Time for Sasol to clear the air

Getting six institutional investors to agree on any issue, let alone go public on that agreement, must have involved Herculean efforts by the drivers behind the bid to table a shareholder resolution at the upcoming Sasol annual general meeting (AGM). The move marks a dramatic departure from institutional investors’ traditional strategy, which is to engage behind closed doors.

The six investors — Old Mutual Investment Group, Sanlam Investment Managers, Abax, Coronation, Aeon Investment Management and Mergence Investment Managers — are not rabid environmentalists, or even what you might call activists. They wanted nothing more than greater transparency on how Sasol’s long-term greenhouse gas emission reduction strategy aligns with the Paris Climate Agreement.

It is critical to point out, in the context of SA company law, that the investors’ proposed resolution contains absolutely no intention to interfere with the board or management’s authority on this or any matter.

Decades ago Sasol ’ s ability to extract oil and chemicals from coal and gas made it a national champion of which South Africans were rightly proud. The Secunda plant has pumped out huge (state-subsidised) profits for private shareholders since Sasol listed in 1979 and has created tens of thousands of jobs in the process. Forty years later, its continued profit pumping underpinned funding for the blighted and ill-considered Lake Charles Chemical Project in the US.

But Secunda’s cash-pumping and employment-generating ability is playing second fiddle to its world-leading ability to pump out greenhouse gases. Now our national champion is primarily known for producing more greenhouse gas emissions than Portugal. And when it comes to world rankings, Secunda suffers the appalling distinction of being the biggest single-point greenhouse gas emission source.

Governments and investors the world over are taking a tough stance on greenhouse gases. If something significant is not done, Sasol’s operations face the risk of becoming stranded assets — they risk premature or unanticipated writedowns. It would be irresponsible of shareholders not to insist on details of how Sasol plans to deal with this.

To date it appears to have relied heavily on its national champion status, seemingly hoping that its status as a major taxpayer and employer will shelter it from decisive action by the government. Even if that were the case, as a global player Sasol is going to find itself bumping up against opposition and protest.

Its just released climate change report, written in June but delayed until November, was touted as a response to investor pressure for details. But apart from a commitment to reduce greenhouse gas emissions from its SA operations by at least 10% by 2030 and a promise to publish an “emissions road map” in 2020, the report was disappointingly replete with the usual sweeping statements and devoid of the sort of details investors need to make decisions.

Sadly, Sasol’s response to the proposed resolution was not quite as historic as that of the institutional investors. It was a carbon copy of its response to a similar move by shareholder activist Theo Botha and the Raith Foundation ahead of the 2018 AGM. A year ago Sasol told shareholders its lawyers had advised the board it did not have to table the resolution. In 2019 Sasol told shareholders it was rejecting their move on the grounds that the matters raised in the resolution “have been addressed and there is no longer any necessity to consider the legality of those resolutions for the upcoming AGM”. Essentially the message from the Sasol board is “trust us, we know what we’re doing”.

This is a chilling response from a company that just a week earlier, in its much-lauded Lake Charles Chemicals Project review, admitted to a “serious erosion of confidence in the leadership of the company”.

AS A GLOBAL PLAYER SASOL IS GOING TO FIND ITSELF BUMPING UP AGAINST OPPOSITION