Small investors make millions out of Sasol
September 25, 2005
By Ingrid Salgado
Cape Town - A group of black service station owners clubbed together nine years ago to form Phakisang Investments, a junior partner in the Exel fuel retail brand, with each member laying out a few thousand rands.
That investment will now give Phakisang a 0.81 percent stake worth about R115 million in Uhambo Oil, the fuel giant to be created from the proposed merger of Sasol's and Engen's liquid fuels businesses.
Phakisang is a member of Tshwarisano, the black economic empowerment (BEE) consortium led by former justice minister Penuell Maduna, whose R1.45 billion empowerment deal with Sasol was unveiled this week.
Over the past decade Phakisang has been involved in the birth of Exel, South Africa's most successful black-owned retail brand, and Exel's subsequent incorporation into Sasol.
The transaction, if approved by competition authorities, will give Sasol and Petronas, the Malaysian parent of Engen, 37.5 percent each of the combined liquid fuels businesses. The remaining 25 percent will be split equally between Tshwarisano and Afric Energy Resources, Engen's BEE partner and a subsidiary of Worldwide Africa Investment Holdings.
Marcus Machaba, the chairman of Phakisang, which comprises 27 direct shareholders, says: "We invested nominal amounts which have appreciated significantly. Our investment has gone up in leaps and bounds."
Machaba is, surprisingly, the owner of a BP service station in Johannesburg and he has no intentions of switching to a Sasol or Exel brand.
Ironically, BP has been one of Uhambo's more vocal critics, charging that it will give rise to a dominant player that could lock out existing competitors and preclude new entry by BEE players.
Uhambo will have 48 percent of South Africa's refining capacity and 34 percent of retail sales. The matter will come before the competition tribunal on October 3.
The transaction was conditionally approved by the competition commission in May on the proviso that Sasol continues supplying fuel to rival oil companies in the inland market until the completion of a new petroleum pipeline from Durban to Gauteng.
The commission says the Uhambo deal's BEE credentials have no bearing on its decision.
The deal will nevertheless allow Sasol to comply with the liquid fuels charter, which stipulates BEE ownership of 25 percent. This has particular relevance for Sasol in a year in which it has come in for stinging criticism from the government over its perceived failure to transform.
Thamie Lefakane, the chief executive of Lelethu Energy and Mineral Group, one of the members of Tshwarisano, does not doubt Sasol's commitment to transformation.
"Since [Sasol chief executive] Pat Davies has come into office, we have clearly seen the pace increasing on transformation," says Lelethu. "We all recognise there's a lot still to be done on many levels. In the liquid fuels business itself, there are tremendous opportunities to bring in more black people to be trained."
Lelethu comprises black-owned groups, mostly from the Eastern Cape, 80 percent of whom are women involved in a school uniform sewing project near Mthatha, a vegetable project and a fishing co-operative.
Because of its development challenges, the Eastern Cape was identified by Sasol as a region in which it wanted to participate more vigorously, Lefakane says.
"We'll do a lot of work to promote the Sasol brand there. You will see more Exel and Sasol facilities coming up in Eastern Cape."
Trevor Munday, Sasol's deputy chief executive, believes the deal is South Africa's most broad-based empowerment transaction yet.
"In most BEE transactions, the participation of women is an afterthought. In this case, the role of women was an unfront objective." Women represent 54 percent of Tshwarisano's shareholders.
Munday says Sasol has given Tshwarisano financial support worth nearly R1 billion. This includes a R450 million saving from reduced borrowings as Sasol has guaranteed the BEE group's R1.1 billion debt, as well as waiving of a R170 million guarantee. "There are not that many corporations that put their balance sheets behind these transactions."
Maduna says the debt-financing guarantee means shareholders are in a much stronger position to accrue considerable long-term benefits.
Munday expects the debt to be repaid after about seven years.
Lefakane says there are indications beneficiaries will accrue benefits from the first year. "The details of that are not concluded, but in essence that's what's going to happen."
The beneficiaries will hold 20.4 percent of Tshwarisano and include PulaNala, a Mpumalanga-based consortium of black-owned associations, Lelethu, Tswelopele Mineral and Energy Holdings and Amandl'Embokodo, a black-owned women's consortium.
Maduna and Tshwarisano's other promoters - prominent businesswoman Hixonia Nyasulu and former Eskom chairman Reuel Khoza - will hold a combined 30 percent.
About 47 percent will be held by former Exel shareholders, including the car workers' provident and pension funds, women's group Nozweni and Phakisang.
Sasol closed 75c higher to R230.90 on Friday, while the FTSE/JSE Top40 index declined 0.59 percent.
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