summarised report of the Remuneration committee

Henk Dijkgraaf, Chairman of the
Remuneration Committee
KEY MESSAGES:
Committed to fair and responsible pay practices
Solicit and welcome
feedback from shareholders
Remuneration outcomes reflect
the business realities

Dear stakeholder,

On behalf of the Remuneration Committee, I am pleased to present the 2017 summarised remuneration report, which highlights the key components of our policy which align to the Group’s strategy and how the policy translated into reward outcomes. The detailed report is available on pages 27 to 45 of the Annual Financial Statements.

The committee is tasked by the Sasol Limited Board to independently approve and oversee the implementation of a remuneration policy that will encourage the achievement of the Group’s strategy and grow stakeholder value sustainably. Our policy should enable the attraction and retention of skilled resources and result in rewards aligned with shareholder interests.

In the year, we welcomed the King IV Code™ for South Africa and specifically Principle 14 addressing fair, responsible and transparent remuneration practices that promote the achievement of strategic objectives and positive outcomes in the short, medium and long term. We debated the matter of fair and responsible remuneration of employees across the organisation to ensure that remuneration is externally comparable and internally equitable.

Since 2011, the committee has engaged actively with Sasol’s large institutional investors who we consider important stakeholders and our remuneration policy has undergone significant changes.

We have considered shareholders’ contributions thoroughly and incorporated them into the policy where these enhancements align with the Group’s strategy. I would like to thank all Sasol’s shareholders for their continued support of our remuneration policy. At the November 2016 Annual General Meeting (AGM), 90,93% of votes cast were in favour of the policy.

Changes to our remuneration policy

Over the past year we converted the cash-settled long-term incentive plan into an equity-settled scheme, replaced the corporate performance target of ‘attributable headline earnings’ with a ‘return on invested capital’ target and introduced an ‘energy efficiency’ target into the short-term incentive plan. In addition, we aligned the minimum shareholding requirements for executive directors to global norms. These amendments further support the delivery of Sasol’s strategic objectives and further incorporate environmental, social and governance matters into the Group’s remuneration policy.

Following the various policy changes made over the past few years, the committee believes that Sasol’s remuneration policy has matured and compares well with relevant market practice. For this reason, we do not consider it necessary at this time to make changes to the policy for the next financial year. We have, however, reviewed the targets in the short- and long-term incentive plans to ensure on-going relevance and appropriateness in the context of the macro-economic climate and Sasol’s business objectives.

The committee, in response to questions by some of our shareholders, reviewed the vesting periods of long-term incentives and concluded that these are consistent with our major capital programmes.

Pay for performance

Sasol’s financial results for 2017 were severely impacted by the volatile macro-economic environment. The unexpected strengthening of the rand against hard currencies, combined with the continued low crude oil price, impacted significantly on Sasol’s ability to meet earnings targets. The prolonged strike action at the Secunda mining operations also resulted in significant additional costs. Despite these challenges, Sasol maintained a resilient performance due to the Business Performance Enhancement Programme (BPEP) and Response Plan (RP) initiatives and was able to meet some of the targets set for the short-term incentive plan. The Group’s ‘total shareholder return’ performance was below target which resulted in a below-target long-term incentive plan vesting percentage. The committee believes that the policy and the incentive targets achieved their stated objectives, resulting in balanced reward outcomes in line with the organisation’s performance over the short and long term. The committee also requested an independent review on the relationship between executive pay and organisational performance and is comfortable that there is strong alignment. There were no exceptions to the policy which required the committee’s approval.

We are committed to ensuring that the remuneration policy and practices are fair and responsible and welcome the opportunity to discuss the policy and its outcomes with our stakeholders.

Henk Dijkgraaf
Chairman of the Remuneration Committee

17 August 2017

Overview of our remuneration policy

The key components of our remuneration policy, structure and incentive targets are set out in the table below:

Remuneration component  Policy principles  Policy application 

  • TGP = base salary + cost of all employer contributions.

  • Broad pay bands are set with reference to location and sector-specific median benchmark points.
  • For executive management, the benchmark is derived from a comparator peer group resembling a similar geographic footprint, market capitalisation and business model as Sasol’s.
  • The total cost of annual increases for employees below executive management is approved by the committee and set in accordance with expected market movement, affordability and forecast inflation.
  • Distribution of increases to employees outside the bargaining forums is done with reference to individual performance, internal equity, competence and potential with an effective date of 1 October.
  • Performance-based increases are not applied for the bargaining sector as across-the-board increases are applied with effect from 1 July. 
  • Employees in countries other than South Africa are paid a base salary rather than a TGP.

  • Salaries are paid monthly to all employees except for employees in the United States and Canada who receive salary payments on a bi-weekly basis in line with local market practice.
  • Employees who are promoted are considered for adjustments if justified.
  • The company’s expatriate remuneration policy enables global mobility of key management and specialists. Salaries are adjusted for cost-of-living and location differences and tax equalisation is applied. 

  • Benefits include, but are not limited to, membership of a retirement plan and health insurance, disability and death cover to which contributions are made by both the company and the employee.

  • Allowances are paid in terms of statutory compliance or as is prevalent in a sector/jurisdiction. 
  • Benefits are offered on retirement, for reasons of sickness, disability or death.

  • The beneficiaries of employees who pass away while in service receive additional insurance depending on the retirement plan of which they were a member during service.
  • Allowances are linked to roles within specific locations, and paid together with salaries. There are no allowances paid to those in senior management and higher levels.
  • A number of special allowances including inter alia housing, cost of living, home leave and child education are included in the company’s expatriate remuneration policy. 

  • A single STI structure applies to all employees globally excluding certain employees who participate in mining production bonus or sales commission arrangements.

  • Target incentives are set in accordance with median benchmarks.
  • The STI structure consists of group, entity and individual performance targets set in advance of every financial year.
  • Annual payment of STIs is in September, after approval by the committee.
  • Production bonuses and commission schemes are paid out monthly. 
  • Group targets for 2017:
    a) Growth in headline earnings
    b) Growth in cash fixed costs
    c) Growth in production volumes
    d) Improvement in working capital and gross margin
    e) B-BBEE targets (for South African entities) in respect of preferential procurement and employment equity
    f) Safety and sustainability targets – recordable case rate (RCR), fires, explosions and releases (FERs) and improvement in energy efficiency in our manufacturing operations.
  • Entity targets are set in line with business plans approved by the responsible Executive Vice President (EVP).
  • Sustainability (including entity-specific environmental targets) are also set at entity level.
  • Individual targets are included in the performance agreement and refer to the requirements of the role. These include major project milestones where relevant. 

The LTI consists of future equity-settled payments calculated with reference to the market value of a Sasol ordinary share (or American Depositary Receipt (ADR) for international employees), subject to the vesting conditions.

The committee is responsible for governing all LTI awards and considers these in respect of:

  • Internal and external promotions to qualifying roles;
  • Annual awards to eligible employees; and
  • Discretionary awards for purposes of retention.

Awards are directly linked to the role and individual performance, and vesting is subject to service and performance targets. The vesting period is three years for participants in leadership and senior management. A split vesting period of three and five years applies to participants in top management (EVPs and Senior Vice Presidents (SVPs)). 

Of the total award, the following portion is linked to corporate performance targets (CPTs)

  • Group Executive Committee (GEC): 100%.
  • Other participants: 60%.

Corporate performance targets include:

  • Total shareholders’ return vs. two indices, namely the MSCI World Energy Index and the MSCI World Chemicals Index.
  • Efficiencies measuring increase in tons produced over staff growth.
  • Return on invested capital (ROIC). 


Our remuneration policy is linked to our strategy and is a key enabler for the achievement of the Group’s key performance indicators. The threshold, target and maximum reward outcomes that could be derived under the terms of the policy are indicated in the following graph:

* Joint President and CEO, Executive Director and GEC at threshold performance will only receive TGP.

Share ownership by executive directors

We require our executive directors to hold shares in the Group. These are to be acquired over a five-year period from the date of appointment, to the following value:

Clawback policy

We have a clawback policy that may be implemented by the Board where there were material misstatements of financial results or other calculation errors that resulted in the overpayment of incentives and gross misconduct on the part of the employee leading to dismissal.

Short-term incentive plan

The configuration and weightings attached to the different parts of the STI formula differ to the extent that employees can influence the achievement of performance objectives either directly or indirectly. For executive management, the following STI formula is used to calculate the awards:

Basic salary/TGP x STI Target % x Group performance % x Individual performance % = STI Award

The following table sets out the targets and weightings approved for the 2017 STI plan. The only change from 2016 is the inclusion of the energy efficiency target:

Long-term incentive plan

We decided to convert the cash-settled LTIs awarded since 2014 to equity-settled LTIs to strike a better balance between flexible reward for employees and shareholder preference for increased employee shareholding. The equity-settled LTI gives participating employees the opportunity, subject to the vesting conditions, to receive Sasol ordinary shares or American Depositary Receipts (ADR) for international employees in large businesses located outside of Southern Africa. Employees have the option to sell the shares after the vesting period.

A split vesting period applies to top management, where 50% of the award vests subject to the achievement of corporate performance targets after three years from the date of grant (performance period). The balance is released to the participant after a five-year period subject to the vesting conditions. Accelerated vesting principles in cases of termination for ‘good leavers’, do not apply to top management. A service penalty is applied for all participants whose services are terminated under ‘good leaver’ conditions before the end of the performance period.

The following table summarises the weightings and performance targets under which we granted the 2017 LTI awards. Vesting is considered in terms of the weighted performance measured against these four targets. There is no opportunity for the retesting of targets.

  1. Vesting on a straight-line basis between threshold and target and between target and maximum.
  2. ROIC replaced compound growth in attributable earnings in 2017.
  3. TSR = Total shareholders’ return measured separately against the two indices; vests on a ranked relative basis between threshold and target and between target and maximum.
  4. AUC = Assets under construction.
  5. WACC = Weighted average cost of capital.

No Share Appreciation Rights Awards have been made since 2013. More details on the plan and vesting percentages are included in the Annual Financial Statements.

Non-executive director fees

Non-executive directors are appointed to the Sasol Limited Board based on their ability to contribute competence, insight and experience appropriate to assisting the Group to set and achieve its objectives. Consequently, fees are set at levels to attract and retain the calibre of director necessary to contribute to a highly effective Board. They do not receive short-term incentives, nor do they participate in long-term incentive plans. No arrangement exists for compensation in respect of loss of office.

Non-executive directors are paid a fixed annual fee in respect of their Board membership, as well as supplementary fees for committee membership and an additional committee fee for formally scheduled Board and committee meetings which do not form part of the annual calendar of meetings. Actual fees and the fee structure are reviewed annually. The comparator group used for benchmarking of fees is the same as for executive remuneration benchmarking. The Committee has undertaken to do a comprehensive review of non-executive director fees in 2018 with a view to narrow the difference between the resident and non-resident non-executive director fees.

The Board recommends the fees payable to the Chairman and non-executive directors for approval by the shareholders.

Non-binding advisory votes on the remuneration policy and implementation report

In the event that less than 75% support for the abovementioned reports are achieved at the AGM, Sasol will invite dissenting shareholders to send reasons for such votes in writing whereafter further engagements may be scheduled.

Implementation report

Here we provide an overview of achievements against the STI targets set for 2017, as well as the performance over the vesting periods for LTI awards that vest with reference to 2017’s performance:

Achievements against the 2017 STI targets:

Achievements against the 2017 LTI targets:

The following table provides a summary of outstanding LTI awards and vesting percentages:

Financial
year of allocation 
Vesting year (financial year) Vesting range  Weighting of performance targets  Vesting results 
Growth in attributable earnings   Return on invested capital  Increase in tons produced/head  Tsr vs. Msci World Chemical Index  Tsr vs.
Jse
resi 10 
Tsr vs. msci World Energy Index 
2014  20171  30% to 170%2

40% to 160%3 
25%  –  25%  –  25%  25%  93,4%

94,3% 
2015  2018  0% to 200%2

40% to 160%3 
25%  –  25%  –  15%  35%  90,4%

94,3% 
2016  2019 & 20214  0% to 200%2

40% to 160%3 
25%  –  25%  25%  –  25%  Unvested 
2017  2020 & 20224  0% to 200%2

40% to 160%3 
–  25%  25%  25%  –  25%  Unvested 
  1. Vested on the 30 June 2016 results and settled in 2017.
  2. EVPs, CFO and Joint CEOs.
  3. All other participants.
  4. Split vesting periods applicable to EVPs and SVPs after three and five years respectively.

Remuneration in 2017

The following tables provide the outcome of rewards based on the application of the policy:

Remuneration and benefits paid (disclosed in rands) and approved in respect of 2017 for Executive Directors were as follows:

Executive Directors  SR Cornell3,4  B Nqwababa5  VN Fakude6   P Victor7  DE Constable8 
R'000  2017  2016  2017  2016  2017  2016  2017  2016  2017  2016 
Total salary and benefits  25 833  –  16 678  8 906  4 651  8 636  8 611  –  –   29 600 
Annual short-term incentive1   9 291  –  7 318  4 413  –  5 049  4 951  –  –   12 437 
Long-term incentive gains2  2 107  –  12 013  –  6 312  10 320  4 538  –  –   14 352 
Total annual remuneration  37 231  –  36 009  13 319  10 963  24 005  18 100  –  –   56 389 
  1. Short-term incentives approved based on the Group results for the 2017 financial year and payable in the 2018 financial year. Incentives are calculated as a percentage of total guaranteed package/base salary as at 30 June 2017.
  2. Long-term incentives for the 2017 financial year represent the number of units x corporate performance target achieved (2017) x closing share price on 17 August 2017. The actual vesting date for the annual awards made on 11 September 2014 is 11 September 2017. Dividend equivalents implemented for all awards with effect from September 2014. Dividend equivalents accrue at the end of the vesting period, to the extent that the LTI units will vest. It represents: number of units awarded x corporate performance targets achieved during financial year 2017 x dividend equivalents up to 11 September 2017.
  3. Mr SR Cornell was appointed as Joint President and Chief Executive Officer on 1 July 2016 and is paid in dollars, the increase in salary and benefits reflect the impact of the rand/US dollar exchange rate. Benefits include a portion of R2 031 061 of a $750 000 sign-on bonus paid and not previously disclosed due to the retention period. Included in other are benefits allowance (R387 038) accommodation (R1 288 998), home leave (R450 000), school fees (R160 236), settling in (R1 044 546), tax on benefits offered (R5 085 138) and relocation costs (R403 777).
  4. Mr SR Cornell participates in an individual Senior Executive Retirement Plan (SERP) in order to adjust for differences between the benefits that would have been payable under his previous employer’s retirement fund and the benefits payable under the retirement programmes of Sasol (USA) Corporation. The value accrued to 30 June 2017 under the SERP is $92 236. The SERP benefit is payable to Mr SR Cornell following his death, disability or termination of employment for any reason other than cause.
  5. Mr B Nqwababa was appointed as Joint President and Chief Executive Officer on 1 July 2016. A sign-on payment totalling R9 000 00 has been paid in 3 tranches over three years compensating partially for incentives and benefits forfeited when he resigned from his previous employer. Included in benefits is the amount relating to the final tranche and amounts not previously disclosed. This balance is disclosed to align with the King IV™ recommended practice.
  6. Ms VN Fakude resigned as Executive Vice President Strategy and Sustainability with effect from 31 December 2016. Benefits include Inzalo dividends (R96 688) earned during the financial year and leave encashment (R192 781).
  7. Mr P Victor was appointed as Chief Financial Officer with effect from 1 July 2016. Included in salary and benefits is the final tranche of a retention payment of R3 000 000 paid in two tranches.
  8. Mr DE Constable resigned from the Group with effect 30 June 2016.

Remuneration and benefits paid (disclosed in rands) and approved in respect of 2017 for Prescribed Officers were as follows:

Prescribed Officers  SR Cornell3  FR Grobler4  VD Kahla   BE Klingenberg 
R’000  2017  2016  2017  2016  2017  2016  2017  2016 
Total salary and benefits  –  16 066  7 832  4 653  6 370  5 873  7 410  6 631 
Annual short-term incentive1   –  3 243  3 515  2 542  3 292   3 002  3 929   3 632 
Long-term incentive gains2   –  12 736  3 094  6 825  3 713  4 233  3 713  6 023 
Total annual remuneration  –  32 045  14 441  14 020  13 375  13 108  15 052  16 286 
Prescribed Officers  CK Mokoena5  M Radebe6  CF Rademan  SJ Schoeman7 
R’000  2017  2016  2017  2016  2017  2016  2017  2016 
Total salary and benefits  6 378  –  5 394  5 005  6 319  5 991  10 118  4 869 
Annual short-term incentive1   1 137   –  2 575   2 672  3 314   3 414  3 366   2 770 
Long-term incentive gains2  –   –  3 713   4 233  4 538   5 019  3 094   6 825 
Total annual remuneration  7 515  –  11 682  11 910  14 171  14 424  16 578  14 464 
  1. Short-term incentives approved based on the Group results for the 2017 financial year and payable in the 2018 financial year. Incentives are calculated as a percentage of total guaranteed package/base salary as at 30 June 2017.
  2. Long-term incentives for the 2017 financial year represent the number of units x corporate performance target achieved (2017) x closing share price on 17 August 2017. The actual vesting date for the annual awards made on 11 September 2014 is 11 September 2017. Dividend equivalents implemented for all awards with effect from September 2014. Dividend equivalents accrue at the end of the vesting period, to the extent that the LTI units will vest. It represents: number of units awarded x corporate performance targets achieved during financial year 2017 x dividend equivalents up to 11 September 2017.
  3. Mr SR Cornell became an executive director on 1 July 2016.
  4. With effect from 1 April 2017, Mr FR Grobler is being paid in Euros in accordance with Sasol’s expatriate policy. The increase in salary and benefits reflect the impact of the rand/Euro exchange rate. Benefits for Mr FR Grobler include (Upset allowance R549 020) (Expatriate allowances R1 395 023). Medical benefits include international cover for dependents.
  5. Ms CK Mokoena was appointed as EVP Human Resources and Corporate Affairs effective 1 February 2017. A sign-on payment totalling R7 500 000 and payable over two years was concluded with Ms CK Mokoena as part of her employment contract compensating partially for incentives and benefits forfeited when she resigned from her previous employer. This amount reflects the first tranche, paid in February 2017. The remaining balance will be paid in 2018. Benefits include accommodation for six months.
  6. Benefits include Inzalo dividends earned during the financial year.
  7. Mr SJ Schoeman became an expatriate effective 1 January 2017 and is paid in US dollars, the increase in salary and benefits reflect the impact of the rand/US dollar exchange rate. Benefits for Mr SJ Schoeman include (Upset allowance R552 603) (Expat allowances R631 370) (Accommodation R1 663 660). Medical benefits include international cover for Mr SJ Schoeman.
Non-executive directors  Board
meeting fees
R’000 
Lead
Independent
Director fees
R’000 
Committee fees
R’000 
Share incentive Trust fees6 R’000  Ad hoc or special meeting
R’000 
Total 
2017 
R’000 
Total 
2016 
R’000 
MSV Gantsho (Chairman) 4 900  –  –  –  –  4 900  4 900 
HG Dijkgraaf 1, 2
(Lead Independent Director)
1 983  688  869  17  10  3 567  3 955 
JE Schrempp1, 3
(Lead Independent Director)
–  –  –  –  –  –  1 731 
C Beggs  660  –  515  –  126  1 301  1 196 
MJ Cuambe1, 4  1 983  –  433  –  21  2 437  186 
GMB Kennealy5  165  –    –  –  165  – 
NNA Matyumza   660  –  452  –  63  1 175  1 010 
IN Mkhize  660  –  569  34  147  1 410  1 384 
ZM Mkhize  660  –  117  –  42  819  819 
MJN Njeke  660  –  316  –  63  1 039  888 
ME Nkeli5  165  –  –  –  –  165  – 
PJ Robertson1  1 983  –  1 025  17  115  3 140  3 411 
S Westwell1  1 983  –  863  –  115  2 961  3 165 
Total  16 462  688  5 159  68  702  23 079  22 645 
  1. Board and committee fees paid in US dollars, except for Share Incentive Trust and Ad hoc or special meeting fees which are paid in rands.
  2. Mr HG Dijkgraaf appointed as Lead Independent Director on 4 December 2015.
  3. Prof JE Schrempp retired from the Board on 4 December 2015.
  4. Mr MJ Cuambe appointed on 1 June 2016.
  5. Mss GMB Kennealy and ME Nkeli appointed effective 1 March 2017.
  6. Share Incentive Trust dissolved on 17 November 2016.

All remuneration decisions for executive vice presidents are approved by the committee and by the Board for executive directors. No changes to formulaic calculations have been approved.

Reporting legend

Integrated Report
Annual Financial Statements
Sustainability Reporting
Form 20-F