Johannesburg - Sasol's decision to identify empowerment as a risk needed to be viewed in the context that the US investor community was highly litigious, according to Stephen Mildenhall, the chief investment officer of Allan Gray Investments.

Allan Gray holds more than 5 percent of Sasol, the petrochemical giant.

He said yesterday: 

"Our view is this is a standard filing. It has to include all the risks. Every risk conceivable needs to be listed."

"They [Sasol] are obliged to list empowerment."

He said that with most empowerment transactions shareholders were giving up something, either because the transaction was not done at the full price or because the company offering the stake was putting up the finance.

These risks might be obvious and to South African investors, but they might not be apparent to an international investor.

Sasol filed its now infamous form 20-F with US regulator the Securities and Exchange Commission (SEC) last month.

It said that due to empowerment legislation, "we cannot assure you that this participation will take place through transactions occurring at fair market terms and that this will not have a material adverse effect on our business, operating results, cash flows and financial condition".

The company said something similar on employment equity and affirmative action. It went on to list terror attacks, HIV/Aids, retention of skilled staff, shifts in public opinion, patents, accidents and a host of other possible threats.

On Friday President Thabo Mbeki joined the Public Investment Commissioners and the Black Managers Forum in criticising Sasol's SEC filing.

Sasol's chairman, Paul Kruger, said in its 2003 annual report: 
 

"Changes in ownership are profound events in business, especially when they are directed by legislation rather than being a consequence of market forces."

Pieter Cox, the company's chief executive, said Sasol's creation of a R10 billion fund for black economic empowerment was testimony to the the group's commitment to transformation in the liquid fuels industry.

However, after almost a decade of democracy, the Sasol board has no black executive directors.

In October Sasol Oil and Exel Petroleum, an empowerment firm, applied to the Competition Commission to merge their businesses, giving Sasol access to the retail market next year for the first time.

Having cleared the commission's hurdles, the two companies will appear before the Competition Tribunal this week.

Sasol has not been able to put a monetary value to its empowerment deal, or explain what percentage of the company would be held by its empowerment partners.

Sasol's profitability has already been heavily knocked by rand strength. A report from Merrill Lynch last week added that the termination of legislated preferential supply agreements with the local oil industry would hurt Sasol's profit.

Merrill Lynch projected headline earnings a share would be down for the full year by 31 percent.

The poor performance of the dollar, not only against the rand but against other currencies such as the euro, was creating another headache for the group.

About 90 percent of Sasol's revenues are generated in dollars, and a third of its costs are in rand. It is making less money and costs are rising with no ceiling in sight.

Sasol's share price has fallen 18.75 percent this year. It closed R3.21 lower at R85.31 on Friday.