Opinion

Bruce Whitfield is a multi-platform award winning financial journalist and broadcaster. He is a sought after public speaker on the political economy.
  • Sasol’s shares are at 2012 levels even though petrol costs 50% more
  • It’s mostly about the tax on fuel.
  • And the small matter of a colossal mess on a foreign project.
  • For more go to Business Insider. 

Turns out that little boy in the Sasol ads knew a thing or two about investing. "Glug, glug, glug…" was not the sound of fuel running into the tank of his model car – it was the sound of money down the drain. 

Sasol's value this week hit its lowest level in ten years, as it plumbed R254 a share, a price last seen in 2009.

There is a combination of factors at play in that.

The company has postponed the publication of financial results. It’s a measure companies never take lightly as it gives the impression that the board cannot trust the information supplied to it by executive management and wants to be absolutely certain of its facts before asking auditors to verify numbers.

The firm’s Lake Charles Ethane Cracker project is over time and over budget in the billions of dollars and there is no certainty as to when the bleeding will stop.

Plus the oil price in Rand terms is at the same level it was at in 2012.

Although no longer just a company that produces an oil replacement from coal, sentiment towards the stock is driven by the rand price of oil.

There has been a huge amount of volatility in between 2012 and now, as prices as high as R1,250 a barrel and dipped as low as R480. At current prices, Brent crude trades just over R900 a barrel.

Yet over this time petrol prices have increased by more than 50%. The price of 95 unleaded petrol has increased from R10.36 per litre to R16.21. Mostly when you think about the petrol price and its rise to near-record levels you might ascribe it to currency depreciation over time, and the rand has fallen from around R9/$ to current levels around R15/$.

But we are talking about the price of Brent Crude in rand per barrel here.

The huge increase in the cost of a tank of petrol according to independent analyst Johann Biermann is due to the increase in taxes.

In December 2011, the Road Accident Fund and a fuel levy made up 25% of the total fuel price. And that has increased to 36% - contributing about R3 more per litre. During that time other charges including the basic fuel levy have increased markedly as a means to increase the wages of some 100,000 petrol pump attendants.

Still, even with this weeks latest adjustments, petrol is cheaper today than it was this time last year.

You might find the huge increases in fuel taxes offensive and wonder why the taxes are not used to improve roads infrastructure, for example. It was during the PW Botha era that it was decided that fuel levies should go into the general fiscus to be used as government saw fit. At the time, sanctions were biting and South Africa was fighting a series of costly wars on its borders. Government was running out of money and so it changed the rules. Something the current government has built on.

The reality is that taxing petrol is the most efficient and reliable mechanism for Treasury to levy taxes as everyone and everything transported using fossil fuels is obliged to pay.

So the petrol price goes up – but Sasol, a maker of petrol, goes down.

Bruce Whitfield is a multi-platform award-winning financial journalist and broadcaster.

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