The on-going decline of oil prices and rand weakness do not only have far-reaching consequences for petrochemical giant Sasol — its Black Economic Empowerment BEE scheme Sasol Inzalo is also feeling the pinch. The biggest challenge for Inzalo — which will probably not go down well with patient investors — is that its long-term debt pile continues to exceed its asset its 2. Inzalo is wrestling with a debt load of R7. For the period under review, it received dividends worth R million, which was used to fund its operating activities, finance costs and payment of short-term debt.
Investment Principal at MMI Holdings Riaz Gardee says although Inzalo has a negative net asset value R million — implying that the scheme is technically insolvent as its liabilities exceed assets — the scheme is well supported by Sasol through guarantees.
The scheme was launched in and now boasts about previously-disadvantaged shareholders. Inzalo will mature in September , and its debt together with expenses will have to be repaid. This might be through the sale of its Sasol shares and remaining shares will be given to Inzalo shareholders.
At current Inzalo price levels, and if an investor wanted to retain the same Sasol exposure, Gardee says it would make more sense to switch out of Inzalo and make allocations into Sasol.
This follows a Financial Services Board directive, which planned to put a stop to unlicensed exchanges extending to OTC platforms. Morgan Jones, principal at Bravura Capital, says there has been a lot of debate about whether highly-leveraged special purpose vehicles or schemes create value for BEE investors over time, given the need to service debt throughout various cycles.
Debt has far-reaching consequences, as under the BEE Codes of Good Practice the net equity must be created and sustained over time for investors. Don't have an account? A nation of criminals of course. Only the corrupt political elite.
After all these years the BEE shareholders are left with debt and no equity, while they were promised instant wealth by the ANC. They got the opposite of what they voted for, but the Luthuli House clan still got the license to plunder.
'Invest in Sasol now'
When will they learn that sustainable employment opportunities are worth much more than owning of a business that is unsustainable. You cannot eat a BEE scheme that is under water.
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Sasol Inzalo Public Ltd. OVERVIEW OF Sasol Ltd. Sasol to apply for delay to air pollution deadline.
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Its parent company Sasol weighs on its performance. This might be through the sale of its Sasol shares and remaining shares will be given to Inzalo shareholders Trading at R Debt funded BEE schemes Morgan Jones, principal at Bravura Capital, says there has been a lot of debate about whether highly-leveraged special purpose vehicles or schemes create value for BEE investors over time, given the need to service debt throughout various cycles.
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