THE Sasol black empowerment share scheme that was launched in 2008 is on life support.
Investors who bought into the Sasol-funded option scheme were last week informed that the scheme's net loss increased toR270-million this year from R250-million last year. This is despite Sasol Group having generated a healthy profit of R37-billion.
Outgoing Sasol Inzalo chairman Bheki Sibiya is expected to face tough questions from investors when the company holds its annual general meeting on November 24.
"The share scheme is drowning," said an analyst who did not want to be named.
The analyst said the current debt-funding structure was proving to be useless.
"The debt is currently being financed through dividends," said the analyst.
The analyst suggested that the deal could be restructured by increasing the debt period from 10 to 20 years.
"Sasol could also opt to increase the dividends from R10 to R15 per share annually, reduce the interest on the loan or just write off the entire debt," he said.
The analyst said the last option would be tough to implement as it would require approval from Sasol Group shareholders and result in their shares being diluted.
Sasol spokeswoman Jacqui O'Sullivan said the difference in performance between the BEE scheme and Sasol Group was due to the latter being a company.
The scheme was funded by equity contribution from the shareholders of R371-million and preference share funding to the value of R550-million.
"The investment income received by the scheme from Sasol Limited is used to service finance expenses (preference dividends) on the preference share funding and to pay administrative costs such as audit fees, agency fees," she said.
She said the main reason for the loss was because the finance income received from Sasol was not sufficient to cover finance expenses.
"These losses should effectively be eliminated in 2018 when the shares are sold.
"The deposit put in by Inzalo shareholders ranged from 5% to 10%, so the capital at risk is relatively small. Sasol is standing behind the entire transaction," she said.
Industrial Development Corporation chief economist Lumkile Mondi advised that investors should buy shares in the company that had not reached a mature stage.
"What do you expect to get in return if you invest in a matured company? You will not get much returns," he said.
Sasol Inzalo share scheme sags
THE Sasol black empowerment share scheme that was launched in 2008 is on life support.
Investors who bought into the Sasol-funded option scheme were last week informed that the scheme's net loss increased toR270-million this year from R250-million last year. This is despite Sasol Group having generated a healthy profit of R37-billion.
Outgoing Sasol Inzalo chairman Bheki Sibiya is expected to face tough questions from investors when the company holds its annual general meeting on November 24.
"The share scheme is drowning," said an analyst who did not want to be named.
The analyst said the current debt-funding structure was proving to be useless.
"The debt is currently being financed through dividends," said the analyst.
The analyst suggested that the deal could be restructured by increasing the debt period from 10 to 20 years.
"Sasol could also opt to increase the dividends from R10 to R15 per share annually, reduce the interest on the loan or just write off the entire debt," he said.
The analyst said the last option would be tough to implement as it would require approval from Sasol Group shareholders and result in their shares being diluted.
Sasol spokeswoman Jacqui O'Sullivan said the difference in performance between the BEE scheme and Sasol Group was due to the latter being a company.
The scheme was funded by equity contribution from the shareholders of R371-million and preference share funding to the value of R550-million.
"The investment income received by the scheme from Sasol Limited is used to service finance expenses (preference dividends) on the preference share funding and to pay administrative costs such as audit fees, agency fees," she said.
She said the main reason for the loss was because the finance income received from Sasol was not sufficient to cover finance expenses.
"These losses should effectively be eliminated in 2018 when the shares are sold.
"The deposit put in by Inzalo shareholders ranged from 5% to 10%, so the capital at risk is relatively small. Sasol is standing behind the entire transaction," she said.
Industrial Development Corporation chief economist Lumkile Mondi advised that investors should buy shares in the company that had not reached a mature stage.
"What do you expect to get in return if you invest in a matured company? You will not get much returns," he said.
Would you like to comment on this article?
Register (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Trending
Latest Videos