Good morning. I’m Alec Hogg and this is the Rational Perspective. I visited with Jannie Mouton on Friday and as always, it’s fabulous to spend an hour with a high quality thinker of his ilk. I’m going to be writing about that a little bit later, so not too much to share just yet.
One of the things that was interesting is that he’s busy reading this book – The Outsiders. I picked it up at the Berkshire-Hathaway AGM two years ago and because Jannie’s at it, I decided to read it as well. It got me thinking about today’s financial results from Sasol. Four years ago, Sasol hired David Constable (who’s a Canadian) from Fluor. He’s been there for 29 years. He was Head of Operations and that’s his expertise. A civil engineer, he knows how to execute on big plants but is the Capital Allocator of the ilk that Thorndike writes about in this book? The capital Allocator who adds a lot of value to an organisation and knows where to put the money. I’m not so sure.
We saw in the results today that Sasol is cutting its dividends by 12.5 percent. It’s laying off staff. It’s doing things different and clearly, this is to conserve cash so that it can execute on a program of building (specifically) a huge plant in the United States – cracker in Louisiana. Now, you’d like to know that if you’re taking such big bets, that you’ve got a guy running the show who’s an expert in allocating capital. Only time will tell whether the Sasol Board’s paid R105m over the last two years, for someone who’s really good on operations or indeed, a Capital Allocator of the type that Thorndike talks about in The Outsiders. The type that Jannie Mouton was reading about and so was I. Interesting stuff.
This is Alec Hogg with the Rational Perspective.
