Sasol Inzalo BBBEE scheme amounts to a R30 billion flop

Ujuh Correspondent

Petrochemical giant Sasol has essentially conceded that its R30 billion broad based black economic empowerment (BBBEE) deal is set to flop when it matures next year.

A statement released by Sasol this morning shows the company expects the scheme to unwind with no value flowing to investors. As things stand the scheme runs with a R2.1 billion shortfall. The company is setting out to reconstruct the Sasol Inzalo BBBEE transaction. It will be reborn with a new name; Sasol Khanyisa.

This is devastating news to the multitudes of poor people who invested in the Sasol Inzalo BBBEE scheme nine years ago. More than 200 000 black people were sold a false ‘reparation dream’, BBBEE being a political program designed to right the wrongs of the past.

The news will be even more painful in light of the fact that banks have made a killing out of the failed Sasol Inzalo scheme. Banks may have raked in more than R5bn in interest income. Both banks and Sasol have derived considerable business boosting BBBEE points from the scheme while the rightful beneficiaries have lost value. This amounts into fronting of sort.

Sasol Inzalo was established on the 7th of September 2008 as a 10 years long BBBEE deal. The R30 billion transaction sort to acquire for empowerment purposes 10% of Sasol shares. The deal was shared as follows: broad-based groups (15%); members of the black public (30%); Sasol Employees (40%) and the Sasol Inzalo Foundation (15%).

The scheme has failed to create value due to a combination of factors. It suffocated under a pile of expensive debt. A sinking oil price made it impossible for the scheme to neutralise its debt. And Sasol’s share price has also under-performed over the past nine years.

Most of the money generated under the scheme was gobbled up by interest payments.

There will be no value in the scheme when it matures in September next year.

Sasol’s statement said based on the share price of R389.00 on 4 September 2017 and funding balances, there is a shortfall in the scheme R1,2 billion. “As a result, assuming the Sasol share price remains at current levels, there will be no distribution of Sasol ordinary shares to Sasol Inzalo Public shareholders when the Inzalo Transaction ends in 2018.”

And so Sasol has devised a plan to save and resuscitate the scheme under a new name Sasol Khanyisa.

In a move that indirectly condemns the negative role of banks in empowerment transactions Sasol has resolved to fund the new scheme itself using a principle called vendor financing.

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The Sasol Inzalo fiasco: What does it mean?

  • […] Petrochemicals giant Sasol is embarking on a new R21 billion Broad-Based Black Economic Empowerment (B-BBEE) share scheme called Sasol Khanyisa which comes after confirmation that its nine years old Sasol Inzalo scheme is flopping. […]

  • My only comment – I worked very hard under difficult circumstandes. My health deteriorated completely but I tried my level best to push through. Heart problems, facial injuries and impossible, expensive ways to get t eork snd home.
    My dear BEE friends and colleagues – my heart and prayers are with you.

  • please tell me what is going on – i am looking forward to receiving my shares – i waited so long – yesterday was the first time i received a sms telling me to up date my details -please tell me what to expect – is it true that the scheme is a flop – where is all our money gone to .

    1. Good Q Yyvonne. It seems we would have earned more in interest if we had just left the money in the bank.

  • Hi
    What I want to know is: If one is very interested to have the Sasol shares, what can one do and who to to contact. Please explain. I am here in Pretoria in the CBD.
    Please help me

  • Please note that we are still studying the long and complicated statements issued by Sasol. We will in due course roll out a series of articles that will clarify the developments and your options.

  • I bought sasol inzalo shares in 2008,which I believe will be due for dividends in 2018,but now I’m hearing and reading a lot about them in the news,I just want to know if I will get my divisions or,I waited for nothing for the past 10 years, thank you

  • […] Inzalo BBBEE scheme’s AGM comes shortly after it was announced that the scheme is failing dashing hopes of more than 200 000 black investors who were promised a reparation like financial […]

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