Chairman's statement
Dr Mandla SV Gantsho
Chairman
Implementing a robust strategy
Fulfilling our safety covenant
Creating broad-based stakeholder value
Maintaining sound governance
Dear stakeholder
During 2018 global economic growth strengthened, with key market indicators, particularly in the world’s developed and rapidly growing economies remaining positive. The global economy, however, continued to be characterised by ongoing volatility and uncertainty, fuelled largely by geopolitical developments, regional conflicts and potential disruption to the global trade regime.
As a participant in the global marketplace, this context had multiple implications for the Sasol Group, presenting both head- and tailwinds. The Group benefited from higher global crude oil prices, which led to improved prices and margins for the products we produce; however, a stronger average rand/US dollar exchange rate offset this advantage somewhat.
Against this backdrop, the Group delivered a solid performance for the 2018 financial year, which enabled Sasol to maintain an annual dividend of R12,90 per share to our shareholders.
Implementing a robust strategy
The Group has remained resilient despite sustained periods of depressed commodity prices, and during these challenging times, we have tailored our business strategies to be agile and adaptable to volatile global markets. An extensive review of the strategy was conducted during the year, bolstering our confidence that the Group is wellpositioned to benefit from the current upward trend in commodity prices, but also sufficiently resilient to adapt to extended periods of depressed prices. Looking to the future, we are also focused on ensuring that the Sasol Group remains relevant, competitive and geared to return superior value to our shareholders.
How we position Sasol within the range of potential commodity scenarios to ensure that we remain relevant, competitive and continue returning superior value to our shareholders, was at the core of our deliberations in assessing the strategy's robustness.
The sectors we operate in are increasingly being impacted by rapid technological developments, transforming ways of working and offering opportunities for greater efficiencies and returns. Pressure continues to mount for companies to do business differently, with stricter regulations requiring an improved environmental footprint and stakeholders demanding more transparency.
Taking cognisance of the megatrends influencing our sectors, we are confident our strategy does not only preserve, but enhances the value of Sasol and, in so doing, is responsive to the changing world around us.
Fulfilling our safety covenant
The safety and well-being of all who are involved in or impacted by the Group’s operations remain an overriding priority, and an integral component of our business ethos and practice. It is deeply regrettable that four fatalities occurred in work-related incidents this past year. In my own name, and on behalf of the Board and Sasol people around the world, I convey our sincerest condolences to the families, friends and colleagues of those who tragically passed away. While these tragic losses occurred against a backdrop of Sasol’s lowest recordable case rate on record of 0,27, it remains unacceptable that a single life is lost in the course of our business. The Board called for focused interventions to further embed safety principles and practices within all facets of our operations such that our employees return home alive and unharmed each and every working day. Management has responded positively to this call and there is already demonstrable evidence that, going forward, this covenant with the families of our employees will likely be honoured.
Creating broad-based stakeholder value
Integral to the Group’s business philosophy is the conviction that Sasol should contribute towards building better lives and sustainable communities. An important component is to create opportunities that enable previously disadvantaged groups to benefit from the wealth created through our operations.
In 2008, Sasol established the Sasol Inzalo scheme, a Broad-Based Black Economic Empowerment (B-BBEE) ownership structure in South Africa, to provide a broad base of black South Africans with an opportunity to own a portion of Sasol. In the 10-year life of the scheme, participants, including employees, received a total of R1,7 billion in dividends. Regrettably, the outcomes since inception did not meet initial expectations and it was decided to replace the scheme during 2018.
Drawing on lessons learnt from Sasol Inzalo, Sasol Khanyisa was implemented at a Sasol South Africa Limited (SSA) level. 18,4% direct black ownership in SSA now exists, which, together with black ownership at the Sasol Limited level, translates into at least 25% black ownership credentials in SSA. The performance of the scheme will be monitored on an ongoing basis to ensure that it meets its objectives.
The Group’s supply chain activities offer significant potential for Sasol to contribute towards entrepreneurial development and empowerment of communities. The Group proactively seeks opportunities to contribute towards creating opportunities for emerging and small suppliers through its procurement policies and practices. During the year, we increased our expenditure with black-owned suppliers to R12,7 billion from R7,5 billion in 2017, with preferential procurement expenditure in the Sasolburg and Secunda regions up from R2,6 billion in 2017 to R4,7 billion. The loan book of our small, medium and microenterprise funding entity, the Sasol Siyakha Enterprise and Supplier Development Trust, grew to R301,7 million during the year.
Maintaining sound governance
“In 2018, Sasol worked to ensure that it is innovative, focused and fit for the future: building on our robust foundation, moving towards lower-carbon energy alternatives, accelerating growth in specialty chemicals and creating a more sustainable business that delivers value to all stakeholders, on whose trust and support we rely.“ Mandla Gantsho
From a governance standpoint, diversity and inclusion at all levels of the business are essential to the sustainability of Sasol. Last year, the Board set a target of 30% representation of women directors by 30 June 2019. During the reporting period, we achieved 33% with five women serving on the Board, three of whom are Black.
We are delighted to welcome Dr Martina Flöel and Ms Muriel Dube as Independent Non-executive Directors. The Board and the Company are already benefiting from their contributions in the areas of chemical and process research and development, technical innovations and industry supply chain, as well as in environmental sustainability, public policy and corporate finance.
During the year we bid farewell to two long-serving Non-executive Directors. Ms Imogen Mkhize retired from the Board and as chairman of the Safety, Social and Ethics Committee on 17 November 2017 and Mr Henk Dijkgraaf retired from the Board and as Lead Independent Director (LID) and as chairman of the Remuneration Committee on 30 April 2018. My fellow directors join me in thanking them for their valuable contributions and dedication to Sasol over many years and in wishing them well for the future. Mr JJ Njeke succeeded Mr Dijkgraaf as LID, Ms Mpho Nkeli became chairman of the Remuneration Committee and Mr Moses Mkhize became chairman of the Safety, Social and Ethics Committee.
Diversity and experience of the Board is vital to support the delivery of our strategy and create stakeholder value. We are proud to have a mix of South African and international business, energy and chemicals experience represented.
Furthermore, Sasol values the robust engagements we had this year with our shareholders, investors and other stakeholders that positively contributed to shaping how we manage, govern and disclose our material matters.
Conclusion and outlook
The 2018 financial year was one of significant progress on many fronts for Sasol. With the scheduled start-up of the first units of the world-scale Lake Charles Chemicals Project (LCCP) in the United States of America (USA) by the end of the 2018 calendar year, we look forward to even greater progress in the year ahead.
The LCCP will transform the Group’s earnings profile and production slate. It will triple our chemical production capacity in the USA, enabling Sasol to strengthen its position in the growing global chemicals market and contribute up to 20% of group earnings before interest, taxation, depreciation and amortisation by 2022.
The LCCP is part of our work to enhance Sasol’s robust foundation. This, along with our focus of driving growth through clear strategic choices and our work to ensure disciplined capital allocation will set Sasol on a path to greater sustainable value creation. This will be to the benefit of all our stakeholders, whose support and confidence we appreciate, and whose trust in us we regard as sacrosanct.
I would like to take the opportunity to thank my Board colleagues for their support and wise counsel over the past year. Our management team, ably led by Messrs Steve Cornell and Bongani Nqwababa, have demonstrated commitment and ingenuity in giving effect to the Group strategy and are to be commended.
I remain confident that the Group is well positioned and resourced to continue delivering value to all its stakeholders, and contributing to the broader vision of prosperity and well-being in the diverse geographies within which it operates.
Dr Mandla SV Gantsho
Chairman
27 August 2018