How they ripped us off

EXCESSIVE pricing in certain circumstances can be described in terms of import-parity pricing.

IPP is what a South African producer with an overwhelmingly dominant position in the market is able to charge its local customers.

It is equivalent to what the South African customer would have to pay to buy the product from an international supplier.

Added to this purchase price is the notional cost of shipping the product from Europe, the US or Asia to South Africa.

Other “notional costs” are often added to cover such things as insurance and “hassle”.

The Competition Commission alleged that Sasol priced its polypropylene on the basis of IPP. Arcelor Mittal SA faced the same allegations.

The irony for local consumers is that many of the dominant producers who charge IPP were former “national champions” created by government to maximise the benefits of the country’s natural resources.

The process of IPP ensures these benefits are privatised and accrue to a small group of shareholders.

The tribunal’s remedy is focused on the ex-works price of polypropylene to prevent Sasol from securing excessive prices from its domestic customers by segmenting the market.

Sasol is able to segment the market by charging its international customers an FOB or delivered price.

In terms of the remedy, all of Sasol’s customers will be charged the ex-works price, which is the price paid for purchase at the factory. —