/ 15 May 2009

A cracker under Sasol

Brian Molefe has lit a cracker under Sasol. This week the Public Investment Corporation (PIC) chief executive called for Sasol’s senior management and chairperson to be held accountable for the charges of collusion and cartel activity the company faces.

With five key divisions of Sasol under investigation by competition authorities in South Africa and abroad, its senior management is in the firing line.

Critics said that there appears to be a culture of anti-competitive conduct within South Africa’s chemical and fuel giant, a claim Sasol disputes.

However, the allegations of price-fixing, collusion, abuse of dominance, price discrimination and cartel activities across the sectors in which it does business indicate that matters are not well.

Full response (PDF)

Read Sasol’s full response

Molefe said Sasol’s shareholders should have demanded a thorough explanation when the European Union’s competition authorities heard the Sasol Wax case.

“We should have been more vigilant. Why did they engage in these activities? Who in the company did it? Who cost the company R3.6-billion?

“Now it has happened on our shores, with Sasol Oil and in the fertiliser industry. The senior management and the chairperson must be held to account, the buck must stop somewhere,” he said.

The PIC is Sasol’s single largest shareholder, with a 10.73% stake.

Molefe faces litigation launched by Sasol chairperson Hixonia Nyasulu, who was outraged by statements that he made about her in the media. Molefe questioned her independence as chairperson because she was a shareholder in Sasol Oil, one of the subsidiaries being investigated for anti-competitive practices.

Nyasulu said Molefe harmed her reputation by making the statements, while Molefe said it is “disingenuous” for Nyasulu, as chairperson of Sasol, to resort to litigation.

Sasol spokesperson Jacqui O’Sullivan said Molefe had inferred that Sasol did not disclose more information about the competition compliance issues in Sasol Oil because Nyasulu has an interest in that company, but in fact the reason was that to do so might compromise the Commission’s ongoing investigation.

Regarding the accountability of Sasol’s executive, O’Sullivan said chief executive Pat Davies and the management team had accepted full responsibility for these matters.

The financial implications of Sasol’s anti-competitive charges are mounting. Next week Sasol will go before the Competition Tribunal to agree to pay a record domestic fine of R188-million for settling some of the charges levelled against it’s fertiliser arm, Sasol Nitro.

This follows the R3.6-billion fine administered by the European Union’s competition authorities in October 2008 for its part in a wax industry cartel.

However, Sasol could face more financial penalties. Numerous charges still have to be settled with the Competition Commission. There are also civil claims from companies indicating they will sue for millions of rands in damages. The Mail & Guardian understands that South African farmers are considering taking legal action because of anti-competitive practices in the fertiliser industry.

Following a competition law compliance review instituted by Sasol in July 2008 the chemical giant approached the commission with a number of leniency applications. This after it uncovered serious contraventions of the Competition Act in its Sasol Nitro, Sasol Oil and Sasol Gas divisions.

Because investigations into Sasol Nitro were ongoing after two complaints by customers Nutri-Flo and Profert, Sasol was denied leniency.

The M&G has discovered that eight months after a Competition Board ruling against a merger between Sasol and AECI, Sasol agreed to collude with the company (see Sasol’s smelly deal).

The commission has granted Sasol conditional leniency for numerous contraventions in its Sasol Oil and Gas subsidiaries.

The M&G understands that the commission is investigating between 10 and 20 products in the Sasol Oil division and that there were two contraventions in the Sasol Gas division.

As long as Sasol cooperates fully with the commission during the investigation and prosecution of its fellow colluders in the Sasol Oil and Sasol Gas matters it will not be subject to any financial penalties. However, it still has to settle the charges of abuse of dominance and price discrimination that it faces in the Sasol Nitro matter, which might result in further fines.