Chemical and energy giant Sasol, which supplies about 40% of SA’s fuel, has warned of the toll that ailing state-owned entities are taking on its business. But is encouraged by growing collaboration between itself, Transnet, and Eskom.
The synthetic fuel and chemicals producer reported a dive in annual earnings on Thursday, attributed in part to the underperformance of SA’s state-owned enterprises.
Sasol CEO Fleetwood Grobler said during an investor presentation that Transnet’s troubled railing service rendered the chemicals business in some instances unable to move product to the coast, causing either delayed or lost sales.
When Sasol resorted to moving products by road instead of rail, it increased the logistics cost by 27%.
These challenges hit the bottom line of Sasol’s Chemicals Africa business by just over R1 billion. This part of the business saw its earnings before interest and tax fall about a quarter to R17.7 billion in its year to end June but was also under pressure from lower sales prices.
But Grobler said he was greatly encouraged by Sasol’s constructive engagements with Transnet and Eskom.
“One of the aspects that we are dealing with is our trajectory between Sasolburg and Secunda, with respect to ammonia rail tank cars, where we have worked with them jointly to put more rolling stock under Sasol’s watch … as well as that we assist with the maintenance of that rolling stock,” said Grobler.
“These are ongoing discussions. But we’re encouraged by the collaboration that we’ve seen.”
He said Sasol had also seen improvement in recent months with respect to other rail trajectories to Richards Bay, and into the port of Durban.
“We’re looking forward to an improvement. I think the government is pulling out all the stops to improve the situation. So from a collaboration point of view, I’m encouraged,” he said.
Grobler noted Sasol is among those to have recently signed the CEO pledge to help government to drive change in key sectors essential for economic recovery.
The three focus areas are logistics, energy, and crime and corruption, but Grobler said Sasol had been playing a much bigger role in the first two areas.
On energy, he said Sasol is helping with resources to assist with Eskom in terms of its leadership in power stations – helping to look at key performance indicators to run those power stations in a way that could be more sustainable.
He however said Sasol has found there are already “top notch” people in Eskom working on those agendas currently.
“So, we can just bring further experience to what we have had in our own power-generation facilities. And I think that just adds to a more robust recovery plan for energy availability in South Africa”, Grobler said.
