The majority of black shareholders in Sasol’s Inzalo — the R28bn empowerment structure launched by the oil and chemicals group in 2008 to hold 10% of its shares — will have gained nothing but a portion of dividend distributions when the scheme matures in 2018, unless the shares appreciate rapidly.
This underlines the hazards of heavily geared equity ownership structures in volatile commodities companies for new black shareholders with no capital. Although a few Sasol Inzalo shareholders bought in using their own money, most of the 270,000 participants — who included the public, customers and suppliers, employees and an educational foundation — were funded by debt designed to be repaid from dividends and appreciation in the share price.
Inzalo’s participants earned R2.5bn of R7.6bn paid in dividends over 10 years, while R5.1bn went to service debt.
Sasol’s shares, at R370 on Wednesday, are barely above the R366 at which the scheme was priced. The shares largely track oil prices and the rand.
Sasol’s other shareholders are likely to be asked to support an accelerated bookbuild to raise R12bn-R13bn to repay the banks that financed Inzalo.
Joint CEO Bongani Nqwababa said other fundraising options would be considered.
Sasol shareholders will be diluted 1.5% more than the 4% dilution agreed to in 2008.
They will also be diluted 1%-1.3%, depending on the share price, when Sasol launches a replacement black economic empowerment structure, Sasol Khanyisa, which will cost the group R7.3bn over 10 years, half of which will be borne in the 2018 financial year.
Sasol shares fell 7% on the JSE as shareholders reacted to the costs and dilution of Inzalo and its replacement.
Sasol chief financial officer Paul Victor said lessons learnt from Sasol Inzalo were being applied to the design of the R21bn Sasol Khanyisa.
Khanyisa will be fully funded by Sasol, not banks, and will hold a 25% stake in the South African operations, which include synfuels, chemicals and gas businesses.
The international operations, where huge capital projects are under way at Lake Charles in Louisiana and in southern Mozambique, are excluded. So too are Sasol Mining and Sasol Oil, which have existing empowerment structures.
Bright Khumalo, portfolio manager at Vestact, said Sasol was not the only group to have to assist a geared empowerment scheme. Naspers had done the same with Welkom Yizani.
Khumalo said the structure of Khanyisa was more solid than Inzalo, since the local operations were efficient and cost-competitive. It was quite likely they would repay debt in the structure in less than 10 years.
Victor said Khanyisa’s debt would be repaid from free cash flow from operations, not share price appreciation.
Khanyisa will not offer shares to the public. It will issue shares to Inzalo participants who choose to move into the new structure and the employee share ownership plan.