Sasol signals job cuts, says survival in doubt without ‘stringent measures’

19 Jun 2020

South Africa petrochemicals group Sasol has signalled its intention to cut an unspecified number of jobs and pull out of the West African oil space as it grapples with depressed prices and the fallout from the Covid-19 pandemic. It has also cut a deal with creditors for leniency on its debt obligations.

Sasol’s share price has lost more than 50% of its value during 2020, underscoring mounting investor concerns about its ability to deliver returns in a business environment unsettled by unprecedented challenges and volatility.

The JSE-listed company said in a statement on Thursday, 18 June that it had issued a Section 189 notice to its union representatives – the regulatory process that a company is required to embark on before it proceeds with retrenchments. Sasol’s global workforce is over 31,000 with most of its employees based in South Africa.

Unusually for a Section 189 notice, the company has not specified the number of jobs that may be on the line. Business Maverick has obtained a copy of the notice that was sent to unions.

The letter notes “the collapse of the international oil price and global economic slowdown”, triggered by the Covid-19 pandemic. It says it expects global crude prices – a key driver of its profitability – to “remain low for the foreseeable future”.

In response, the letter says the company is taking several steps, including a moratorium on external recruitment for “non-critical vacancies” and the “implementation of salary sacrifices on a sliding scale”. So Sasol is effectively not hiring at the moment and will also be cutting salaries, with the biggest hair cuts at the top of the pyramid.

Pointedly, it says: “Sasol remains under significant pressure and our current measures are not sufficient for the company to survive this crisis over a longer period unless stringent measures are taken.”

So the “Great Lockdown” looks set to destroy more jobs in South Africa, which already had an unemployment rate of almost 30% before the Covid-19 pandemic. Retailer Edcon just announced its intention to lay off 22,000 workers.

So the company is telling unions that without “stringent measures”, no Sasol employee will have a job because it is lurching toward collapse. That, folks, is quite dramatic.

The letter goes on to say that the number of affected employees has yet to be determined. The final number is usually worked out after talks with unions and other stakeholders, though a potential number is typically laid out in advance. The letter says the “dismissals will occur in a staggered way, commencing mid-August 2020 with higher managerial layers in the organisation”. So managers will be the first to go.

The company’s SENS statement was not so dramatic:

“The redesign of the organisation to enable our sustainability at lower oil prices will have an impact on our workforce structure. We have accordingly issued a notice to our representative trade unions in South Africa... inviting them to enter into consultation with Sasol. A similar process will be followed with the relevant recognised bodies in our other jurisdictions.”

So the “Great Lockdown” looks set to destroy more jobs in South Africa, which already had an unemployment rate of almost 30% before the Covid-19 pandemic. Retailer Edcon just announced its intention to lay off 22,000 workers.

Sasol further announced “the discontinuation of all oil growth activities in West Africa”, which comes as no surprise. Virtually no one is splashing out capital right now on expanding oil projects. It has also managed to get a relaxation from lenders on its debt covenants. That is also no surprise in light of the tone of the Section 189 notice. Lenders are not going to get blood from a stone. DM/BM

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