Sasol’s ability to innovate will trump social indiscretions
Posted on 08. Mar, 2010 by admin in Business-Financial Results, News-Chemical
JSE listed petrochemicals giant will be forgiven its social indiscretions simply because it is one of the most innovative companies in South Africa.
That’s the view of the ManufacturingHub.co.za team who believe that unlike listed food group Pioneer, Sasol will not only learn but continue to innovate in the coming years.
Much has been made of Sasol running foul of competition authorities in both South Africa and Europe. These events have not only hit the business in the pocket but has also negatively impacted on the social image of the firm and weighed on it from an investment perspective.
“We took a huge amount of pain and frankly, we are quite happy the last year is behind us,” said chief executive Pat Davies in presenting financial results for the firm today.
Davies went on to say: “But with all pain comes some growth. This organisation is a better, more compliant, more aware organisation given the trauma we went through in the last year.”
The “trauma” itself isn’t entirely over either with both management and shareholders both awaiting investigations into anti-competitive behaviour in piped gas, petroleum, fertiliser, wax and polymer industries. However in our view, this pro-active approach from management will see it move on from these issues with minimal fuss.
The trigger is innovation
While many analysts and market commentators will point to the impact of the rand and the oil price on Sasol, we would argue that in fact its biggest trigger for success is its ability to innovate across its business units.
Sasol has world class technology and has a long-standing culture of innovation. Simply put, the company cannot be viewed as simply an oil company which is planning to benefit from old school production of fossil fuels.
Instead it should be viewed as a technology company which sits on the cutting-edge of the energy market.
Anecdotal evidence of Sasol’s ability to innovate can be seen from its forward thinking approach to the engineering skills shortage as well as anticipated electricity supply problems.
Ten years ago Sasol recognised that there was a skills shortage coming in key industries and began to rapidly deploy its own internal resources to develop its skills base. Sasol is no longer dependant on the South African education sector for good people.
Under Davies’ management Sasol recognised three years ago that there was a power crisis coming and once again deployed its own resources to begin looking at becoming partially self-sufficient from an energy perspective. In fact they may ironically even be able to sell energy back to Eskom in the coming years.
This should not be forgotten when you consider how many South African companies are simply paralysed by the thought of Eskom price hikes.
More to do
We started this article by saying that Sasol’s ability to innovate would trump its social indiscretions, that should not be interpreted as management riding roughshod over stakeholders.
The change in the makeup of the shareholder base is likely to be a catalyst for improved corporate governance and more socially responsible shareholder values in coming years. Investors such as Element Asset Management and a number of the Islamic and Shariah funds are likely to keep the shareholders honest and despite a tongue lashing in 2008 from Inzalo shareholders, Sasol has continue to engage these stakeholders.
In conclusion, we see Sasol as the cornerstone of the South African economy for many years to come and stakeholders need to look beyond near-term competition issues to recognise long-term value.