3.A [Reserved]
3.B Capitalisation and indebtedness
Not applicable.
3.C Reasons for the offer and use of proceeds
Not applicable.
3.D Risk factors
This section describes some of the risks that could materially affect, separately or in combination, Sasol’s business, operating results, cash flows and financial position. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business operations. Accordingly, investors should carefully consider these risks.
Further background and measures that we use when assessing various risks are set out in the relevant sections of this report, indicated by way of cross references under each risk factor.
Summary of Risk Factors
Please carefully consider all of the information discussed in this Form 20-F for a more thorough description of these and other risks. The risks described below are organised by risk type and are not listed in order of their priority to us or their impact on us.
Risks related to our business
● Cyclicality and variability in petrochemical and refined product margins, supply and demand may adversely affect our business, operating results, cash flows and financial position;
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● Our coal, crude oil, and natural gas reserve estimates may be materially different from the quantities and qualities that we eventually recover or ultimately make use of;
● We may be unable to access, discover, appraise and develop gas resources at a rate and price that is adequate to sustain our business and/or enable growth;
● We may not be able to exploit technological advances quickly and successfully enough, or competitors may develop superior technologies; and
● Our insurance may not sufficiently cover damage or other potential losses, thereby impacting our business and financial position.
Risks related to financial matters
● We may not be able to repay, extend or refinance our debt in a timely manner or at all, which would have a material adverse effect on our credit rating, financial position and ability to continue as a going concern;
● Our access to and cost of funding is affected by our credit rating, which in turn is affected by, among other factors, our financial performance and the sovereign credit rating of the Republic of South Africa;
● We may not achieve our business plans to deliver sufficient positive cash flow available for debt service, given the magnitude of debt;
● Fluctuations in coal, crude oil, natural gas, ethane, chemical and petroleum product prices and refining margins may adversely affect our business, operating results, cash flows and financial position;
● Fluctuations in exchange rates may adversely affect our business, operating results, cash flows and financial position; and
● Certain factors may result in the recognition of asset impairment charge, which could negatively impact our financial position.
Risks related to economic, political or social factors
● Economic, political or social factors affecting the regions in which we operate may have a material adverse effect on our operations and profit; and
● Our global asset base and market footprint expose us to negative impacts of tariffs and/or trade barriers that may inhibit our ability to place products across regions.
Risks related to our capital investments
● We may not achieve projected benefits of acquisitions or divestments;
● Our projects and capital investments may be subject to schedule delays and cost overruns, and we may face material changes in market conditions or other business assumptions, which could render our projects unviable or less profitable than anticipated;
● The concentration of service providers supplying the oil and gas industry and the immaturity of the supplier market in Mozambique may adversely affect our business or our operations;
● Exposure related to significant investments in associates and joint arrangements may adversely affect our business, operating results, cash flows and financial position; and
● We may not pay dividends or make similar payments to shareholders in the future due to various factors.
Risks related to the safety and reliability of our operations
● Constraints in the supply of water and electricity, utility cost increases in excess of inflation, as well as poor infrastructure may impact our operations;
● We may face potential costs as well as harm to our reputation in connection with incidents causing property damage, personal injury or environmental contamination and industry and value chain-related operational interruptions; and
● Our facilities may also be subject to deliberate disruptions.
Risks related to legal, regulatory and governance matters
● Our shareholders might lose confidence in our financial and other public reporting if we continue to identify material weaknesses and fail to maintain an effective system of internal controls over financial reporting, which in turn may adversely affect our share price;
● Actual or alleged non-compliance with regulatory requirements could result in criminal or civil enforcement and associated sanctions and/or harm our reputation and negatively impact our licence to operate;
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● Stringent South African regulations in the areas of mining, petroleum and energy activities may have an adverse effect on our mineral rights and impact our business, operating results, cash flows and financial position;
● Changes in environmental, health, safety and chemical regulations, other legislation and public opinion may adversely affect our business, operating results, cash flows and financial position;
● We are subject to risks associated with litigation and regulatory proceedings; and
● Intellectual property risks may adversely affect our freedom to operate our processes and sell our products and may weaken our competitive advantage.
Risks related to our sustainability
● The effectiveness of our strategy to respond to climate change, including compliance with evolving regulatory requirements, our adoption of policies and implementation of plans to reduce GHG emissions as well as other pollutants while adequately disclosing related risks, strategies and impacts, is subject to uncertainties and related regulatory and public scrutiny. This scrutiny could result in negative sentiments and environmental claims adversely impacting our business. In addition, laws, policies and societal concerns related to climate change could reduce supply/demand for our products, increase our operational costs, reduce our competitiveness, negatively impact our stakeholder relations, or adversely affect our licence to operate and impede our access to capital and financing; and
● The assumptions we have used to test our resilience to climate change may be incorrect, and we may not be able to accurately ascertain our vulnerability to climate change.
Risks related to health, including pandemics
● Our global operations expose us to pandemics which may adversely affect our workforce, our access to external labour and impact business continuity, operating results, cash flows and financial position.
Risks related to information management
● We may face the risk of data breaches or attempts to disrupt critical information and operational technology services, which may adversely impact our operations and business continuity.
Risks related to our people
● We may be unable to attract and retain some critical talent to support current and future business requirements;
Risks related to our American Depositary Receipts (ADR or ADRs)
● The exercise of voting rights by holders of ADRs is limited in some circumstances;
● Holders of Sasol’s ordinary shares or ADSs may be subject to dilution as a result of any non-pre-emptive share issuance, and shareholders outside South Africa or ADS-holders may not be able to participate in future offerings of securities (including Sasol’s ordinary shares) carried out by or on behalf of Sasol;
● Sales of a large amount of Sasol’s ordinary shares and ADSs could adversely affect the prevailing market price of the securities; and
● US securities laws do not require Sasol to disclose as much information to investors as a US issuer is required to disclose, and investors may receive less information about the Company than they might otherwise receive from a comparable US company.
Risks related to our business
Cyclicality and variability in petrochemical and refined product margins, supply and demand may adversely affect our business, operating results, cash flows and financial position
Sasol’s chemicals portfolio includes several products that are exposed to cyclicality in margins and demand. Margins for polymers, solvents, surfactants and fertilisers trend in a cyclical manner that usually, but not always, coincides with the normal business cycles of regional and global economies.
Cyclicality combined with difficulty in forecasting the timing of business cycles, and prices for refined and chemical products, especially during
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periods of volatile market conditions, may have a material adverse effect on our business, operating results, cash flows and financial position.
Loss of business competitiveness remains a risk, driven by, inter alia, uncompetitive product cost, insufficient volumes impacting the competitiveness of our cost structure (for any or all of our products) and ability to meet demand, sub-optimal inventory levels, supply chain disruptions, critical feedstock availability, inadequate innovation, a breakdown in key customer relationships, loss of customers and ability to place product in the market. This includes the risk of increased competition in the liquid fuels market in Southern Africa should new market entrants emerge.
Our coal, crude oil, and natural gas reserve estimates may be materially different from the quantities and qualities that we eventually recover or ultimately make use of
Our reported coal, crude oil, and natural gas reserves are estimated quantities and qualities based on applicable reporting regulations that, under present conditions, have the potential to be economically mined processed, produced, delivered to market and sold.
There are numerous uncertainties inherent in estimating quantities and qualities of reserves and in projecting future rates of production, including factors that are beyond our control, and therefore estimated quantities and qualities of reserves are uncertain. The accuracy of any reserve estimate is a function of the quality of available data at the specific time collected (which if changed, may require us to lower the estimated mineral reserves and mineral resources), engineering and geological interpretation, costs to develop and produce and market prices for related products.
Reserve estimates are adjusted to reflect improved recovery and extensions and are revised from time to time based on improved data acquired from actual production experience and other factors. In addition, regulatory changes and market prices may result in a revision to estimated reserves. Revised estimates may have a material adverse effect on our business, operating results, cash flows and financial performance. For example, if quantities and qualities eventually recovered or if recovery rates are materially different from estimates, then this could result in us having insufficient quantities to meet demand or supply obligations for such production. See “Item 4.D—Property, plants and equipment”.
We may be unable to access, discover, appraise and develop gas resources at a rate and price that is adequate to sustain our business and/or enable growth
Our natural gas resources in Mozambique are of particular importance as feedstock for our plants in South Africa, as well as for sales of gas into the markets in Mozambique and South Africa. We continue to develop a portfolio of gas options in Mozambique which includes gas field development of the current Petroleum Production Agreement (PPA) and PSA assets and pursuing exploration opportunities, as well as considering options for future supply of liquified natural gas. However, we cannot be sure that we will be able to successfully develop the full portfolio of gas options. Capital availability as well as economic viability play a key role in determining which projects are implemented. Cost of gas increases when there is low volume recovery requiring significant capital investments. The cost of these additional tranches of gas has the potential to be uneconomical to buyers of gas.
Natural gas from the PPA, which has been in operation since 2004, has started to decline. There are no guarantees that the production plateau will persist given the inherently uncertain nature of upstream production in accurately forecasting gas recovery, especially at this stage of the asset life. In addition to PPA investments, any investment made in the PSA has significant subsurface volume uncertainty given that it is a new development, and additional data is required to improve forecasting. Gas to the domestic market in Mozambique will be prioritised in accordance with existing commitments, and thereafter production will be allocated according to the gas volumes contracted for export to South Africa.
Competition for suitable opportunities, increasing technical difficulty, stringent regulatory and environmental standards, large capital requirements, lack of strategic enabling infrastructure and existing capital commitments may negatively affect our ability to access, appraise and develop new gas resources in a timely manner, which could adversely impact our ability to support and sustain our current business operations while we pursue our growth ambitions. Our future growth could also be impacted by these factors, potentially leading to a material adverse effect on our business, operating results, cash flows and financial position.
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We may not be able to exploit technological advances quickly and successfully enough, or competitors may develop superior technologies
Many of our operations, including the manufacture of synthetic fuels and petrochemical products, are dependent on the use of advanced technologies. The development, commercialisation and integration of the appropriate advanced technologies can affect, among other things, the competitiveness of our products, the continuity of our operations, our feedstock requirements and the capacity and efficiency of our production.
It is possible that new technologies or novel processes may emerge and that existing technologies may be further developed in the fields in which we operate. Unexpected advances in employed technologies or the development of novel processes can affect our operations and product ranges and could render the technologies we utilise or the products we produce obsolete or less competitive in the future. Difficulties in accessing new technologies may limit our ability to implement them and competitive and environmental pressures may force us to implement these new technologies at a substantial cost.
In addition to the potential technological challenges, expansion projects are often integrated across our value chain. Delays with the development of an integrated project may have an impact on more than one business segment and could result in a material adverse effect on our business, operating results, cash flows and financial position.
Over time, we anticipate using alternative feedstocks for sustainable products, however, this will depend on the affordability of production technologies, the scale of renewable energy roll-out, and our ability to procure the necessary technology cost effectively. Our effort to transition may be unsuccessful and the process may lead to increased operational and capital costs and negatively impact other growth strategies. For more information, see “—Risks related to our sustainability – The effectiveness of our strategy to respond to climate change, including compliance with evolving regulatory requirements, our adoption of policies and plans to reduce GHG emissions as well as other pollutants while adequately disclosing related risks, strategies and impacts, is subject to uncertainties and related regulatory and public scrutiny. This scrutiny could result in negative sentiments and environmental claims adversely impacting our business. In addition, laws, policies and societal concerns related to climate change could reduce supply/demand for our products, increase our operational costs, reduce our competitiveness, negatively impact our stakeholder relations, or adversely affect our licence to operate and impede our access to capital and financing - Transitional risk, access to low-carbon opportunities.”
Our insurance may not sufficiently cover damage or other potential losses, thereby impacting our business and financial position
It is Sasol’s policy to ensure the appointment of an effective service provider and procure appropriate insurance cover for property damage and business interruption for our production facilities. We aim to obtain insurance policies to cover above acceptable deductible levels at acceptable commercial premiums. However, cover for all loss scenarios may not be available at acceptable terms or commercial rates, and we cannot give any assurance that the insurance procured for any particular year will sufficiently cover all potential risks or that the insurers will have the financial ability to pay all claims that may arise. In addition, loss and liability in relation to cybersecurity may not be sufficiently covered by our insurance.
The costs we may incur as a result of the above or related factors could have a material adverse effect on our business, operating results, cash flows and financial performance.
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Risks related to financial matters
We may not be able to repay, extend or refinance our debt in a timely manner or at all, which would have a material adverse effect on our credit rating, financial position and ability to continue as a going concern
A number of short- to medium-term factors can adversely affect our access to capital and ability to repay, extend or refinance our existing debt or access future financing on commercially reasonable terms (if at all), which in turn can materially affect our business results, liquidity and financial position. These factors include:
● the risk of a prolonged surge in global inflation and interest rates;
● poor financial and operational performance, including a reduction in operating cash flow, changes to our net debt to EBITDA ratio as applied to our covenant calculations;
● a low share price and consequent low market capitalisation, which may result in a high multiple of debt to market value of equity which negatively impacts market confidence;
● prolonged dislocation in the financial and capital markets;
● insufficient cash flow available for debt service in the future reporting periods to support our existing debt on the balance sheet;
● prolonged periods of low oil and chemical prices and product margins;
● inherent business risks, including unplanned production outages, supply chain disruptions, and higher-than-anticipated capital requirements to sustain operations and projects;
● climate change and environmental, social and governance (ESG) strategy concerns, which may restrict the availability of bank loans or limit our access to the local and global debt capital markets;
● obligations under guarantees may limit the ability to obtain debt or result in being called upon to satisfy the guarantee in the event of a default by an obligor;
● changes in financial market regulation; and
● adverse global events including the impact of pandemics, tariffs and geopolitical conflicts.
In addition, our principal credit facilities contain restrictive covenants (including financial covenants). These restrictive covenants limit, among other things, our ability to encumber our assets, incur incremental debt and dispose of assets in certain circumstances. In addition, the financial covenants include a requirement to not exceed a maximum net debt-to- EBITDA ratio, as applied to our covenant calculations and as defined in the credit facility agreements. These restrictive covenants could limit our operating and financial flexibility, and failure to comply with any covenant may enable lenders to accelerate our repayment obligations.
Our operating cash flows and credit facilities may also be insufficient to meet our capital requirements and related incremental working capital plans, depending on the timing and cost of development of our existing and future projects and our overall operating performance. As a result, additional capital may be needed to meet the funding requirements of these projects and to maintain ongoing business activities. Should available capital not be allocated firstly to refinancing and extending existing debt maturities (to the extent they are not covered by cash flows), the funding deficit would impact our ability to continue as a going concern.
Further, we have incurred US dollar-denominated debt to fund certain US dollar-operated assets. To the extent the cash flows from these assets are insufficient to fulfil our debt obligations, rand cash flows and/or cash balances from the Company of the debt may need to be utilised. US dollars may not readily be available to us when required, and we may not be able to fund such repayments.
Under South African exchange control regulations, we must obtain approval from the Financial Surveillance Department (FSD) of the SARB ahead of proceeding with any capital raising activity involving a currency other than the rand. In granting its approval, the FSD may impose conditions on our use of the proceeds of the capital raising activity outside of South Africa, including limits on our ability to retain the proceeds of such activity, or require further approval by the FSD prior to applying any of these proceeds to any specific use. Any limitations imposed by the FSD on our use of the proceeds of a capital raising activity could adversely affect our flexibility in financing our
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investments or our financial needs. For more information regarding exchange controls in South Africa, see “Item 10.D—Exchange controls”.
Our access to and cost of funding is affected by our credit rating, which in turn is affected by, among other factors, our financial performance and the sovereign credit rating of the Republic of South Africa
Any downgrades to our credit rating, be that due to the deterioration of our financial performance or a decline of the sovereign credit rating of the Republic of South Africa, could adversely affect our access to and the cost of funding.
There are factors that may negatively impact the achievement of our set targets. These include, among others, negative macroeconomic developments or deterioration of market conditions, as well as the impact of operational instability and failure to manage costs appropriately across our operating sites. Any cash flow improvements achieved may therefore differ significantly from the amounts currently being targeted. The actual improvements may only be targeted in countering inflation and macroeconomic developments and may not result in expected improvements. If the anticipated benefits cannot be realised from these efforts, our business, operating results, financial position, cash flows and ability to execute our growth strategy could be adversely affected.
We may not achieve our business plans to deliver sufficient positive cash flow available for debt service, given the magnitude of debt
There are factors that may negatively impact the achievement to deliver on the required cash flow for debt servicing. These include negative macroeconomic developments or deterioration of market conditions as well as the impact of operational instability and our failure to manage costs appropriately across our operating sites. The actual cash flow improvement achieved may therefore differ significantly from the current targeted amounts. If the anticipated benefits cannot be realised from these efforts, our business, operating results, financial position, cash flows and ability to execute our growth strategy could be adversely affected.
Fluctuations in coal, crude oil, natural gas, ethane, chemical and petroleum product prices and refining margins may adversely affect our business, operating results, cash flows and financial position
Market prices are subject to fluctuations due to general economic conditions, production capacity, industry inventory levels and technology advancements
We depend on coal, crude oil, natural gas, ethane, chemicals and petroleum products, among others, as feedstock and process materials. The market prices of these products fluctuate, and it remains inherently challenging to forecast such fluctuations in prices and margins as they are subject to local and international supply and demand fundamentals and other factors, such as macroenvironment volatilities, over which we have no control. Currency fluctuations and commodity prices can have a joint impact on our financial performance and could adversely affect our business, operating results, cash flows and financial position, including the delay or cancellation of projects.
In addition, a substantial proportion of our turnover is derived from sales of natural gas, chemical and petroleum products, the prices of which have fluctuated significantly in recent years. These prices are affected primarily by feedstock costs and other global factors including changes in global product inventory, production capacity and availability of substitute products. Crude oil prices may be significantly influenced by macroeconomic conditions, global supply conditions, industry inventory levels, technology advancements, weather-related damage and disruptions, alternative fuel prices and geopolitical risks, including warfare. See “Item 5.A—Operating results” for the impact of the crude oil prices on the results of our operations.
It is inherently difficult to forecast fluctuations in prices for coal, crude oil, natural gas, ethane, chemicals and petroleum products. This risk has been and will continue to be exacerbated by policy changes (such as price caps on gas, tariffs, the promotion of electric vehicle sales or the phasing-out of future sales of new diesel or petrol internal combustion engine vehicles) and the disruption caused by the Russia-Ukraine war as well as conflicts and the related instability in the Middle East, and the consequent inflationary pressures from feedstock costs, changing regulatory environments, impacts on supply chains and uncertainties around changes in monetary and trade policies in high inflationary environments. The macro-environment remains volatile, with key indicators (such
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as exchange rate, oil, feedstock cost and inflation) changing frequently and significantly.
As we are unable to control the price at which these products are purchased or sold, fluctuations in prices, or inability to obtain or sell these products, may have a material adverse effect on our business, operating results, cash flows and financial position.
South African regulations and margin erosion
The South African government controls and/or regulates certain fuel prices and our margins may be impacted as a result of changes to the regulations and formulae used to calculate such prices.
South African liquid fuel prices are determined on an import parity principle using the basic fuel price (BFP) mechanism. Elements in the BFP formula are updated or adjusted from time to time at the discretion of the Department of Mineral and Petroleum Resources (DMPR), which may affect margins.
Further, through our equity participation in the National Petroleum Refiners of South Africa (Pty) Ltd (Natref) crude oil refinery, we are exposed to fluctuations in refinery margins resulting from fluctuations in international crude oil and petroleum product prices.
Piped gas prices are regulated through the approval of maximum gas prices (MGP) by the National Energy Regulator of South Africa (NERSA). NERSA uses its MGP Methodology adopted from time to time as the guideline for assessing and deciding on maximum gas price applications by licensed traders. In January 2023, NERSA adopted a revised MGP Methodology which is subject to periodic review by NERSA and the adoption and implementation by NERSA of any revised methodology in relation to future gas price applications by Sasol Gas (Pty) Ltd (Sasol Gas) could have an adverse effect on our business, operating results, cash flows and financial position. In addition, the ultimate outcome of the ongoing litigation in the review application of the 2021 NERSA Maximum Gas Price decision (described under “Item 4.B—Business overview—Legal proceedings and other contingencies”) may also lead to such an adverse effect.
Long-term fluctuations in US dollar prices for oil
While we use derivative financial instruments and engage in hedging activities from time to time to mitigate against downside risk, these do not protect against all differences in pricing trends among crude oil, chemicals and petroleum products and, as such, our exposure could result in reduced revenues and may have an adverse effect on our business, operating results, cash flows and financial performance. See “Item 11—Quantitative and Qualitative Disclosures About Market Risk”.
Fluctuations in exchange rates may adversely affect our business, operating results, cash flows and financial position
The South African rand is the principal functional currency of our operations, and we report our financial results in rand. However, a significant portion of our turnover is impacted by the US dollar and the pricing of most petroleum and chemical products is based on global commodity and benchmark prices, which are quoted in US dollars. Further, most of the components of the BFP are US dollar-denominated and later converted to rand, which impacts the price at which we sell fuel in South Africa. In addition, a significant part of our borrowings is US dollar-denominated, as these relate to investments outside South Africa or constitute materials, engineering and construction costs imported into South Africa. Fluctuations in the rand/US dollar (ZAR/US$) exchange rate impact our financial leverage, profitability and estimated capital expenditure.
We also generate turnover and incur operating costs in US dollars, euros and other currencies.
As a result, fluctuations in exchange rates between the rand and the US dollar, and/or between the rand and the euro, among others, may have a material effect on our business, operating results, cash flows and financial position.
Furthermore, the rand exchange rate is affected by various international and domestic economic and political factors. The strengthening of the rand would have an adverse effect on our operating results, cash flows and financial position; essentially a stronger rand translates into less rand-based revenue received from products with rand sales at prices derived from dollar price reference points. However, given the significance of our foreign currency-denominated long-
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term debt, a weaker rand against the US dollar would have a negative impact on our gearing and result in a larger ZAR amount when the USD debt is translated into ZAR. See “Item 5.A—Operating results” for further information regarding the effect of exchange rate fluctuations on results of our operations.
Although the exchange rate of the rand is primarily market-determined, its value at any time may not be an accurate reflection of its underlying value, due to the effect of, among other factors, exchange controls. For more information regarding exchange controls in South Africa see “Item 10.D—Exchange controls”.
In addition, fluctuations in the exchange rates of the rand against the US dollar, euro and other currencies may impact the comparability of our financial statements between periods due to the effects of translating the functional currencies of our foreign subsidiaries into rand at different exchange rates.
Certain factors may result in the recognition of asset impairment charge, which could negatively impact our financial position
An impairment risk may continue to materialise as a result of one or more uncertainties when preparing the financial statements, such as but not limited to:
● Macroeconomic and commodity price assumptions: Sasol’s operating results are heavily dependent on commodity prices, such as those for crude oil, natural gas, coal, ethylene and ethane. A significant decline in these prices, as well as adverse exchange rate developments, inflation, a decline in chemical prices and petroleum product prices and above-inflation-related price increases in electricity could result in a reduction in the value of Sasol’s assets and operations;
● Currency fluctuations: We operate in several countries, and our financial results are impacted by exchange rates. A significant change in exchange rates could lead to an impairment of assets denominated in foreign currencies;
● Environmental and carbon market regulations and instruments: Sasol’s operations are subject to environmental and carbon market regulations in the countries where it operates. Changes in these regulations and a failure to
comply with them could lead to fines or other penalties that could negatively impact our licence to operate and impact Sasol’s financial results. Carbon market regulations and instruments including the carbon tax rate, tax-free allowances and emissions exceeding the carbon budget requirements could also result in an impairment of our assets;
● Technological advances: Sasol’s operations rely on complex technologies, and advances in technology could render its assets obsolete. This could result in a reduction in the value of its assets and operations;
● Economic conditions: Our financial results are impacted by economic conditions in the countries where we operate. A significant economic downturn could result in a reduction in demand for our products, which could impact our financial results;
● Business strategy: Sasol’s business strategy is subject to risks and uncertainties, and changes in the business environment could impact the success of its strategy. If the Company’s strategy is not successful, it could result in an impairment of its assets;
● Political and social factors: Sasol operates in countries where political and social factors could impact its operations. Political instability, civil unrest, or changes in government policies could lead to a reduction in the value of Sasol’s assets and operations;
● Operational factors: reduction in the productivity of our coal mining operations resulting in additional external coal purchases, the availability of coal reserves, coal quality and cost of mining activities are among the factors that could impact our financial results. Sasol’s production volumes are also impacted by coal quality and operational stability, as well as the availability of natural gas reserves, cost of producing or sourcing of natural gas or liquified natural gas and fluctuations in regulated gas selling prices, all of which could lead to an impairment of our assets. Increasing operational costs and costs of sustenance capital, including capital and operational costs required to achieve our environmental target, may impact our financial results and lead to a failure to meet our strategic ambitions;
● Changes in cost of debt, risk-free rates, equity risk premium, betas, country risk premiums and capital structure, which may lead to
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changes in our weighted average cost of capital; and
● A sustained decline in Sasol’s market capitalisation below the carrying value of its net assets may be considered an external indicator of impairment and could trigger impairment testing under applicable IFRS accounting standards.
If any of these uncertainties occur, either alone or in combination, management could be required to recognise an impairment, which could have a material adverse effect on our results of operations, and financial position and harm our reputation.
Risks related to economic, political or social factors
Economic, political or social factors affecting the regions in which we operate may have a material adverse effect on our operations and profit
Fiscal and monetary policies
Macroeconomic factors, such as inflation and interest rates, could affect our ability to contain costs and obtain cost-effective debt financing. Global financial conditions, geopolitical tensions, commodity price trends, emerging market sentiment swings and domestic socio-political and policy developments, could contribute to significant currency volatility.
Global economic conditions remain uncertain. Macroeconomic, trade (such as imposition and effects of tariffs internationally), socio-political uncertainties and other potential disruptions to international credit markets and financial systems could cause a loss of investor confidence and any economic recovery may remain limited. Moreover, any eventual recovery may prove slower than anticipated or not materialise, leading to a period of recession.
Political and social uncertainty
We have invested in or are in the process of investing in and/or divesting from, significant operations in Southern African, European, North American, Asian and Middle Eastern countries that are experiencing or have experienced political, social and economic uncertainty, in some cases having experienced recent instances of political and social unrest. For example, South Africa faces ongoing challenges to develop the country’s growth potential, reduce inequality, strengthen its public finances, combat corruption and address weaknesses at state-owned enterprises, particularly the national power utility, Eskom Holdings SOC Limited (Eskom) and Transnet SOC Limited (Transnet, the state-owned rail, port, terminal and pipeline company), and other institutions. These factors remain a risk to South Africa’s business environment, sovereign credit rating outlook and future socio-economic stability.
In addition, economic and political instability in regions outside of the jurisdictions in which we operate and other geopolitical conflicts and/or instability, such as the Russia-Ukraine war and the geopolitical instability in the Middle East may result in unavoidable uncertainties that could negatively affect costs of business and cause volatility in exchange rates, commodity prices, inflation and interest rates including disruptions in supply chains. Such events impact worldwide political, regulatory, economic or market conditions, as well as cause instability in political institutions, regulatory agencies and financial markets, any of which have a material adverse effect on our business, operating results, cash flows and financial position.
Sasol operates in countries where political and social factors, such as political instability, civil unrest, or changes in government policies, could affect its operations. Specifically, Sasol’s mining operations in South Africa and Sasol’s gas operations in Mozambique are vulnerable to community disruptions, such as local community protests to obtain employment opportunities and procurement contracts. Following the 2024 election in Mozambique, instances of unrest and operational disruptions were experienced, such as community protests, temporary plant closures, damage to property, project delays, and employee safety concerns.
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Further, government policies, laws and regulations countries where we operate, or plan to operate in may change in the future. Such changes may be triggered by changes in government/public representatives due to the outcomes of elections in various countries/regions where we operate. In the past, governments in those countries have pursued, and may in the future pursue, policies of resource nationalisation and market intervention, including through protectionism like import tariffs and subsidies. The impact of such changes on our ability to conduct operations or deliver on planned projects cannot be determined with any degree of certainty. Such changes may therefore have an adverse effect on our operations and financial results. These risks may also include changes to tax regimes that adversely impact our business, as well as increased difficulty in obtaining or renewing licences and permits required to operate or expand in certain jurisdictions.
Sasol Mining Pty Ltd (Sasol Mining) is obliged to comply with the 2018 Broad-Based Socio-economic Empowerment Charter for the Mining and Metals Industry (the Mining Charter) requiring Sasol Mining to empower local communities and local businesses with at least 51% Black-owned, 100% Black women-owned and designated groups companies. The target of procurement spend is increased from time to time in accordance with the Mining Charter. Failure to comply with the Mining Charter provisions might result in an adverse effect on Sasol Mining’s rights and licences.
Transformation and local content
We are required to interpret and understand the local content requirements for certain countries in which we operate. For example, in Mozambique we are required to interpret and comply with certain local content requirements to be able to enhance our social licence to operate in the domestic oil and gas industry. As a result, not understanding or complying with these local content requirements exposes Sasol to potential negative regulatory, financial and reputational risks, which may in turn cause a degradation of community relations and loss of competitiveness.
Further, we may not be able to ensure compliance with transformation requirements or with newly imposed regulations. For example, value creation, if any, to the majority of the Sasol Khanyisa (Sasol Khanyisa) shareholders at the conclusion of the Sasol Khanyisa Transaction (as defined below) is exposed to the inherent business risks of Sasol South Africa Limited (SSA) during the 10-year empowerment period of the Sasol Khanyisa transaction. The value created is determined with reference to the extent the fair value of SSA and any dividends declared by SSA exceed any outstanding vendor financing related to the Sasol Khanyisa shareholding transaction at the end of the transaction period. Any adverse impact on dividend distributions to the Sasol Khanyisa shareholders or on the valuation of the SSA business on conclusion of the transaction will reduce the ultimate value created, which could negatively impact Sasol’s ability to meet B-BBEE targets. See “Item 4.B— Business Overview— Empowerment of historically disadvantaged South Africans”.
ESG practices, especially regarding diversity, equity, inclusion, and belonging (DEIB), have been increasingly subject to political controversy in the United States most recently as a result of the executive orders signed by the U.S. administration on 20 January 2025, and 21 January 2025 respectively, aimed at limiting DEIB initiatives in the workplace. Sasol’s policies and practices regarding DEIB and other ESG-related matters, including previously established goals and initiatives, or disclosures that may be required by non-U.S. laws, may expose the Company to legal, reputational and other risks, including anti-ESG and anti-DEIB-related orders, investigations, legislation, litigation, media coverage and scrutiny, boycotts and negative publicity from investors and other stakeholders.
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In addition, the JSE Listings Requirements mandate that listed companies have a broad diversity policy focused on the promotion of various diversity attributes including gender diversity and report on gender representation to their stakeholders. Similarly, the Mineral and Petroleum Resource Development Act 28 of 2002 (MPRDA) through the Mining Charter requires that at least 20% of the members of the board of directors for mining companies are to be women. There can be no assurance that Sasol will be able to recruit, attract and/or retain qualified members of its board of directors and satisfy gender and diversity requirements under the JSE Listing Requirements, the MPRDA or any other law that may become applicable to the Company, which may expose Sasol to financial penalties and adversely affect its reputation.
Sasol cannot predict what regulatory or other changes may occur in the future and may not be able to meet the conflicting expectations of some or all of its investors, customers, vendors, employees and other third parties (including governmental entities and officials and non-governmental organisations) regarding various aspects of its business, including with respect to DEIB and other ESG matters.
Disruptive industrial action
While the Sasol employee relations landscape is relatively stable, the South African and Mozambican labour markets are typically volatile and can be characterised by major industrial action in key sectors of the economy, especially during the seasons of wage negotiations. The current socio-economic climate, fragile political landscapes, cost-of-living pressures and high unemployment rates increase this risk.
Jurisdictional and Sovereign Risk Factors
Country-specific risks that are applicable to the jurisdictions in which we operate, and which may have a material adverse effect on our business, include:
● expropriation of assets;
● non-performance by state-owned enterprises in South Africa such as Eskom and Transnet. See “—Risks related to the safety and reliability of our operations—Constraints in the supply of water and electricity utility cost increases in excess of inflation as well as poor infrastructure may impact our operations”;
● lack of capacity (financial or otherwise) to deal with emergency response situations; and
● terrorism threats.
Our global asset base and market footprint expose us to negative impacts of tariffs and/or trade barriers that may inhibit our ability to place products across regions.
Our global asset base and diversified market footprint expose us to adverse impacts from tariffs, trade restrictions, and protectionist policies. These barriers can limit our ability to efficiently place products across key regions, disrupt established supply chains, increase input costs, and reduce market access particularly in jurisdictions where Sasol operates manufacturing hubs or exports specialty chemicals and energy products.
In the United States, the new administration is imposing and increasing tariffs on imports into the country and may impose additional tariffs or further increase existing tariffs on imports. Other countries are also responding by imposing or increasing tariffs and may introduce further restrictions on imports. Any or all of these measures or restrictions may impact our ability to service our customer base in a cost-effective manner.
Changes in trade policy might also provoke retaliatory measures from affected countries, which could limit our ability to conduct business in those markets or decrease the number of foreign customers purchasing our products. Consequently, we may face higher costs for components used in our products, increased manufacturing expenses, currency exchange rate volatility, and elevated prices for our products in foreign markets. Additionally, protectionist policies and regulations could encourage our customers to shift their operations or supply chains to their own countries or others, or require their contractors, subcontractors, and agents to do the same, potentially undermining our current levels of productivity and manufacturing efficiency, manufacturing expenses, and currency exchange challenges.
Risks related to our capital investments
We may not achieve projected benefits of acquisitions or divestments
We may, from time to time and subject to favourable market conditions, pursue acquisitions or divestments. Further, the rise of factors and concerns relating to sustainability and ESG issues in investment decisions may also result in certain divestments.
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With any such transaction, there is the risk that any benefits or synergies identified at the time of such acquisition or divestment may not be fully achieved as a result of changing or inappropriate assumptions, materially different market conditions, integration challenges or other factors. Furthermore, we could be found liable, regardless of extensive due diligence reviews, for past acts or omissions of the acquired or disposed business without any adequate right of redress.
In addition, in the event we choose to raise debt capital to finance acquisitions, our leverage will increase. Should we choose to use equity as consideration for an acquisition, our existing shareholders may suffer dilution. Alternatively, we may choose to finance any future acquisitions through our existing resources, which could decrease our ability to fund future capital expenditure, expand our business and pay dividends.
Our projects and capital investments may be subject to schedule delays and cost overruns, and we may face material changes in market conditions or other business assumptions, which could render our projects unviable or less profitable than anticipated
Our capital projects were and are subject to the risk of delays and cost overruns inherent to any project, including as a result of:
● shortages or unforeseen increases in the cost of equipment, labour and raw materials whether as a result of inflation, global supply chain disruptions, geopolitical tensions or otherwise;
● unforeseen design and engineering problems, contributing to or causing late additions and/or increases to scope;
● unforeseen construction problems and/or fraudulent activities and criminal syndicates;
● unforeseen failure of mechanical parts or equipment;
● unforeseen technical challenges on start-up causing delays in beneficial operations being achieved;
● inadequate phasing of activities;
● unforeseen safety issues;
● labour disputes;
● inability to recruit or retain labour with the required expertise to execute the project/capital investment;
● lack of community support;
● inadequate workforce planning or productivity of workforce;
● inadequate change-management practices which are aligned with our business needs;
● natural disasters and adverse weather conditions, including excessive winds, higher-than-expected rainfall patterns, tornadoes, cyclones and hurricanes or a pandemic;
● failure, or delay, to source equipment or materials by third-party suppliers and/or service providers;
● significant variations in the assumptions we make in assessing the viability of our projects, including those relating to budget development, capital and operating costs, commodity prices and the prices for our products, exchange rates, import tariffs, interest rates, discount rates (due to changes in country risk premiums) and the demand for our products; and
● delays in regulatory approvals and changes in compliance obligations, changes to regulations including changes to environmental regulations, construction and operating licences, price and tariff determination methodologies and/or identification of changes to project scope necessary to ensure safety, process safety, and environmental compliance.
For example, the development of projects such as the field development plan amendment of the PSA in Mozambique (which allows for flexible production from different reservoirs) involves capital-intensive processes carried out over long periods of time. Any cost overruns, schedule delays, reservoir performance issues, process safety incidents or adverse changes in assumptions affecting the viability of the project could have a material adverse effect on our business, operating results, cash flows, financial position and prospects.
In addition, our capital projects are subject to high inflation risk. For the impact of high inflation on costs of operations and the material adverse impact on our financial position, see “—Risks related to economic, political or social factors—Economic, political or social factors affecting the regions in which we operate may have a material adverse effect on our operations and profit—Fiscal and monetary policies / Political and social uncertainty”.
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The concentration of service providers supplying the oil and gas industry and the immaturity of the supplier market in Mozambique may adversely affect our business or our operations
The service provider market supplying the oil and gas industry in Mozambique is not mature and we rely heavily on international contractors to support our projects. In most instances, costs are increased on the basis that local contractors are required to be appointed over international contractors to comply with local content requirements, who then subcontract to the international contractors. With the global oil and gas market booming due to increased activity, global supply chain constraints and increased supply and demand for services has resulted in price increases. We rely on local service providers to fulfil their contracts at acceptable rates and should one or more of these contracts be terminated as a result of increased rates, particularly for our well delivery operations, we may be unable to speedily replace these services on terms that are acceptable to us, increasing our costs, disrupting our operations and materially affecting our financial position.
Further, although our procurement policy requires service providers to acknowledge and ensure adherence to our corporate values and ethical standards, there is a risk that instances of unethical conduct may occur, and such instances could impact our reputation. If we identify that a service provider fails to meet these standards, such service provider may be required to be replaced, which in turn could cause additional strain on the supply chain (thereby increasing costs and delivery times), particularly if any of our largest service providers were to be implicated.
Exposure related to significant investments in associates and joint arrangements may adversely affect our business, operating results, cash flows and financial position
The development of projects may require investments in associates and joint arrangements some of which are aimed at facilitating entry into countries and/or sharing risk with third parties. As a result, we have invested in a number of associates and joint arrangements, and we continue to consider such opportunities where appropriate.
Although the risks are shared, the objectives of our associates and joint arrangement partners, their ability to meet their financial and/or contractual obligations, compliance with legal requirements,
compliance to safety, health and environmental requirements and standards, behaviour and ethical standards may result in disputes, litigation, sanctions and/or suspension of licences which in turn may have a material adverse effect on our business, operating results, reputation, cash flows and financial condition, and may constrain the achievement of our growth objectives.
It is noted that the parent company of Prax SA has recently entered into administration and has been placed under liquidation in the UK. Prax SA is Sasol’s joint venture partner in the Natref refinery. This development introduces uncertainty regarding Prax SA’s ability to meet its financial and governance obligations within the joint arrangement, which may impact decision-making and strategic alignment at Natref.
We may not pay dividends or make similar payments to shareholders in the future due to various factors
As further described under “Item 8––Financial Information”, the Company’s dividend policy takes into consideration various factors, including overall market and economic conditions, Sasol’s financial position, and capital investment plans.
Whether funds are available for distribution to shareholders depends on a variety of factors, including the quantum of leverage, the amount of cash available, our capital expenditure and other liquidity requirements existing at the time. Given these factors and our board of directors’ discretion to declare cash dividends or other similar payments, dividends may not be paid.
Risks related to the safety and reliability of our operations
Constraints in the supply of water and electricity, utility cost increases in excess on inflation as well as poor infrastructure may impact our operations
Our operations are located in multiple regions across the world and are reliant upon the stable supply of electricity, availability of water and access to transportation routes in order to optimally run our operations and/or move our products. The infrastructure in South Africa, such as rail, electricity (both the generation and transmission of electricity) and inland water supply systems need to be maintained, upgraded and expanded, and in certain instances, such improvements may need to be funded at our own cost. In addition, we have operations in locations that may be
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subject to substantial electricity cost increases, including but not limited to our operations in Europe. These increases may be driven by, among other factors, geopolitical events, regulatory actions and/or ESG considerations. Any lack of access to reliable electricity supply, limited access to water, above-inflation utility cost increases, infrastructure challenges, or failure to identify and obtain the resources required to establish the infrastructure necessary for the development of our projects could have a material adverse effect on our business, operating results, cash flows, financial position and future growth.
A reliable supply of electricity is important to run our plants optimally. While we have the capacity to generate half of our own electricity requirements at our South African operations, we remain dependent on external electricity supply from Eskom. Severe weather conditions can disrupt the supply of coal to Eskom’s power stations and result in disruptions to its electricity production and supply.
South Africa’s electricity supply improved during calendar year 2024, with a reduction in load curtailments during the first quarter and no-load curtailments in the second quarter due to a reduction in unplanned outages of the Eskom fleet and a reduced demand due to the private sector and households moving to solar energy generation. In 2025, Eskom’s cost of generating electricity per unit has increased above the national inflation rate. As a result, Eskom has imposed additional tariff increases which in turn have affected our cash flows. Eskom continues to request above-inflation tariff increases and punitive measures for solar users. We may again in the future be subject to intermittent load curtailments.
The availability of water is becoming increasingly constrained as demand increases in the catchment areas within which we operate, specifically in South Africa, exacerbated by the effects of climate change. A significant part of our operations requires the use of large volumes of water. South Africa is generally an arid country with a highly variable climate, and prolonged periods of drought, sudden floods, significant changes to current water laws or our related permits/authorisations could increase the cost, management or availability of our water use and supplies or otherwise impact our operations. Water use by our operations varies widely depending largely on feedstock and technology applied. Water to our South African operations is supplied from the Integrated Vaal River System (IVRS), which makes up about 81% of Sasol’s total water demand. While the water supply to
these operations remains secure, expectations are that this situation may worsen. This may lead to issues of the imposition of restrictions on its use, specifically during periods of drought. Seasonal changes and ineffective management of water quality objectives when considering impacts of industry and other water users can result in a deterioration in the quality of water supplied from the IVRS. This in turn can lead to feed water that is periodically of poor quality, resulting in increased treatment costs and higher water use. Although various technological advances may improve the water efficiency of our processes, these are capital intensive. We may also experience limited water availability due to periodic drought events. Deterioration in water quality and other infrastructure challenges related to our South African operations could have a material adverse effect on our business, operating results, cash flows, financial position and future growth.
Lack of infrastructure reliability and availability could equally impact our operations. The transportation of inbound materials to our plants and of products to our customers is reliant on the region’s available workforce and infrastructure. Numerous factors like natural disasters, labour strikes, political unrest, compromised infrastructure, criminal activity, pandemics or extreme weather events may impact transportation modes which could have a material adverse effect on our business, operating results, cash flows, financial position and future growth. For further information on operational interruptions impacting our business or value chains, which may have a material adverse effect on volumes produced and costs, see “—Risks related to the safety and reliability of our operations—We may face potential costs as well as harm to our reputation in connection with incidents causing property damage, personal injury or environmental contamination and industry and value chain-related operational interruptions”.
Moreover, unplanned rail and port outages in South Africa could cause a negative impact on our sales volumes, cost and profitability while exposing the Company to the risk of increased road transport accidents. While we rely on some of our own infrastructure and have other options available at our South African operations, we remain dependent on Transnet (for example, for exports from South Africa). Transnet often operates with delays and cancellations, impacting our ability to export our chemicals products timeously and thus resulting in financial losses and reputational damage.
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We may face potential costs as well as harm to our reputation in connection with incidents causing property damage, personal injury or environmental contamination, and industry and value chain-related operational interruptions
Operational interruptions impacting our business or value chains may have a material adverse effect on volumes produced and costs. This impact could be caused by the failure of critical assets, extreme weather events or natural disasters, lack of required feedstock volumes and quality (specifically coal, natural gas, crude oil, petroleum, ethane and ethylene), supply chain disruptions (inbound and outbound, including critical input or process materials and reliance on third party infrastructure), utility interruption (including electricity, water, oxygen, steam, hydrogen, nitrogen, and reliance on third party suppliers and infrastructure), cleaning costs in relation to contamination or a breach of our social licence to operate (including non-compliance with regulatory requirements, licences or permits).
We operate coal mines, explore for and produce gas and operate a number of plants and facilities for the manufacture, storage, processing and transportation of crude oil, chemicals and gas, related raw materials, products and waste materials. These facilities and their respective operations are subject to various risks, such as fires, explosions, loss of containment of hazardous substances, and soil and water contamination, among others. For example, on 4 January 2025, a fire occurred at the Crude Distillation Unit in the Natref crude oil refinery. While no personnel sustained any injuries, fire damage was sustained to instrumentation, electrical cabling, and piping in the immediate vicinity of the leak. This resulted in the Natref refinery not being operational for two months.
Due to the nature of our operations, we are subject to the risk of experiencing, and in the past have experienced, industry-related incidents. Further, if we fail to provide safe working environments for our employees and the public while at our facilities, and surrounding communities, premises or adequate product transportation, it could lead to injuries, loss of life and work stoppages, halting production. Such incidents may lead to inspections conducted by relevant authorities, with the associated potential consequences of enforcement action, including directions to temporarily cease and desist operations and/or the imposition of fines and penalties, and potentially could lead to the denial of our licence to operate. For
example, in South Africa, section 54 of the Mine Health and Safety Act, 29 of 1996 (the Mine Health and Safety Act) allows an inspector, who has reason to believe that any occurrence, practice or condition at a mine endangers or may endanger the health or safety of any person at the mine, to give any instruction necessary to protect the health and safety of such person. Most often these instructions will result in the operations of the whole or a part of a mine being stopped, resulting in significant production losses as well as reputational harm.
Further, Sasol operates the Pande and Temane gas fields in Mozambique. The production of gas through wells, pipelines and a processing plant is inherently exposed to the risk of integrity failures (including legacy well obligations and historical issues) which may result in a loss of containment and/or a disruption of gas supply to our own and/or customers’ operations which in turn could have a material adverse effect on our revenue, cash flows, costs and reputation. This may have a material adverse effect on our business. See “Item 4.B—Business overview—Regulation—Safety, health and environment—Regions in which Sasol operates and their applicable legislation”.
Our facilities may also be subject to deliberate disruptions
Deliberate disruptions, such as acts of terror, may result in damage to our facilities and may require the shutdown of the affected facilities, thereby disrupting production and increasing production costs and may in turn disrupt the mining, gas, chemicals and oil businesses which make up a significant portion of our total income. Furthermore, acts of terror at our operations may cause environmental contamination, personal injuries, health impairment or fatalities which expose Sasol to extensive environmental remediation costs, civil litigation, the imposition of fines and penalties and the need to obtain or implement costly pollution-control technology.
Further, while we actively monitor the gas pipeline from Mozambique as well as the gas pipeline network in the parts of South Africa where our piped-gas business operates, there is no certainty that there will not be third-party encroachment (whether inadvertent or deliberate) along the gas pipeline, and such encroachment may cause significant interruptions to our operations and may cause physical harm to perpetrators.
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Our operations in the Southern Africa region are further susceptible to business interruptions which could result from community protests and social unrest. These have from time to time resulted in violent incidents which remain challenging to manage.
The costs we may incur as a result of the forementioned or related factors could have a material adverse effect on our business, operating results, cash flows and financial position.
Risks related to legal, regulatory and governance matters
Our shareholders might lose confidence in our financial and other public reporting if we continue to identify material weaknesses, and fail to maintain an effective system of internal controls over financial reporting which in turn may adversely affect our share price
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting and for evaluating and reporting on the effectiveness of our system of internal controls. We identified material weaknesses in internal controls over financial reporting for the financial year ended 30 June 2025. These material weaknesses relate to the following:
● lack of adequate resources and understanding of the application of internal controls over reporting (ICFR), resulting in ineffective design and implementation of internal controls across the South African and Eurasian businesses particularly as it pertains to the level of precision and evidence of review, including the completeness and accuracy of the information relied upon;
● inadequate design and implementation of risk assessment processes relating to the methodology for the process for determining material entities for internal controls over financial reporting purposes;
● inadequate design and execution of controls over revenue recognition processes and supporting systems at the South African operations;
● insufficient precision in determining the completeness and accuracy of information
used in Southern African impairment processes;
● ineffective information technology (IT) general controls over user access and the management of changes to certain financial reporting systems for the South African operations; and
● ineffective design and implementation of controls related to the implementation of a new ERP system at an Italian subsidiary that forms part of the Chemicals Eurasia segment.
We cannot be certain that our internal controls over financial reporting or disclosure controls and procedures will be effective or ensure that we will design, implement and maintain adequate controls over our financial processes and reporting in the future. If we continue to fail to implement newly required or improved controls, or to adapt our controls or difficulties encountered in their operation, this could prevent us from meeting our financial reporting obligations or result in a restatement of previously disclosed financial statements. These financial reporting obligations include filing our periodic reports with the SEC on a timely basis and maintaining compliance with applicable New York Stock Exchange (NYSE) listing requirements.
In addition, material weaknesses and any resulting restatements could require additional remedial measures, including additional personnel and system changes, which could be costly and time consuming and also could subject us to regulatory scrutiny and litigation that could have a material adverse effect on our business and our reputation.
Furthermore, if we are unable to maintain an effective system of internal controls over financial reporting or disclosure controls and procedures, investors may lose confidence in the reliability of our financial statements, and this may have an adverse impact on investors’ ability to make decisions about their investment.
Actual or alleged non-compliance with regulatory requirements could result in criminal or civil enforcement and associated sanctions and/or harm our reputation and negatively impact our licence to operate
Non-compliance with laws and regulatory requirements, particularly with anti-corruption and anti-
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bribery laws, sanction laws, environmental laws, competition or anti-trust laws and data privacy laws have been identified as our top five regulatory risks.
Anti-corruption and anti-bribery laws
Ethical misconduct and non-compliance with applicable anti-corruption/anti-bribery laws by Sasol employees or business partners could result in criminal or civil sanctions and could have a material adverse impact on our reputation, operations and licence to operate.
We, like other international petrochemical companies, have a geographically diverse portfolio and conduct operations in some countries which have a perceived prevalence of corruption. Our operations must comply with applicable anti-bribery laws, such as the US Foreign Corrupt Practices Act, as well as similar anti-corruption and anti-bribery laws of South Africa and other applicable jurisdictions. Major investments in countries with high corruption exposure create an elevated risk when dealing with private companies, governments or government-controlled entities. We additionally face risks associated with the deployment of Sasol sales agents, consultants, customs clearance agencies and other intermediaries, since we could be held liable for any of their actions (including actions in violation of anti-corruption laws and regulations), even if these third parties act independently. While we have an anti-corruption and anti-bribery compliance and training programme in place (including a third-party due diligence process) we cannot provide assurance that there will be no violation, and any such violation could result in substantial criminal or civil sanctions and could damage our reputation.
Sanctions laws
Our international operations require compliance with applicable trade and economic sanctions, or other restrictions imposed by governments, such as the US and the UK, and organisations such as the United Nations, the European Union (EU) and its member countries. Non-compliance with applicable sanction laws by Sasol employees or business partners could result in criminal or civil sanctions. Although we closely monitor developments in these sanctions programmes, a violation of any of these sanctions regimes could lead to a loss of import or export privileges, penalties against or the prosecution of Sasol and our employees, which could have an adverse effect on our reputation, business, operating results, cash flows and financial position.
While we have a sanctions compliance programme and sanctions screening systems in place, there can be no assurance that we will comply in the future, particularly as the scope of certain laws may be unclear and subject to frequent amendments or differing interpretations.
Environmental laws and regulations
See “—Risks related to legal, regulatory and governance matters—Changes in environmental, health, safety and chemical regulations, other legislation and public opinion may adversely affect our business, operating results, cash flows and financial position”.
Competition laws/Anti-trust laws and Consumer Protection laws
Non-compliance with competition/anti-trust legislation and/or consumer protection laws could expose Sasol to administrative penalties, civil claims and damages, including punitive damages. Such penalties and damages could be significant and have an adverse impact on Sasol’s business, operating results, cash flow and financial position. In addition, Sasol’s reputation could be damaged by findings of such contraventions and individuals could be subject to fines and/or imprisonment in countries where competition/anti-trust/consumer protection law violations are a criminal offence.
While it is our policy to comply with all applicable laws and we have related training and compliance programmes in place for our employees and where applicable, business partners, we could inadvertently contravene competition/anti-trust laws and/or consumer protection laws and be subject to the imposition of fines, criminal sanctions and/or civil claims and damages which may have a material adverse impact on our reputation, business, operating results, cash flows and financial position.
Labour and Employment laws
Various parts of Sasol’s operations globally have employees who are members of trade unions or works councils. In South Africa and Europe, the right to strike is constitutionally protected. Should trade unions and work councils exercise this right based on legitimate legal grounds, or should they do so under arbitrary considerations, it could negatively affect our production and general operations.
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Data privacy laws and regulations
We operate in countries that have data protection laws and regulations. It is our policy to comply with all applicable laws, and we implement numerous training, awareness and data privacy compliance programmes. However, non-compliance with data protection laws could result in fines and/or civil claims and damages. Further, uncoordinated or divergent global legislative standards and regulatory frameworks for digitalisation, including the rise in artificial intelligence (AI), could heighten this risk, which could have a material adverse impact on our reputation and a consequential financial impact. See “—Risks related to information management— We may face the risk of data breaches or attempts to disrupt critical information and operational technology services, which may adversely impact our operations and business continuity.”
South African exchange control and other regulations
South African law provides for exchange control regulations which apply to transactions involving South African residents, including both natural persons and legal entities. These regulations may restrict the export of capital, funds and cash from South Africa, including foreign investments and may require us to obtain regulatory approval from the SARB for certain of our international debt financing. The regulations may also affect our ability to borrow funds from non-South African sources for use in South Africa, including the repayment of these borrowings from South Africa and, in some cases, our ability to guarantee the obligations of our subsidiaries with regard to these funds. These restrictions and inability to obtain SARB approval where required may affect the manner in which we finance our transactions outside South Africa and the geographic distribution of our debt, which could also impact our financial and strategic flexibility.
Tax laws and regulations
We operate in multiple tax jurisdictions globally and are subject to both local and international tax laws and regulations. Although we aim to fully comply with tax laws in all the countries in which we operate, tax is a highly complex area leading to the risk of unexpected tax uncertainties. Tax laws or dispensations, including incentive programmes, are changing regularly, and their interpretation may potentially result in ambiguities and uncertainties, in
particular, in the areas of international taxation and transfer pricing.
Where the tax law is not clear, we interpret our tax obligations responsibly, relying on our legal and tax advisors as deemed appropriate. Tax authorities and courts may arrive at different interpretations from those taken by Sasol, which may lead to substantial increases in tax payments. Although we believe we have adequate systems, processes and people in place to assist us with complying with all applicable tax laws and regulations, the outcomes of certain tax disputes and assessments may have a material adverse effect on our business, operating results, cash flows and financial position.
We could also be exposed to significant fines and penalties or enforcement measures, including legal action and tax assessments, despite our best efforts at compliance. In response to tax assessments or similar tax deficiency notices in particular jurisdictions, we may be required to pay the full amount of the tax assessed (including stated penalties and interest charges) or post security for such amounts notwithstanding that we may contest the assessment and related amounts.
For more information regarding pending tax disputes and assessments see “Item 4.B—Business overview—Legal proceedings and other contingencies”.
Ownership rights
In Africa, ownership rights in respect of land and resources are uncertain, giving rise to potential disputes or other community disagreements. The impact of these related disputes is not always predictable and may cause disruption to our operations or development plans.
Legal and regulatory uncertainties
Inconsistency of enactment, interpretation, and application of regulations, particularly between developed and developing countries, increases legal and regulatory uncertainty, which may affect both our decision to pursue opportunities in certain countries and our cost of operations.
Further, legal and regulatory uncertainties could result from changes in regulatory and legal policies of governments and/or delays in the implementation thereof. See “—Risks related to
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economic, political or social factors—Economic, political or social factors affecting the regions in which we operate may have a material adverse effect on our operations and profit––Political and social uncertainty”.
Stringent South African regulations in the areas of mining, petroleum and energy activities may have an adverse effect on our mineral rights and impact our business, operating results, cash flows and financial position
Mining legislation
Some South African mining legislation is currently under review and subject to repeal and replacement. For example, once promulgated, the Upstream Petroleum Resources Development Act 23 of 2024, assented to by the President of South Africa on 25 October 2024, will repeal and replace certain mineral and mining-related matters currently governed by the MPRDA. Such changes, depending on their nature, may impact our operations resulting in higher cost of production and higher compliance costs.
Another example is the Mining Charter, which contained more stringent compliance criteria than the previous Mining Charter, especially in respect of applications for new mining rights and the requirements in respect of the procurement of mining goods. The Mining Charter had a two-fold material adverse effect on Sasol Mining: firstly, it led to a higher cost of production, and secondly, it increased the risk of being non-compliant with the requirements of the Mining Charter.
Amendments to the MPRDA, associated regulations to be promulgated, the Financial Provisioning Regulations and the Mining Charter may have a material adverse effect on our business, operating results, cash flows and financials. The Draft Mineral Resources Development Bill, 2025 (the Draft Bill) was published on 20 May 2025 for public comment. It is at this stage unclear whether the Draft Bill will be enacted in its current form or whether it will be amended pursuant to the comments received. The Draft Bill contains aspects which may have an impact on the business but which impact cannot be assessed with certainty at this stage. These include a new provision that certain transformation-related matters will in future be contained in regulations. The contents of these regulations are however not yet known. The prescribed penalties for certain offences in terms of the Draft Bill have been substantially
increased to 5% of annual turnover for some offences and 10% of annual turnover for other offences. See “Item 4.B—Business overview—Regulation—Empowerment of historically disadvantaged South Africans—The Mining Charter”.
Legislation in relation to petroleum and energy activities
Legislation in South Africa in relation to petroleum and energy activities, such as the Petroleum Products Amendment Act 2 of 2005 (the Petroleum Products Act), currently under review (by way of the new Petroleum Products Bill published on 21 October 2024 which is still in the public comment phase), entitles the minister and government to regulate the prices, specifications and stock holding of petroleum products. Such price regulation and maximum price imposition may have a material adverse effect on our revenue and competitiveness, operating results and cash flows particularly as compared to other suppliers of products such as ours, in other jurisdictions with no such price regulations. The Petroleum Products Act also regulates the issue of licences for the manufacturing and trading in petroleum products, as well as the operation of retail filling stations, and provides for the imposing of fines and other punitive measures for failure to comply with the licence conditions and/or the provisions of the Petroleum Products Act.
In South Africa the Gas Act 48 of 2001 (the Gas Act), currently under review, in addition to allowing NERSA to approve gas transmission tariffs and maximum gas prices, also provides NERSA with the authority to issue licences for the construction and operation of gas pipelines and to impose fines and other punitive measures for failure to comply with the licence conditions and/or the provisions of the Gas Act. Any disagreement or dispute we may have with NERSA regarding gas pricing could impact our licences to operate, subject us to fines and could result in a material adverse effect on our business, operating results, cash flows and financial position.
Changes in environmental, health, safety and chemical regulations, other legislation and public opinion may adversely affect our business, operating results, cash flows and financial position
We are subject to a wide range of general and industry-specific environmental, health, safety, chemical and other legislation in the jurisdictions in which we operate. See “Item 4.B—Business overview—
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Regulation—Safety, health and environment—Regions in which Sasol operates and their applicable legislation”.
Stakeholder challenges in relation to environmental legislation
One of our most material challenges is ensuring that we remain able to anticipate and respond to the rapidly changing legal landscape and associated stakeholder expectations, in particular relating to environmental legislation in all areas where we operate. Evolving legislation imposing more stringent air quality thresholds, climate change disclosure obligations and water, waste and chemicals management requirements may introduce further compliance challenges to our operations. These laws and regulations and their enforcement are likely to become more stringent over time in all the jurisdictions in which we operate, although these laws and regulations in some jurisdictions are already more established and mature than in others.
Any non-compliance may result in administrative or criminal enforcement action, which may include directives to cease operations, fines and penalties as well as prosecution and sanctions, and could harm our reputation and relationships with stakeholders, in turn, having a material adverse impact on our business.
Non-government organisations (NGOs), activists and other stakeholders increasingly use environmental, health and safety permitting processes, including ours, to challenge a company’s practices to promote greater environmental sustainability in both operations and value chains. We expect this activity to increase over time, which could impede our ability to obtain or renew permits or result in more stringent compliance standards. Protests are being experienced at Annual General Meetings (AGMs), such as at Sasol’s AGM on 17 November 2023, particularly regarding a company’s perceived climate impacts.
Further, our permits and operational licences require input from stakeholders in certain of the jurisdictions in which we operate and there is a trend by activists to challenge the issuance or renewal of a company’s licences based on climate, health or other impacts associated with the licensed activities. In addition, the increased litigation risk for companies related to ESG issues (including climate change, greenwashing concerns or allegations, environmental justice and public disclosure of strategies) could
adversely impact the resilience of Sasol’s operations and our continued licence to operate See “Item 4.B—Business overview—Regulation” for more detail.
Compliance costs associated with additional or new regulation
The costs associated with compliance with additional or stricter regulation of environmental and climate issues could be significant and could have a material adverse impact on our business, operating results, cash flows and financial position. For further information on the impact of carbon taxes see “—Risks related to our sustainability— The effectiveness of our strategy to respond to climate change, including compliance with evolving regulatory requirements, our adoption of policies and implementation of plans to reduce GHG emissions as well as other pollutants while adequately disclosing related risks, strategies and impacts, is subject to uncertainties and related regulatory and public scrutiny. This scrutiny could result in negative sentiments and environmental claims adversely impacting our business. In addition, laws, policies and societal concerns related to climate change could reduce supply/demand for our products, increase our operational costs, reduce our competitiveness, negatively impact our stakeholder relations, or adversely affect our licence to operate and impede our access to capital and financing.”
From our chemicals business perspective, our products must be registered in accordance with regulatory requirements in many of the countries in which we operate and sell. For example, in the EU, these requirements include filing of registration, evaluation, authorisation and restriction of chemicals (REACH) registrations for chemicals we produce in or import into Europe. In other regions, such as the US, China and other Asian countries, chemical notifications have to be filed for new chemicals. Many countries are in the process of revising their chemicals regulations based on the EU REACH regulation, including the UK. All of these changing chemical regulations come with further obligations and requirements with which Sasol will need to comply, resulting in increased compliance costs and, in the event of non-compliance, the imposition of fines or penalties and other enforcement actions that could materially impact our operations.
Further, South Africa is aligning its regulatory systems with international commitments on safe chemicals management including the Globally Harmonized System of Classification and Labelling of Chemicals (GHS). The Hazardous Chemical Agent
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Regulations require South African employers to ensure that their workplaces comply with more stringent occupational exposure limits (OELs) for identified substances within a specified transition period. Compliance with some OELs require Sasol’s mature plants to be retrofitted with the necessary abatement equipment, leading to significant capital investment and extended lead-time to ensure compliance for certain substances at some of our plants. Any instances of non-compliance may result in administrative or criminal enforcement action, which may include instructions to suspend operations, fines and penalties, as well as prosecution and sanctions, which could harm our reputation and relationships with employees and stakeholders, in turn, materially adversely impacting our business.
We have applied to the relevant authorities for extended time frames for implementation of such retrofits. While some of the extensions have been granted, the approved periods granted are shorter than those initially requested. As a result, we may be required to submit further exemption applications to allow for the full implementation of the mitigation plans. Additional requests for extensions are still pending, and the outcomes of these applications remain uncertain. Accordingly, we cannot provide assurance that further exemptions will be granted. Further challenges include the practical execution of the GHS labelling system on our pipelines. Although Sasol has obtained certain labelling exemptions and is actively working towards full compliance, additional extensions may be required in the future due to shortened implementation timelines, as was the case with the OEL exemptions outlined above.
At Sasol, systems and processes are in place, monitored and improved upon, to ensure our compliance with laws and regulations applicable to Sasol and our obligations up and down the value chain. However, we cannot guarantee that we will be in compliance with all laws and regulations at all times. For example, non-compliance with environmental, health or safety laws and regulations may occur from system or human error in monitoring our emissions of hazardous or toxic substances into the environment, such as the use of incorrect methodologies or defective or inappropriate measuring equipment, errors in manually capturing results, or other mistaken or unauthorised acts by our employees or service providers.
Public opinion of public health and safety
There is growing public opinion and awareness of the hazards to public health and safety associated with the manufacturing and use of chemicals and industries reliant on fossil fuels. This related social opposition is further heightened through the increased use of social media, other user-generated content and online press. As a result, given the nature of our operations, we may be subject to increased scrutiny and liabilities, due to our use, manufacture, transport and/or exposure to these materials and related emissions.
Any changes in environmental, health, safety and chemical laws and regulations, other legislation and public opinion may adversely affect our business, operating results, cash flow and financial position.
We are subject to risks associated with litigation and regulatory proceedings
As with most large corporations, we are from time to time a party in various lawsuits, arbitrations, regulatory proceedings, investigations or other disputes. Litigation, arbitration and other such legal proceedings or investigations involve inherent uncertainties and, as a result, we face risks associated with adverse judgements or outcomes in these matters. Even in cases where we may ultimately prevail on the merits of any dispute, we may face significant costs of defending our rights, lose certain rights or benefits during the pendency of any proceeding or suffer reputational damage as a result of our involvement. We are currently engaged in a number of legal and regulatory proceedings and arbitrations in various jurisdictions. See “—Risks related to economic, political or social factors—Economic, political or social factors affecting the regions in which we operate may have a material adverse effect on our operations and profit—Transformation and local content.”
See also the litigation matters, described under “Item 4.B—Business overview—Legal proceedings and other contingencies”.
We could also face potential litigation or governmental investigations or regulatory proceedings in connection with the material weakness identified in our internal controls over financial reporting. See “—Risks related to legal, regulatory and governance matters—Our shareholders might lose confidence in our financial and other public reporting if we continue to identify material weaknesses and fail to maintain an effective system of internal controls over financial
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reporting which in turn may adversely affect our share price”.
Further, given the increasing requirements from regulators and investors related to public disclosure on climate change matters, we may be further exposed to challenges primarily from NGOs and shareholders, potentially resulting in increased related litigation risk. See “—Risks related to our sustainability—Risks relating to increasing disclosure requirements and scrutiny.”
There can be no assurance as to the outcome of any litigation, arbitration or other legal proceeding or investigation, and an adverse determination of material litigation could have a material adverse effect on our business, operating results, cash flows and financial position.
Intellectual property risks may adversely affect our freedom to operate our processes and sell our products and may weaken our competitive advantage
Our various products and processes, including most notably our specialty chemical and energy products and processes, have unique characteristics and chemical structures and, as a result, are subject to confidentiality and/or patent protection, the extent of which varies from country to country. Rapid changes in our technology commercialisation strategy may result in a misalignment between those countries where we apply our intellectual property protection filing strategy and the countries in which we operate. The disclosure of our confidential information and/or the expiry of a patent may result in increased competition in the market in relation to the relevant products and/or processes. In addition, aggressive patenting by our competitors, particularly in countries like the US, China, Japan and in Europe may result in an increased patent infringement risk and may constrain our ability to operate in our preferred markets.
A significant percentage of our products can be regarded as commodity chemicals. Some of our chemical products have unique characteristics and chemical structures which make the products more suitable for applications different from those of typical commodity products. These products are normally utilised by us or our customers, such as feedstock to manufacture specialty chemicals. We have noticed a worldwide trend of increased filing of patents relating to the composition of product formulations and the applications thereof. These patents may create pressure
on both Sasol and our customers who market these product formulations which may adversely affect our sales to these customers. These patents may also increase our risk of exposure to claims arising from limited indemnities provided to our customers of these products in case there is a patent infringement which may impact the use of the product by our customers. Patent-related pressures may adversely affect our business, market reputation, operating results, cash flows and financial position.
We believe that our proprietary technology, know-how, confidential information and trade secrets provide us with a competitive advantage. A possible loss of experienced personnel to competitors, and a possible transfer of know-how and trade secrets associated therewith, including the patenting by our competitors of technology built on our know-how obtained through former employees, may negatively impact this advantage. Similarly, operating and licensing technology in countries in which intellectual property laws are not well established and enforced may result in an inability to effectively enforce our intellectual property rights. The risk of some transfer of our know-how and trade secrets to our competitors is increased by the growth in the number of licences granted for our intellectual property, as well as the increase in the number of licensed plants which are brought into operation through entities which we do not control. As intellectual property warranties and indemnities are provided under each new licence granted, the cumulative risk increases accordingly. These risks may adversely affect our business, operating results, cash flow and financial position.
Risks related to our sustainability
The effectiveness of our strategy to respond to climate change, including compliance with evolving regulatory requirements, our adoption of policies and implementation of plans to reduce GHG emissions as well as other pollutants while adequately disclosing related risks, strategies and impacts, is subject to uncertainties and related regulatory and public scrutiny. This scrutiny could result in negative sentiments and environmental claims adversely impacting our business. In addition, laws, policies and societal concerns related to climate change could reduce supply/demand for our products, increase our operational costs, reduce our competitiveness, negatively impact our stakeholder relations, or adversely affect our licence to operate and impede our access to capital and financing.
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Transitional risk
Key manufacturing processes in South Africa, especially coal gasification and combustion, result in GHG emissions. Sasol’s ability to develop and implement appropriate climate change mitigation responses and provide sustainable product and feedstock solutions is a significant transitional risk for our business, most notably in South Africa. This is heightened by the need to appropriately address increasing societal pressures to shift away from carbon-intensive processes and products in a just manner, as well as meet new and anticipated policy and regulatory requirements, including carbon taxes, carbon budgets, legislated GHG reduction targets and enhanced disclosure requirements. In addition, meeting Sasol’s committed GHG reduction targets, and delivering on emission reduction roadmaps have inherent transitional risks related to, among other things, technology availability and cost. It is particularly challenging in South Africa, where access to low-carbon energy is limited, related infrastructure is under-developed and just transition implications need to be taken into account. Further, other companies that demonstrate a stronger track record of implementing climate change mitigation responses and providing more sustainable solutions, may enhance their ability to secure market opportunities, attract financing, and strengthen stakeholder confidence, which in turn could support higher growth and profitability over time, thus impacting our overall competitive position.
As part of the transition and shift away from carbon-intensive processes, there could be closure of certain mines in the future (particularly in the long term) which could result in rehabilitation and reclamation costs, including redeployment and re-training of employees. Further, cost estimates of such closure of operations may be based on inaccurate assumptions which could adversely affect our operations.
Access to lower-carbon opportunities
Delivery of our decarbonisation strategy depends partly on our ability to progress access to low- carbon resources and feedstocks. Our ability to progress access to upstream resources and develop technologies at a level in line with our strategic outlook for hydrocarbon production could impact our future production and financial performance. Furthermore, our ability to access low-carbon opportunities and the commercial terms associated with these opportunities could impact our financial performance and the pace of
our transition. In addition, failure to access low-carbon resources and exploit low-carbon opportunities at the required speed may lead to loss of customers.
In addition, failure to provide a glidepath for lowered product carbon footprint to at least 2030 and potentially beyond may result in the loss of some key customers in Europe.
Carbon tax and carbon budgets
A carbon tax was implemented in South Africa on 1 June 2019. Since then, the tax and the rates have increased significantly from R120/tCO2e in 2019 to R236/tCO2e in 2025. This has increased the costs of our South African operations. In addition, a significant increase in the carbon tax rate reaching R308 by 2026 and R462 by 2030 has been imposed. In the second phase, the carbon tax is likely to be integrated with a carbon budget, particularly in light of the recent signing into law of the Climate Change Act 22 of 2024 (the Climate Change Act). The tax is applicable to an entity’s scope 1 emissions for each calendar year with several allowances providing for a reduction in an entity’s carbon tax liability. Even though the allowances applicable to carbon tax, which could reduce the impact of the carbon tax, have been retained, the South African National Treasury has indicated that the allowance design might be amended. This potential change raises further concerns around the carbon tax implications for our business into the future.
Sasol’s net carbon tax payment for 2024 on calendar 2023’s GHG emissions, after offsets and electricity levies, was R1 010 million, and the payment for 2025 on calendar 2024’s GHG emissions paid in July 2025 is R832 million. The lower payment compared to 2024 is as a result of the higher offset purchases for the 2024 calendar year liability and lower emissions as a result of lower production. The extent of the cost increases resulting from the carbon tax is significant and it is expected that the tax rate will continue to increase beyond 2030.
The South African government is developing mandatory carbon budgets in parallel within the remit of the Climate Change Act, signed into law in July 2024 and which will become effective at a date to be proclaimed by the South African president. Once the carbon budget regulations are finalised, mandatory carbon budgets will be enforced, with a potential penal tax applicable should the budget be exceeded.
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There is an additional risk that non-compliance with mandatory budgets and GHG mitigation plans may still be regulated in the carbon budget regulations to be finalised. This would be a risk subject to criminal and administrative enforcement as provided for in the National Environmental Management Act, 107 of 1998.
Further, the risk of escalating standalone carbon prices and mandatory carbon budgets will be exacerbated should our fiscal instruments lack effective alignment with mitigation being available in this timeframe.
The assumptions we have used to test our resilience to climate change may be incorrect, and we may not be able to accurately ascertain our vulnerability to climate change
We use downscaled modelling to improve our understanding of the physical impacts on prioritised operational sites (Secunda, Sasolburg, Vilancoulos in Mozambique and Lake Charles in the US), using the intergovernmental panel on climate change high emission scenarios (referred to as representative concentration pathway (RCP) 8.5) and an intermediate emission scenario (RCP 4.5). Although modelling simulations span multiple decades, they focus on specific indicators such as temperature increases/decreases, changes in rainfall patterns and increased propensity for cyclones/hurricanes and may therefore not identify all potential risks or all potential impacts to these sites.
Further, there are risks associated with the accuracy and completeness of the various assumptions that are used as inputs, including scenarios developed to test resilience to climate change as set out below. In addition, the estimates of required or available capital and other assumptions underpinning necessary investments to make our business sustainable for the long term could prove to be incorrect and lead to delays, cost overruns or the infeasibility of capital expenditure projects. Should all or some of these assumptions prove to be inaccurate or incomplete, our resilience and long-term sustainability may be significantly impacted.
Risks associated with achieving the 2030 GHG reduction target and 2050 net zero ambition.
South Africa’s Nationally Determined Contribution (NDC), targeting an emission range of between 350-420 Mt CO2e by 2030, was submitted by the South African government to the United Nations
Framework Convention on Climate Change as part of South Africa’s obligations under the Paris Agreement for the 26th Conference of the Parties. NDC refers to South Africa’s climate change action plan to cut GHG emissions and adapt to climate change. Sasol is targeting a 30% scope 1 and 2 GHG emission reduction by 2030, off a 2017 baseline, which, if met together with reductions in other targeted sectors, will contribute to South Africa meeting its emission reduction range by 2030. Scope 2 GHG emissions are broadly defined as emissions attributable to Sasol’s use of purchased electricity and steam to conduct its operations. In addition, we set a 20% emission reduction target by 2030 for our scope 3 category 11 emission (Use of Sold Energy Products). We have also set a net zero ambition by 2050 for our scope 3 category 11 emissions and our scope 1 and 2 emissions. Category 11 accounts for approximately 80% of Sasol’s total scope 3 emissions. The achievement of our 2030 GHG reduction targets and 2050 ambition is primarily subject to the availability of capital to implement the roadmap, the availability of sufficiently developed renewable energy projects and grid infrastructure to route renewable energy to our operations, global supply chain challenges in the renewable energy sector, our ability to access sufficient and cost-effective carbon offsets and the ability to access markets in the jurisdictions within which we operate and trade to enable the transition. It is also subject to the potential prohibitive costs of green hydrogen and electrolysers, the lack of enabling policy and legal frameworks, and the need to balance people, planet and profit considerations, taking a just transition into account. In this regard, we can provide no assurances that Sasol’s plans to reduce GHGs pursuant to our roadmaps or otherwise will be successful in a commercially viable manner or at all.
Additionally, the EU’s Carbon Border Adjustment Mechanism (CBAM), effective since 1 October 2023, imposes carbon costs on imported goods—currently excluding chemical imports—from regions like South Africa, where carbon pricing is lower than in the EU. This mechanism places an additional cost burden on South African exports, particularly carbon-intensive sectors, potentially reducing competitiveness in the EU market. The recently proposed UK CBAM, if implemented, could further increase our export costs.
These carbon border mechanisms reflect a broader trend of climate-related trade regulation that exposes carbon-intensive exporters in South Africa to added economic risks, especially as the country’s energy sector remains heavily coal-dependent and emits
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high levels of greenhouse gases. Transitioning under such constraints remains challenging due to investment barriers, infrastructure bottlenecks and policy uncertainties.
Potential physical impacts of climate change
Climate change poses a significant risk for both our South African and global business due to potential physical impacts, including changes in weather patterns, water availability, and extreme weather events such as cyclones/hurricanes, tornadoes, flooding and rising sea levels. These risks can materially impact our costs of operation, cause production outages and hinder our business growth. For our major operating sites (Secunda, Sasolburg, Mozambique, and Lake Charles), updated climate modelling indicates that surface temperatures could increase by 1–4°C by 2050, with a higher frequency of extremely hot days, leading to operational challenges. Projected rainfall patterns vary by location:
● South Africa (Secunda and Sasolburg): No significant change in average annual rainfall is expected, however, the frequency and intensity of extreme rainfall events are projected to increase, raising the risk of flooding and infrastructure damage.
● Mozambique: Rainfall is expected to increase, particularly during the wet season, potentially leading to more frequent and severe flooding. Additionally, tropical cyclones are projected to intensify, posing significant risks to our infrastructure and operations.
● The US (Lake Charles): Rainfall patterns are expected to follow a similar trend to South Africa, with more extreme rainfall events. Additionally, hurricanes are likely to become more intense, increasing risks to facilities and necessitating enhanced disaster-preparedness.
Climate change related laws and regulations
Climate-change-related laws and regulations may threaten our licences to operate (or ability to obtain new licences to operate), result in stranded production and assets and substantially increase the cost of doing business, including the imposition of higher carbon taxes. Enhanced focus on issues concerning the
environment, evolving human rights, regulatory landscape from voluntary guidance to mandatory law (such as the adoption by the EU Council on 24 May 2024 of the Corporate Sustainability Due Diligence Directive which introduces mandatory supply chain due diligence requirements), environmental justice and climate change are resulting in a more complex regulatory environment, additional legal risks and the imposition of carbon or similar taxes. For example, to the extent that we reduce our reliance on coal in favour of sustainable feedstock, this is likely to increase the cost of production and reduce our profitability significantly. Current information indicates that imported liquified natural gas and other gas sources, biomass and green hydrogen are more costly feedstocks than coal for our operations in Secunda. In transitioning to these lower or low GHG intensive feedstocks, we anticipate an impact on the margin of some of our products. These climate change-related requirements could have a material adverse effect particularly on our South African business, operating results, cash flows, financial position and future growth.
Risks relating to increasing disclosure requirements and scrutiny
Businesses like ours face increasing requirements from regulators and investors on climate change issues including public disclosure on climate change risks and impacts associated with their operations. Complying with these new requirements may require Sasol to spend a significant amount of time and resources, and Sasol may be exposed to claims that certain of its ESG disclosures are misleading or overstate potential ESG benefits, primarily from NGOs and shareholders, potentially resulting in increased litigation risk. Certain NGOs and other private actors have also recently filed lawsuits under various securities and consumer protection laws alleging that certain ESG statements, goals, or standards of certain corporations were misleading, false, or otherwise deceptive.
In addition, the EU has also adopted the Corporate Sustainability Reporting Directive (CSRD), which imposes reporting requirements for a broader set of companies on disclosure of company social and environmental data and associated impacts on such companies. The CSRD has introduced new disclosure requirements which seek to broaden the categories and types of ESG information that must be reported, mandate a double materiality analysis (that requires the consideration of both the financial impacts of climate change on a company and the climate change impacts
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of a company’s operations on other stakeholders), and introduce new third-party assurance obligations. Companies covered by the CSRD are required to comply with its new disclosure requirements. The requirements of the CSRD are likely to overlap in scope and diverge in content with the rules of other jurisdictions, and there will be more non-EU companies and their subsidiaries making ESG disclosures. This will also increase the possibility of filing multiple sustainability disclosures on a subsidiary-by-subsidiary basis, which requires cross-company integration of sustainability information to avoid divergent disclosures.
The proposed EU Omnibus Package 2025 will significantly narrow the scope of the CSRD, delay reporting deadlines, simplify value chain and assurance requirements, and remove sector-specific standards to reduce the regulatory burden on companies. Until the proposed standards are issued, uncertainty with respect to reporting data points for Sasol remains.
Further, environmental and other NGOs as well as regulators increasingly scrutinise past and current corporate reporting on climate change risks and impacts. We may face regulatory or other claims alleging that we have not sufficiently complied with disclosure requirements or otherwise adequately disclosed climate change risks and impacts, which may affect our ability to maintain current licences or obtain new licences to operate or potentially result in civil fines and reputational damage.
In addition, while a significantly lower risk compared to South Africa, global carbon prices and taxes are escalating, which pose a risk to our operations in the EU and potentially the US, should carbon prices rise further.
Our expectations and estimates regarding ESG matters, including the potential environmental impact of our development and initiatives, may not be achieved or may ultimately prove to be incorrect, which may lead to additional claims or liability.
Stakeholder activism and risk on maintenance of permits and operational licences
Our GHG emissions and the use of coal as a key feedstock could also negatively impact our potential base of shareholders and our relationship with stakeholders, as well as our ability to source financing in capital and/or financial markets and/or increase our cost of capital.
See “—Risks related to legal, regulatory, and governance matters—Changes in environmental, health, safety and chemical regulations, other legislation and public opinion may adversely affect our business, operating results, cash flows and financial position—Stakeholder challenges in relation to environmental legislation”
Risks related to health, including pandemics
Our global operations expose us to pandemics which may adversely affect our workforce, our access to external labour, and impact business continuity, operating results, cash flows and financial position
Sasol’s global workforce, service providers, suppliers and customers are exposed to pandemics. These can impact their wellbeing and the safety and health of our employees and surrounding communities, with an associated direct or indirect effect on the safety and continuity of our operations. Pandemics and the period of recovery from such events may impact demand for our products and may have a prolonged material adverse effect on our business, operating results, cash flows and financial position.
Another key challenge is the impact of pandemics on the commodity markets, including among others, the demand for our products and ability to obtain raw materials, which is not under our control. As we cannot predict the spread of such viruses and the impact on the economy in the countries in which we operate, pandemics may continue to have a negative impact on our business, operating results, cash flows and financial position.
Risks related to information management
We may face the risk of data breaches or attempts to disrupt critical information and operational technology services, which may adversely impact our operations and business continuity.
The increasing use of information technology to enable business processes, in particular digital processes in operations, is making all industries, including the energy and chemicals industries, much more susceptible to cyber threats and proprietary or privacy-related data breaches. As digitalisation, including the rise in the use of AI, expands to include our financial, commercial, transacting and production systems, the cyber security risk increases. While Sasol has an information security programme in place, cyber security threats we face consistently evolve and emerge
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to expose the organisation, both in business and operations systems, to significant external threats. As a global energy and chemicals organisation we may also be subject to the risk of state-sponsored or climate-activist lead cyber attacks. Cyber attacks generated or strengthened by the use of AI pose a significant and growing risk, particularly as the use of advanced techniques such as deepfake audio and video for impersonation, phishing and data manipulation become popularised. In addition, we outsource several information technologies functions and applications to third-party vendors. Such engagements may have an impact on our cybersecurity position, such as in the event where a third-party vendor’s system is cyber-attacked, which in turn could result in the loss of certain of our data.
While no material losses related to the increased attempts on our information security systems have been discovered, given the increasing sophistication and evolving nature of this threat, the possibility of successful breaches occurring in the future cannot be ruled out. An extended failure of critical system components, caused by accidental actions, such as failed hardware or failed network infrastructure, or malicious actions, including those resulting from a cybersecurity attack, could result in a significant environmental incident, commercial loss or interruption to operations. We may also incur significant costs, including but not limited to, protecting against or repairing damage caused by any successful disruptions or security breaches in the future, such as rebuilding internal systems, implementing additional threat protection measures, defending against litigation, responding to regulatory inquiries or taking remedial steps with respect to third parties, among others.
If there is a violation of proprietary or privacy data, or a cyber threat, we could experience disruptions to critical services or may be vulnerable to cyber and ransomware attacks. This could result in financial loss, and have a material adverse effect on our business, operating results, cash flows, financial position and our disclosure of control processes.
Risks related to our people
We may be unable to attract and retain some critical talent to support current and future business requirements
It may take time to fill vacant positions in growth areas due to a general scarcity of individuals
with the required skills and experience in the sectors and locations within which we operate.
In order for Sasol to deliver on its strategic objectives, sustainably grow into the future and effectively operate and continuously improve existing and future assets and technologies, we are highly dependent on our human capital. While Sasol maintains a focus on attracting, developing and retaining diverse, skilled and experienced employees (including critical or scarce skills like qualified scientists, engineers, project execution managers, artisans and operators and employees in business and functional roles, including specialists required for our green economy and just transition strategies), slow hiring times due to a general scarcity of specialist skills may influence our ability to attract and retain talent with our required skill-set. There is constant competition across global labour markets for these critical or scarce skills. The quality and availability of skills in certain labour markets may also be impacted by the challenges within the education and training systems.
While we prioritise employee development and upskilling, it may take time to develop the required depth of skills and experience of employees to support our transition imperatives. Sectorial targets set by the Employment Equity Amendment Act (South Africa) may also impact our FY28 employment equity targets.
Risks related to our American Depositary Receipts
The exercise of voting rights by holders of ADRs is limited in some circumstances
Holders of ADRs may exercise voting rights with respect to the ordinary shares underlying their ADSs only in accordance with the provisions of our deposit agreement with J.P. Morgan Chase Bank N.A., as the depositary (the Deposit Agreement, and the Depositary, respectively). For example, ADR holders will not receive notice of a meeting directly from us. Rather, we will provide notice of a shareholders’ meeting to J.P. Morgan in accordance with the Deposit Agreement. J.P. Morgan has undertaken in turn, as soon as practicable after receipt of our notice, to mail voting materials to holders of ADRs. These voting materials include information on the matters to be voted on as contained in our notice of the shareholders meeting, and a statement that the holders of ADRs on a specified date will be entitled, subject to any applicable provision of the laws of South Africa and our Memorandum of Incorporation, to instruct J.P. Morgan as to the exercise
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of the voting rights pertaining to the shares underlying their respective ADSs.
Upon the written instruction of an ADR holder, J.P. Morgan will endeavour, in so far as practicable, to vote or cause to be voted the shares underlying the ADSs in accordance with the instructions received. If instructions from an ADR holder are not received by J.P. Morgan by the date specified in the voting materials, J.P. Morgan will not request a proxy on behalf of such holder. J.P. Morgan will not vote for or attempt to exercise the right to vote other than in accordance with the instructions received from ADR holders.
We cannot assure ADR holders that they will receive the voting materials in time to ensure that they can instruct J.P. Morgan to vote the shares underlying their ADSs. In addition, J.P. Morgan and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that ADR holders may not be able to exercise their right to vote and there may be no recourse if ADR holders’ voting rights are not exercised as directed.
Holders of Sasol’s ordinary shares or ADSs may be subject to dilution as a result of any non-pre-emptive share issuance, and shareholders outside South Africa or ADS-holders may not be able to participate in future offerings of securities (including Sasol’s ordinary shares) carried out by or on behalf of Sasol
Future share issuances by Sasol, with or without subscription rights, could (depending on how the share issuance is structured) dilute the interests of existing shareholders or require them to invest further funds to avoid such dilution.
In the case of an equity offering with subscription rights, holders of Sasol’s shares in certain jurisdictions may not be entitled to exercise such rights unless the rights and the related shares are registered or qualified for sale under the relevant legislation or regulatory framework. In particular, holders of Sasol’s securities who are located in the United States (including those who hold ordinary shares or ADSs) may not be able to participate in securities offerings by or on behalf of Sasol unless such equity offerings are registered under the U.S. Securities Act of 1933 (the Securities Act) or exempted from registration under the Securities Act. Holders of these shares in these jurisdictions may therefore suffer dilution should they
not be permitted to, or otherwise choose not to, participate in future equity offerings with subscription rights.
Sales of a large amount of Sasol’s ordinary shares and ADSs could adversely affect the prevailing market price of the securities
Historically, trading volumes and the liquidity of shares listed on the JSE have been low in comparison with other major markets. The ability of a holder to sell a substantial number of Sasol’s ordinary shares on the JSE in a timely manner, especially in a large block trade, may be restricted by this limited liquidity. The sales of ordinary shares or ADSs, if substantial, or the perception that these sales may occur and be substantial, could exert downward pressure on the prevailing market prices for Sasol ordinary shares or ADSs, causing their market prices to decline.
US securities laws do not require Sasol to disclose as much information to investors as a US issuer is required to disclose, and investors may receive less information about the Company than they might otherwise receive from a comparable US company
Sasol is subject to the periodic reporting requirements of the SEC and the NYSE that apply to “foreign private issuers”. The periodic disclosure required of foreign private issuers under applicable rules is more limited than the periodic disclosure required of US issuers. Accordingly, there may be less publicly available information concerning Sasol than there is for US public companies. For example, Sasol is not required to file current reports, periodic reports and financial statements with the SEC as frequently or as promptly as US companies whose securities are registered under the Securities Exchange Act of 1934 (Exchange Act). As a result, investors will also receive less timely financial reports than they otherwise might receive from a comparable US company or from certain of the company’s peers in the industry. This may have an adverse impact on investors’ ability to make decisions about their investment in Sasol.