Sasol blunder costs CEOs their jobs

Sasol named a new chief executive officer to replace co-CEOs Bongani Nqwababa and Stephen Cornell as the company seeks to draw a line under the disastrous development of an almost $13 billion (about R190 billion) chemicals plant in the US.

The delays and massive cost overruns at the Lake Charles chemical project (LCCP) in Louisiana have tarnished the whole company, Sasol said yesterday.

South Africa’s biggest company by sales has seen its shares drop 37% this year and twice delayed reporting full-year results as it conducted an investigation into the problems at the US plant.

The probe showed that the Lake Charles project management team acted inappropriately, lacked experience and were overly focused on maintaining cost and schedule estimates instead of providing accurate information.

Sasol didn’t find misconduct or incompetence by either of the outgoing leaders, who will be replaced on November 1 by Fleetwood Grobler, previously executive vice-president for chemicals. Nonetheless, the board decided a leadership reset was needed to restore trust in the company.

“Shortcomings in the execution of the LCCP have negatively impacted our reputation, led to a serious erosion of confidence in the leadership and weakened the company financially,” Sasol said. The setbacks “have tarnished the entire company”.

A senior executive previously in charge of the project is facing disciplinary action and three executives involved in Lake Charles have left the company.

LCCP is poised to be a transformational project for Sasol, which built its business making fuel from coal. The massive plant, where costs have surged about 50% from initial plans, will boost revenue from chemicals to more than 70% of the company’s total.

Other actions following the Lake Charles review:

Co-CEOs and members of the group executive committee were awarded zero short-term incentive value for the 2019 financial year.

Reassigned oversight and accountability for the project to a new executive vice-president as of April and added project management resources.

Revised the company’s procedures regarding the escalation of ethics complaints and internal investigation findings.

LCCP is one of two mega projects in the US that were planned to significantly expand the company’s international footprint. The second, a gas-to-liquids project, was abandoned during the oil-price crash. – Bloomberg