The Competition Commission has forced Sasol to divest from some of its fertiliser assets, the first time a South African company has been ordered to do so, arising out of a cartel investigation.
This week the commission announced that it had reached a settlement agreement with Sasol, which would see it shed five of its fertiliser-blending facilities in Bellville, Durban, Kimberley, Potchefstroom and Endicott.
The sale of the blending units will be conducted by Sasol and must be approved by the commission.
Sasol has agreed to sell ammonium nitrate-based fertilisers using a transparent pricing mechanism that will not discriminate against any customers. It will house its ammonia plants and business operations in a business unit, separate from Sasol Nitro, with separate audited accounts.
This settlement agreement relates to the abuse of dominance aspects of the commission’s investigation into the fertiliser market.
The collusion aspect of the case was settled in May last year and saw Sasol being fined R250-million.
The commission’s investigation was launched after two complaints were lodged in 2003 and 2004 by Nutriflo and Profert respectively. It concluded that Sasol had contravened the Competition Act. It argued that Sasol, Omnia and Kynoch/Yara had agreed to fix the price of ammonia-based fertilisers.
Omnia and Kynoch/Yara are going to defend the case before the Competition Tribunal.
Sasol was also accused of exclusionary practices, such as a refusal to supply its rivals, and price discrimination.
The tribunal still has to approve this settlement agreement on July 14.
Potentially Sasol was facing a massive fine for alleged exclusionary practices. But after Sasol settled with the complainants, who requested the investigation by the commission, the commission chose to waive the fine in exchange for a structural remedy to the market, which will create greater competition.
“This remedy will ensure that there is competition in the blending and retail of fertilisers particularly in the ammonia-based market,” said the commission.
“The commission engaged in settlement negotiations on the basis that SCI [Sasol Industries Limited] would make reasonable endeavours to settle with the two complainants, Nutriflo and Profert, and the commission understands settlements have been reached.
“The settlement will ensure that SCI does not exclude its smaller rivals and means more participation in the industry and better prices for farmers,” said competition commissioner Shan Ramburuth.
“Fertiliser is a key input in the production of field crops, accounting for a significant portion of the costs of production.”
Sasol spokesperson Jacqui O’Sullivan said Sasol Nitro approached the commission with the structural solution and did not believe it engaged in excessive pricing and exclusionary practices.
“Sasol believes the restructuring will address the commission’s concerns regarding Sasol’s position within the nitrogen-based fertiliser value chain, while also opening the industry to more competition,” said O’Sullivan.
“Sasol Nitro will withdraw from certain downstream activities with increased focus on the core activities of its fertiliser business.”
O’Sullivan said the five blending facilities contribute less than 5% of Sasol Nitro’s turnover and that Sasol estimated that between R250-million and R300-million of turnover would affected by the disposals.
O’Sullivan said approximately 50 permanent Sasol Nitro employees and about 90 commission-based agents would be affected by the restructuring.
“Over the implementation period, Sasol Nitro will work with the affected parties to limit the impact of the changes on the staff as far as possible,” said O’Sullivan.