Material Matters

Our material matters are those issues that could substantially affect Sasol’s ability to create value in the short, medium or long term as a result of not being able to execute on our strategy and impact our ability to stay competitive.

We use the following process to manage our material matters:



In 2017, we identified five material matters:

The volatile macro-economic environment requires us to maintain our cash-conservation and savings initiatives, while effectively allocating capital for growth projects and improving our competitive position.

Sasol’s profitability is significantly impacted by changes in the oil price and the rand/US dollar exchange rate as most of our products have a rand cost base and a dollar-based final selling price. Subdued world growth in 2017 limited the rise in commodity and energy prices and our revenue, margins and earnings. The rand was volatile and it strengthened in the first half of the financial year before losing ground to the dollar in the second half due to political instability resulting in the downgrade of South Africa’s sovereign credit rating to sub-investment status. This has implications for our future cost of funding, our rand-based product prices and our share price.

Managing the capital trade-offs

Through our hedging activities, RP and BPEP we conserved financial capital, which was however impacted adversely by subdued world growth. Reduced earnings in turn affected our spending with suppliers, negatively impacting on human as well as social and relationship capital. Reprioritising capital projects was to the detriment of manufactured capital but to the benefit of natural and financial capital. Our enhanced cost initiatives to protect our competitive advantage supported intellectual capital. South Africa’s downgrade could impact our future cost of funding, in turn impacting on manufactured capital.


How we are responding

  • We entered into crude oil put options for approximately 82% of our liquid fuel sales to protect our balance sheet against adverse movements in commodity and product prices and considered other commodity and currency hedges.
  • We hedged 70% of our rand/US dollar exposure for 2018 using zero-cost collar instruments. We entered into hedges with a notional amount of US$4 billion, an annual average floor of R13,46/US$, and an annual average cap of R15,51/US$. These will provide some cash flow and balance sheet protection, as gearing and net debt-to-EBITDA are expected to peak in 2018. They will also partially mitigate the negative translation impact of valuing the balance sheet at each reporting date.
  • We continue to drive our BPEP cost-containment programme and, through our RP in 2017 managed variable and cash fixed costs well below inflation in nominal terms. We achieved our BPEP sustainable savings exit run rate target of R5,4 billion in 2017, a year earlier than expected.
  • Through our RP, we recorded cash savings of R32,3 billion in 2017, mostly through reprioritising our capital portfolio. This positions Sasol well to operate profitably in a US$40-50/bbl oil price environment. We have increased our RP sustainable cash cost savings target from R2,5 billion to at least R3,0 billion by 2019.
  • We are reviewing our functional structure to ensure we remain cost competitive while embedding a cost-savings mindset.
  • We continue to prioritise the effective allocation of capital to maximise returns to shareholders (click here).
  • We are reviewing digital solutions to evaluate how we can be more efficient and responsive to the macro-economic landscape.
  • We are reviewing our assets to improve our performance and profitability.

Driving continuous improvement, harnessing technology and talent, developing a diverse portfolio and embracing more digital solutions enables us to deliver superior value to our stakeholders and ensure long-term sustainability.

Through disciplined capital allocation

Sasol operates in a cyclical and volatile environment. Remaining competitive and delivering superior returns to our stakeholders remain a key focus. When it starts up, the LCCP will have a significant impact on the growth of our earnings and hence capital availability.

We are working to improve Sasol’s capital allocation principles in pursuit of delivering maximum sustainable value for our shareholders and stakeholders. We are optimising the way we operate and leveraging our full capabilities while consistently achieving capital project performance. We have initiated a detailed asset review process to ensure that all assets in our portfolio deliver against our stringent financial metrics. This requires excellence in all we do, from achieving zero harm, leveraging our financial strength and raising capital at the best possible rates, to containing costs, honing talent management, executing projects more effectively and operating at sustainably higher rates. At Sasol, we undertake a holistic approach to growth and ensure that we contribute to lowering unemployment and creating opportunities in our supply chain within the communities in which we operate. We need to continue to promote social value, particularly in South Africa and Mozambique.

LCCP, once commissioned, will move the product slate much more to chemicals with the geographic split from foreign sources increasing to approximately 50% once the LCCP is in full operation.

How we are responding

  • We implemented a new capital allocation framework in 2017 (click here) to drive a disciplined and transparent process.
  • We progressed the LCCP according to plan, with the first units on track to start up in the second half of the 2018 calendar year. We are confident that we can manage the risks that remain on the project because of our increased management oversight, the detailed project control base that we have developed, and the assurance processes that we have put in place. We issued a revised LCCP fact sheet. The updated economics, earning profile, capital spend and sensitivities are detailed in the Analyst Book available online.
For further details refer to our website at www.sasol.com

Managing the capital trade-offs

Improving our safety, production, technological, environmental and financial performance have positive implications for all the capital stocks. By ensuring efficient capital project planning and execution, we are able to support manufactured capital and make the best use of financial capital. Our work to upgrade community infrastructure boosted social and relationship capital, but at a cost to our financial capital.



Through stakeholder relationships and digital solutions

Building and managing trust-based relationships with all our stakeholders is a business imperative: our strategic success depends on it. Creating and maintaining a stable workforce is also essential. A prolonged strike at our Mining operations in 2017 led to additional costs of R1,4 billion, (including external purchases) reducing our profitability and requiring renewed and extensive efforts to reintegrate teams and stabilise the workforce.

All of the industries in which Sasol participates are impacted to some extent by the adoption of digital solutions. Digital encompasses new ways of synchronising, improving and optimising systems and processes across companies, customers and products through the use of hyper-connectivity, data proliferation and leaps in technology. To improve our efficiencies and customer experience as well as maintain our competitiveness we need to embrace more digital solutions, and in so doing ensure maximum returns.

Managing the capital trade-offs

Greater engagement with stakeholders, and in particular our employees to create a stable workforce, boosts the stocks of human capital and social and relationship capital, and ultimately financial capital. Manufactured and intellectual capital benefit from our investment in digital technologies, however in the short-term this has a negative impact on financial capital. Ultimately, as we become more efficient, this investment should boost this capital but potentially to the detriment of human capital.

How we are responding

  • We engage with stakeholders through a planned annual programme. It involves communicating the strategic aspirations, performance, decisions and activities that impact our stakeholders or are of significant interest to them. We communicate in a manner which is both honest and transparent and aim to understand our stakeholders’ perspectives.
  • In South Africa, we work to enhance partnerships aimed at improving the lives of people in our fenceline communities as well as working with multiple stakeholders to promote inclusive economic growth.
  • We strive to provide a work environment that promotes a values-driven, high-performance culture, offers sustainable and versatile careers, encourages diversity and transformation, and fosters sound employee relations.
  • Following the Mining strike, we undertook a detailed survey of employees’ levels of indebtedness and offered financial support to employees to restructure their debt. We continued to work to enhance the Sasol employee value proposition, particularly for lower-level employees.
  • We embarked on a journey to formally define our digital roadmap, which will be a key input into our strategy, defining our required digital capabilities and skills and plans going forward. We adopted a formal and focused initiative to unlock value across multiple value chain areas, selecting a strategic partner to help develop our digital roadmap and determine our digital opportunity.
  • Our Digital Catalyst pilot programme aims to transform how we do business with our chemicals customers. It is about recreating the future of planning and scheduling through automation; enhancing order management by leveraging digital solutions; improving warehousing by reducing quality assurance time and implementing smart sensors and warehouse management systems.

Promoting safety, diversity and cultural transformation as well as attracting, developing and retaining high-performing people, while engaging all employees and respecting human rights.

Human capital management is key in enabling the execution of our Group business strategy. We continued to focus on building a resilient and engaged workforce. By leveraging the skills, experience, diversity and productivity of our people, we are able to operate our facilities safely, reliably and sustainably, and deliver on our growth objectives. To this end, we continued to invest in sponsored study, technical learning programmes, as well as leadership, career, succession development interventions and critical skills development to secure a pipeline of future talent.

Our diversity and inclusion 10-Point Plan provides a set of qualitative measures designed to enable the achievement of our diversity objectives, including the recruitment, development and retention of candidates from underrepresented groups, as well as measures to enhance gender equity.

Our culture transformation journey continues. It includes the embedding of our three critical behaviours:

  • work to a common game plan;
  • adopt a “One Sasol, one bottom-line” approach; and
  • embrace empowered accountability.

To drive the next phase of our culture transformation journey, we have refreshed our purpose, vision and values based on employee feedback received from the Heartbeat Survey in 2016. Promoting a healthy workforce through an integrated health and wellness approach contributes not only to employee health but also to the safety of our employees and service providers, and enhances productivity.

We continued to maintain constructive relationships with all representative unions and works councils that enjoy consultative or negotiating powers on issues of mutual interest. However, in South Africa, socio-political developments adversely impacted stability in the labour market. We had a prolonged strike at Mining therefore restoring a positive relationship with our employees, and enhancing our engagement levels to ensure optimal productivity, is a priority.

Managing the capital trade-offs

Our BPEP and RP initiatives to achieve cost savings targets led to continued efforts to manage our headcount and negatively impacted our human capital, hence we remained focused on the health and wellbeing of our employees; developing them and ensuring our culture is one of high performance. Managing our external spend for service providers also negatively impacted our human capital, but benefited our financial capital.


How we are responding

  • We refined our approach to employee wellness, focusing on disease management, psychosocial wellness and risk management.
  • We adopted a risk-based approach to minimise labour volatility challenges. This required a review of our broader employee relations landscape and the adoption of a more integrated approach across all affected stakeholder groups aimed at achieving greater employee engagement and ensuring business continuity.
  • We invested R1 billion in bursaries, learnerships and scarce critical skills development.
  • Although we have made significant progress in improving diversity at Sasol, there is still work to do. In 2017, we released R70 million from Response Plan savings to invest in targeted development programmes.
  • Women empowerment remains a key focus area. In South Africa women in operations programmes have been implemented across the majority of operating model entities. In the US, women were the recipients of all the bursaries we awarded in the year.
  • Our bursary and graduate programmes are designed to secure the critical and scarce skills required to operate our plants and deliver on our long-term growth ambitions.
  • We refreshed the Sasol values to address the feedback received from employees through the Heartbeat Survey and to drive the next phase of our transformation journey.


HUMAN CAPITAL SAFTEY

At Sasol, safety is a way of life. It is a belief that zero harm is possible, through dedicated focus and teamwork. For Sasol, this is a journey we will continuously improve on. It is founded on a standardised and systematic approach to Safety, Health and Environment (SHE). Our SHE fundamentals emphasise leadership and accountability across our operations, engage our workforce and require a risk-based approach to inform the implementation of controls and associated activities at each operation. Despite our Recordable Case Rate (RCR) declining steadily, the number of high-severity injuries, as evidenced by the fatalities and life-altering injuries, is not declining. The past year was a challenging one for safety performance. We experienced five fatalities which is unacceptable:

  • Mr Themba Mahlangu from Sasol Mining was struck by a pipe that dislodged under pressure causing fatal injury;
  • Mr Johannes Mashili from Sasol Mining was trapped between the cab of a shuttle car and a underground side wall;
  • Mr Gideon Coetzee and Mr Carl Vermaak from Supply Chain were fatally injured in a motor vehicle accident on the N17 highway; and
  • Mr Tyler Truett, a service provider in the Lake Charles Chemicals Project, passed away after falling through an opening in a scaffold.

Managing the capital trade-offs

There is no trade-off for the safety of our people. Any loss of life in the workplace is completely unacceptable and is damaging to nearly all the capital stocks – human, social and relationship, intellectual and financial.

Many of the fatalities in the year were preventable and arose from practices that were not aligned to our safety policies.




How we are responding

Our heartfelt condolences go out to the families of the fatally injured. These five fatality incidents were thoroughly investigated and the root cause analysis shared with the Board. The learnings from the root cause analysis were then brought into our overall approach to safety to strengthen it and ensure our actions are correctly focused and informed by our priorities.

Specific focus from the fatality incidents included:

  • understanding the critical control failure;
  • sharing of lessons learnt; and
  • a reinforced approach to behaviour, transformation, as well as behaviour-based safety.

Death benefits from Sasol to the employees fatally injured while on duty, as may be applicable, include salary, short-term incentive, share-based payments, leave encashment payment, personal accident and benefit fund as well as funeral benefits. Other payments include risk and retirement fund benefits based on employee-selected schemes and claims for Compensation for Occupational Injury and Disease.



Securing our licence to operate by driving sustainable air quality, waste and land risk management, responding to the climate change and energy security challenges, promoting water stewardship and ensuring responsible product stewardship. 

Sasol operates in a rapidly evolving environmental regulatory landscape, particularly in South Africa. We have a responsibility to manage and mitigate our impact to uphold the right to an environment that is not harmful to health or wellbeing.

We prioritise compliance with all applicable legal requirements, including the conditions of our authorisations. To deliver on our strategy and create value requires that we operate within a complex legal framework, in turn requiring an integrated approach to address cross media impacts. Delivery on our environmental roadmaps committed to by our South African facilities is a key deliverable for ambient air quality improvement and we closely monitor progress.

Greater environmental awareness is resulting in public opinion becoming more sensitive and more challenges being raised including consumer preferences changing. As a significant emitter of greenhouse gases in South Africa, emission reductions remain a top priority and we continue to evaluate, develop and implement mitigation options. We also continue looking for more gas in an effort to further reduce our consumption of coal.


Managing the capital trade-offs

In moving towards compliance with environmental emissions standards, we continue to consider the trade-offs between the various issues affecting natural capital. As our plant processes are highly integrated, implementing emission abatement equipment could have technical implications and negatively impact manufactured capital. We use our intellectual capital to identify new solutions for our unique plant processes.

Addressing emissions from community sources to offset our own emissions offers an opportunity to achieve desired environmental outcomes more cost effectively and with potentially greater socio-economic outcomes, thereby enhancing social and relationship capital. In some cases, there may be depletion of financial capital where new solutions (e.g. clean fuels) are more capital intensive.


Refer to for further information on environmental compliance.

 

How we are responding

  • AIR: We are implementing multi-billion rand environmental roadmaps to enable compliance and improve ambient air quality. We work to prevent pollution as well as minimise emissions at source. Through our offset programmes we are targeting an improvement in ambient air quality from community emissions.

    We are transparent about our compliance challenges and work with the regulatory authorities in addressing these.


  • WASTE: We are working to reduce our waste footprint. Our operations are advancing roadmaps to adhere to new landfill prohibitions that take effect in South Africa over the next 11 years.


  • WATER: Societal pressure to reduce our water consumption is growing. We have achieved significant milestones in our water stewardship endeavours, but there is scope for more partnership initiatives. We have adopted the UN Global Compact CEO Water Mandate as the framework for directing our water stewardship efforts. We also work collaboratively to assist in resolving infrastructure challenges such as those in the Integrated Vaal River System in South Africa.


Consistently delivering on our commitments to community stakeholders and optimising the impact of our social investment programmes by increasing local content and collaborating more broadly to address social and economic development challenges.

At Sasol we recognise that we have an important role to play in the socio-economic development of the communities in which we operate. Most of our fenceline communities expect that we contribute to creating employment opportunities, skills development as well as facilitating access to our supply chain.

In addition to creating value through our business operations, we bring our good corporate citizenship to life through our multi-pronged, multi-year, integrated social investment approach. In response to feedback from our communities during 2017 we refocused our social investment programmes to prioritise fewer, high-impact initiatives to address the needs of our fenceline communities.

Our focus is on:

  • Education and skills development.
  • Community development.
  • Small business enablement.
  • Environmental education.

Key highlights

  • Spent R676 million globally in social investment programmes, 88% of which was in South Africa.
  • Completed baseline studies of our key programmes to enable us to measure future impact.
  • Refocused our social investment spend on underserved communities.
  • Refocused our local government collaboration programme towards capacity- building initiatives.
  • Enhanced our volunteer support scheme to enable more employees to volunteer to causes of their choice within their communities.
  • Embedded the community scorecard we implemented in 2016 to track performance related to community indicators including, among others, local procurement, value of social investments in townships and local small, medium and micro enterprises (SMMEs) supported.

Responding to the needs of our fenceline communities through high-impact social investment programmes

Invested R333 million on improving Science, Technology, Engineering and Mathematics (STEM) education in Southern Africa.

Impacted: 6 million learners.  

Over R30 million spent on increasing access to healthcare in fenceline communities in South Africa and Mozambique.

Impacted:
274 893 people.
99 jobs created.

Invested R128 million in projects working in partnership with local government and other stakeholders to improve delivery of services to our fenceline communities.

SMME loan book of R139 million to enable SMMEs.

3 902 jobs sustained.
149 jobs created.

Promoted environmental education and awareness by developing a smartphone application as well as a website focusing on Qatari fauna, flora and nature reserves.

Impacted:
8 400 learners.

Increased the number of Sasol volunteers from 660 to 1 500 and maintained the hours available per employee to volunteer to 40 hours per annum.

Impacted 128 569 people globally through the implementation of our “Sasol For Good” programmes.

Reporting legend

Integrated Report
Annual Financial Statements
Sustainability Reporting
Form 20-F