'We were sold a fong kong car with a BMW sticker': Sasol Inzalo investors slam BEE scheme
Investors who put their money in Sasol’s Inzalo shares are banding together over the R30-billion Black Economic Empowerment Scheme they describe as a 'fong kong vehicle with a BMW sticker'.
The company‚ however‚ says it has refinanced the deal at no cost to the original investors with a new offering it hopes will bring hard cash to over 200‚000 black shareholders.
Investors who bought into the scheme in 2008 to score a stake in one of South Africa’s most successful companies are now crying foul as their hopes have been dashed by market forces.
Frustrated investors have started a Facebook group called Sasol Inzalo robbed us. These investors feel that the company has let them down and failed to achieve its BEE objective through the transaction.
“Existing shareholders of Sasol who owned the shares when we bought Inzalo shares in 2008‚ had already benefited from apartheid. Why did they [Sasol] create a separate BEE share that would benefit shareholders based on future investment‚ from 2008 onwards‚ when the actual money was created during the apartheid era. Basically they sold us a dummy product…It is like they sold us a fong kong car with a BMW sticker. People bought because it is a brand name. It is Sasol but the product is definitely worthless‚” said Dale Chetty‚ one member of the group.
He said the group‚ comprising about 100 people‚ is considering taking legal action against Sasol as it believes investors have been left with shares that nobody wants to buy in the market.
“As a group we believe that this was not done in a fair spirit of BEE ownership initiative. What Sasol did was take our R18 or R19 per share for the first hundred and R26 for all the shares above 100. Whoever bought more than 100 needed to pay R26 per share. They took that from all of us 10 years ago and they are not giving us any money back for that.
“They took our money…collected profits from that investment. It was basically an interest-free loan that they receive. They receive money from the bank. We covered about less one tenth of the actual share price. The bank covered the rest of it. So it happened they got this interest-free loan for 10 years and BEE accreditation for 10 years‚ making it [as if] there are BEE people that own Sasol. But towards the end of the 10 year period‚ we don’t actually own any value of that company. Basically what they gave us were BEE shares that they are not accountable to. They are not accountable to us as the BEE shareholders‚” said Chetty.
According to Sasol‚ the Inzalo transaction was implemented by Sasol Limited in 2008 as part of its B-BBEE transformation aspirations. In the transaction‚ black South Africans were invited to participate by buying shares in Sasol Inzalo Public Limited or Sasol Inzalo Groups Limited (the Inzalo companies) and Sasol BEE Ordinary shares (cash) in Sasol Limited.
The shareholders in the Inzalo companies paid a portion of the subscription price with the balance of the subscription price funded by a number of banks. Sasol provided guarantees for any shortfall in the repayment of the funding.
“The funding to the banks was intended to be repaid with the dividends paid by Sasol to the Inzalo companies. However‚ the dividends were not enough to repay the funding‚ and after 10 years the outstanding amount due to the banks exceeds the value of the shares owned by Inzalo companies. Hence‚ there was no distribution to Sasol Inzalo Groups shareholders when the Sasol Inzalo Groups transaction terminated in June 2018‚” Sasol said in its reply.
Sasol said it anticipated that there would be no distribution to Sasol Inzalo Public shareholders when the Sasol Inzalo Public transaction terminates in September 2018. However‚ the company has a new transaction called Sasol Khanyisa.
“Sasol has implemented the Sasol Khanyisa transaction in which only the Sasol Inzalo shareholders were invited to participate at no cost to them. All existing Sasol Inzalo shareholders (cash‚ funded or groups) who participated in the Sasol Khanyisa transaction have received bonus SOLBE1 shares (tradable from June 2018) and also free Sasol Khanyisa shares (tradable in June 2028)‚” the company said in its reply this week.
Business Day explained last month that Sasol launched its Inzalo scheme when oil prices were in three figures. Its market capitalisation at the time was R280-billion and the share price R460; both are little changed today and not far from where they were. As a result‚ the financing charges have eaten up the entire scheme‚ and more. Sasol will have to chip in roughly R1.7-billion to cover the shortfall.
Bongani Nqwababa‚ Sasol’s joint president and CEO‚ said in the Sunday Times Business Times in June: “B-BBEE transactions like ours have had mixed results in achieving economic empowerment goals. It is well known that Sasol Inzalo has not created the value we expected. This has been a painful lesson.
“We have taken this experience to create what we believe to be a compelling proposition that will lead to long-lasting‚ unencumbered black ownership of Sasol.”
With Khanyisa‚ the company’s intention is to create meaningful financial benefits for about 230‚000 black shareholders‚ and to achieve 25% direct and indirect black ownership of Sasol South Africa‚ said Nqwababa.