Sasol and Anglo pass different wayposts
Anglo American and Sasol reached contrasting milestones recently. Sasol announced a new BEE deal to replace the Inzalo scheme, which has not yielded the desired results. Anglo, for so long the bulwark of SA’s economy, turned 100.
No entity has been as intrinsically linked to the South African story as Anglo American. In its heyday, the “corporation” directly influenced every aspect of society. As a direct owner of companies that controlled more than half of the JSE shares at one point, its economic dominance was as enviable as it was tumultuous. To traditional capitalists, it represented a wonderful example of capitalism’s ability to generate wealth.
To others, its position as a giant in a mining industry built on the back of cheap labour made it a symbol of exploitation. Its monopolistic nature at the heart of the mining industry meant it had frontline experience of the rise of trade unionism and industrial action against the backdrop of social oppression.
It was perhaps in its political leadership that Anglo distinguished itself from other corporations. Business leaders rarely take an active part in politics, but Sir Ernest Oppenheimer and his son took up seats in Parliament and actively advocated the liberalisation of the country’s political system. This was not altogether altruistic as they had an intimate understanding that their business would do much better in the absence of international economic sanctions.
Anglo’s great gift is that it always seemed to have visionary leadership that was able to read beyond prevailing circumstances and plan ahead.
After 1994, it pioneered the first wave of BEE megadeals. Such deals were largely successful for Anglo and its chosen beneficiaries.
One problem with those initial deals, and most BEE deals since then, is the question of whether they are broad-based at all. Individual beneficiaries are easy to identify; the few black billionaires are well known. For broad-based structures — communities, employees — identifying the benefit from BEE deals is more difficult.
This could simply be due to poor evaluation mechanisms. Until such instruments exist, the impression one gets about BEE deals is that they have fallen way short of being broad-based. Anglo has had some successes — Mzi Khumalo represents an individual beneficiary who apparently didn’t have to do much to get his windfall. Companies such as Exxaro and Royal Bafokeng Platinum are examples of BEE done right.
The Anglo bursary scheme is well known for its effect on society. Anglo subsidiary Kumba built an entire suburb next to its mining operations in Sishen. Most other schemes struggle to exhibit such a balanced suite of broad-based empowerment results.
The second issue is how such deals ought to be financed. By their nature, BEE deals require some dilution of the economic wealth of existing shareholders. Most deals are a gamble. In exchange for granting discounted stakes to black shareholders, current shareholders must hope that the long-term trajectory in the value of the business leaves them no worse off.
For Sasol, the key input was the expected growth in the oil price, which never materialised. Sasol now has to start again with the wisdom of hindsight. Whether the shareholders and the intended beneficiaries have the patience to wait another decade remains to be seen.