cially, Sa­sol also wants to iden­tify in­di­vid­ual cul­prits to il­lus­trate its claim that the prob­lem isn’t en­demic but rather as a re­sult of the ac­tions of a hand­ful of in­di­vid­u­als.

Davies hopes the process will give the com­pany – listed on the JSE and on the New York Stock Ex­change – a clean bill of health. It’s aimed at restor­ing the rep­u­ta­tion of a firm that has a shad­owy past, in that it was formed as a sanc­tions-bust­ing mech­a­nism un­der the apartheid gov­ern­ment to defy the then oil ban.

Com­ing clean car­ries the risk that even more dirty laun­dry could be washed in pub­lic. Ex­ec­u­tives sim­ply don’t know if the in­ves­ti­ga­tors hired by Sa­sol will find that col­lu­sive be­hav­iour spread be­yond more than just its Sa­sol Wax and Sa­sol Nitro busi­ness units.

While the Sa­sol Nitro case has been set­tled, there’s still an abuse of dom­i­nance is­sue that must also be ad­dressed, which car­ries the po­ten­tial of fur­ther sanc­tion.

SA’s Com­pe­ti­tion Com­mis­sion is al­ready in­ves­ti­gat­ing other di­vi­sions, ei­ther di­rectly or as part of broader in­dus­try probes out­side the

Clear­ing house. Pat Davies

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