Sasol Nitro, a division of Sasol Chemical Industries Limited, settles with Competition Commission regarding allegations of abuse of dominance in its fertiliser businesses
Sasol Nitro, a division of Sasol Chemical Industries Limited, has concluded a settlement agreement with the Competition Commission of South Africa, relating to its fertiliser business. This agreement is scheduled to be considered by the Competition Tribunal on 14 July 2010.
Sasol Nitro and the Commission have been engaged in settlement discussions, regarding alleged contraventions of the Competition Act, pertaining to excessive pricing and exclusionary practices. The discussions have been focused on addressing outstanding matters raised by Nutri-Flo and Profert, from the mid-2000s.
The settlement will see Sasol Nitro restructuring its fertiliser business. Sasol Nitro does not believe it engaged in excessive pricing and exclusionary practices. Sasol believes the restructuring will address the Commission's concerns regarding Sasol's position within the nitrogen based fertiliser value chain, while also opening the industry to more competition. Sasol Nitro will withdraw from certain downstream activities with increased focus on the core activities of its fertiliser business.
Sasol Nitro approached the Commission with this structural solution and has undertaken several changes to its fertiliser business model:
Divesting its regional blending capacity in Bellville, Durban, Kimberley, Potchefstroom and Endicott whilst retaining its full production activities in Secunda.
Altering Sasol Nitro's fertiliser sales approach to a Secunda ex-works model. All fertiliser retail agent contracts will be phased out and a new fertiliser sales operating model formulated.
Supplying the market, in future, from Sasol Nitro Secunda and three distribution centres within a 100km radius of Secunda and Sasolburg.
Pricing all ammonium nitrate based fertilisers on an ex-Secunda basis.
Phasing out ammonia imports on behalf of customers in South Africa.
Approximately 50 permanent Sasol Nitro employees will be affected by the restructuring as well as approximately 90 commission-based agents. Over the implementation period, Sasol Nitro will work with the affected parties to, as far as possible, limit the impact of the changes on the staff. Sasol ChemCity, Sasol's business incubator, will facilitate interested parties in the development of business opportunities that may arise from the restructuring.
"Not only will this settlement see us restructure our fertiliser business within Sasol, we believe it will open the downstream fertiliser industry to more players, encouraging competition and potentially create new distribution business opportunities, as this sector redesigns itself. We also believe that these changes will create several new opportunities for Sasol Nitro to improve our offering to the end customer, our farmers", said Marius Brand, managing director of Sasol Nitro.
"We remain committed to the agriculture industry and the competitiveness of inputs to that industry. We have already started with detailed planning to ensure these changes are implemented as smoothly as possible", he said.
The agreement will be a full and final settlement of the alleged contraventions of excessive pricing and exclusionary practices, which are the subject of the Nutri-Flo and Profert referrals, but requires confirmation by the Tribunal. As the Commission is of the view that the settlement will address their competition concerns, the Commission has not sought an administrative penalty.
The proposed settlement together with the changes to the Sasol Nitro business will not have a material adverse impact on the Sasol Group.
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