As this report underscores, corporates that are generating returns for shareholders may be riding on taxpayers’ backs, with stock market darling Sasol benefiting from fuel subsidies and a carbon tax exemption. South African taxpayers are carrying a heavy weight with state-owned entities like SAA, Eskom, Denel, the SABC and the Land Bank all requiring sizeable cash injections – of R3bn and more – to keep afloat. Finance minister Tito Mboweni is scheduled to present a revise plan to stop the country’s economy from plunging further later in October. He has indicated that SAA and other SOEs are in his sights. But is Sasol? – Jackie Cameron
Sasol tax break, subsidy support boosts pollution, group says
By Paul Burkhard
(Bloomberg) — Sasol Ltd. got a $490 million profit boost last year thanks to the country’s fuel subsidies and its exemption from a South African carbon tax, according to the International Institute for Sustainable Development.
In a report, the institute says that Sasol’s proprietary coal-to-fuel technology is a significant source of greenhouse gases from its Secunda plant yet it still benefits from government policy on emissions and fuel price regulation. The company’s biggest shareholder is the fund manager that oversees state worker pensions, the Public Investment Corp.
The fuel and chemicals company received a carbon tax exemption of 6.5 billion rand ($394 million) last year as well as 1.6 billion rand in direct subsidies through South Africa’s regulated fuel price, according to the report. The researchers were unable to calculate Sasol’s production cost versus fuel refined from crude oil, but note the process of using coal creates 2.5 times more emissions than the conventional method per unit produced.
Sasol is South Africa’s second-biggest producer of greenhouse gases after the state power utility, Eskom Holdings SOC Ltd. Secunda, which supplies about a third of the motor fuel produced in South Africa, is the world’s biggest single-site emitter of the pollutants.
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The company and South Africa’s energy and environment departments didn’t immediately respond to requests for comment.
Sasol plans to reduce greenhouse gas emissions by at least 10% by 2030. The company is seeking bids for two 10-megawatt solar power plants and recent asset sales, spurred by a need to cut debt, will reduce its total emissions.
Still, the subsidies are hindering efforts to move the country’s transportation sector away from reliance on coal, according to the group, which is based in Canada and funded by a number of governments, United Nations’ agency and private sector donors.
“South Africa’s reliance on coal is already badly polluting local air in several cities,” Mostafa Mostafa, an IISD policy adviser, said in a statement.
The Ministry of Transport in South Africa should focus on aligning energy policy with social and environmental objectives, which “will promote a shift to cleaner energy sources and gradually reform pricing policies to stop subsidies,” the report recommended.
