We are in the grip of what must be the most severe economic hardship that the world has experienced since the Great Depression of 1929. Sometimes I wonder what life was like during the previous crises and global defining situations. In Charles Dickens’ Hard Times, Mr Gradgrind would have advised that nothing but facts mattered. But since the Industrial Revolution, we have become too aware that facts alone are not sufficient to make people happy and productive, nor can facts assure you that your friends tell all they know about an impending disaster.
When President Cyril Ramaphosa raised his hand and accepted the challenge of leading the sixth Parliament of the Republic of South Africa and said “Thuma Mina”, he had no idea what hard times lay ahead.
He didn’t only accept to be Thuma’d, he invited others to join him. It is in this context that one finds the courage to dare raise one’s voice to make a contribution not only on what is to be done in times like this when survival is the game, but also how to think past the crisis. The Covid-19 storm is leaving the destruction of small firms in its wake, and major institutions have not been spared.
We are all watching with horror the devastation this virus is causing to economies and companies all around the world. A lot of companies, big and small, will not survive this crisis. Here at home, all indications are that SAA is the first casualty. You don’t need to be Sanusi Credo Mutwa (may his soul rest in peace) to know that the emergency ward is soon going to be flooded with victims.
Even more worrisome is that there’s even greater danger on the horizon. That danger will manifest and if we are not careful, foreign hands with an eye for a bargain will walk away with our national treasures. We must all be more concerned that such a fate doesn’t befall the country’s strategic assets. I count our globetrotting synfuels behemoth, Sasol, as one of those “made in South Africa” crown jewels that need special mention and focus. This company has fallen on serious hard times recently, and the share price has hit rock bottom. The pandemic, coupled with international crude oil prices, has thrown Sasol into a tailspin. It doesn’t help that there was always the Lake Charles fiasco in the background.
After Steinhoff, South African investors and the economy in general can ill-afford the unmitigated destruction of another major SA-Inc A-lister. Neither should such a pride of the nation be allowed to be gobbled up by a foreign investor, thereby donating it on a platter to another nation. These times of crisis shouldn’t cause us to take our eye off the ball. Sasol itself has said that it is looking into a rights issue to raise the capital it desperately needs to execute current and future commitments.
There’s no better time than the present, and there won’t be a much better price than the current price to buy back what once belonged to the people of South Africa. And to do so rather cheaply. A portion, most likely a small portion, of the company could once more belong to its original owners. A crisis like this will not come again in our lifetime, or the lifetime of those responsible for making decisions. Everyone’s mind is focused on the lockdown and how to mitigate its impact. But as a friend remarked recently, let’s not waste a good crisis. Someone had better lift up their eyes and look into the future.
The state needs to move quickly to spend a billion or more to acquire a significant portion of Sasol. At R55.02, Sasol’s price is affordable at the moment. At current prices, an investment of R1-billion could result in 2.9% of the company. The ANC has always had aspirations to increase its influence in the energy sector. There’s no better time than now. Sasol is a bargain at these prices.
In 2015, it was reported that the state oil company PetroSA wanted to acquire Engen for R18-billion, but that deal never materialised. For a third of that amount, the state machinery could end up with 17% of this petrochemical giant. Somebody will jump at the opportunity to have a sizeable hold on Sasol. Of that, there can be little doubt. Given half a chance, the Chinese will not hesitate to take over Sasol. Who would blame them? They will not be the only ones drooling at the opportunity. The government could do this strategic purchase via the Central Energy Fund (Strategic Fuel Fund, SFF, to be precise).
My suspicion is that PetroSA does not have the balance sheet for such a transaction. In many ways, the SFF would be more of a strategic fit given its mandate under the Central Energy Fund. There’s the added advantage in looking locally for mitigating the current risks of being heavily reliant on foreign sources for our emergency stockpiles.
Alternatively, a significant stake at Sasol could be purchased by the PIC. Either way, a huge part of Sasol would remain local and we would regain control. Sasol will turn around, but if the investors that buy now are not South Africans, the turnaround will only benefit vultures from foreign nations. The PIC has enough reserves to make this kind of investment. For a change, it could make a less controversial investment at a penny compared to its colourful, if dubious choices hitherto.
Another option could be the Sovereign Fund that was announced by the president in his State of the Nation Address in February. In the end, it doesn’t really matter who does the deed. In this case, the end justifies the means.
Seized with similar fears, the Indian government passed a law last week to allow it to vet any transaction regarding a purchase of an Indian firm by a foreign firm (focusing on large companies of course). This is a preemptive strike to prevent exactly what this piece is about. As proud citizens, it is unpatriotic to sit back and watch while we can see imminent danger approaching and do nothing. That would not be in the spirit of Thuma Mina.
Make no mistake, the threat of the virus is real and must be dealt with in the manner that we have done. However, this virus has an ugly economic side to it. We must be alive to it and we must act fast.
That’s my patriotic contribution in these hard times! DM
