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SASOL. From State-Owned Enterprise to Chemical Leader: Management and Strategy, 1952–1980

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Reassessing the Role of Management in the Golden Age

Part of the book series: Central Issues in Contemporary Economic Theory and Policy ((CICETP))

Abstract

In 1951, the South African state established the South African Oil and Gas Corporation (SASOL), which became the world leader in the manufacturing of synthetic fuel. By the early 1970s, management insisted on privatization and the listing of the company on the Johannesburg Securities Exchange. This chapter investigates the making of the managers of SASOL: their personality traits, their background (as sociocultural context and education) and their relationship with government’s exponents as well as their industry links. The chapter shows the role of independent professional management in securing operational efficiency and its impact on facilitating an exit strategy from the state ownership.

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Notes

  1. 1.

    During the 1920s the South African mining industry came under severe cost pressures, and the railways as well as the mining industry was in need of a steady and affordable supply of electricity. The government of General J.C. Smuts commissioned an investigation into the supply of electricity in South Africa, which reported on the essentiality of future sustained and increased supply for the development of the industrial sector. Opposing views of the state-mining officials and railways officials and the private sector controlling electricity supply in a monopolistic market to the mining industry caused heated debates in the House of Assembly when the Electricity Bill was debated in 1922. Moves by the private electricity supply company, the Victoria Fall Power Company, to build another big power station swung the sentiments in Parliament against the company, as fears arose of market monopolization. The Electricity Bill was passed in 1922 and established the ESCOM as legally designated “body corporate”, not a state entity. ESCOM was separate from the state and relied on funding raised by the private and government loans. Its primary goal was “to stimulate the provision of a cheap and abundant supply of electricity” and to supply such electricity on a non-profit basis (Jones and Müller 1992, pp. 60–61; Christie 1984; Clarke 1994).

  2. 2.

    Four different iron and steel manufacturing companies produced iron and steel in South Africa. The Lewis & Marks’ Union Steel Company was established in 1913 in Pretoria. In Natal, the Newcastle Iron and Steel Company was formed in 1919. C.F. Delfos, a Dutch immigrant, established the South Africa Iron and Steel Corporation in 1920. These three concerns attempted to amalgamate their interests to establish a joint manufacturing plant in Pretoria to process mined iron ore, but a lack of capital led the South African government in 1927 to pass a bill in Parliament to establish the South African Iron and Steel Corporation (ISCOR). ISCOR was jointly controlled by the state and private shareholders, but vociferous opposition against the venture resulted in the defeat of the bill in the Senate, only to be passed by a joint session of the Senate as well as the House of Assembly (full Parliament) in 1928. The opposition was on two grounds: doubt about the viability of such an enterprise and opposition in principle against the use of such large amounts of public money for a single industrial enterprise. When finally shares were issued to the public in 1832, the timing was bad—in the aftermath of the depression, few applications were received, and the state eventually became virtually the only shareholder (ISCOR was privatized only 57 years later in 1989.) (Jones and Müller 1992, pp. 74–75; Clarke 1994, pp. 59–67).

  3. 3.

    The town Sasolburg was erected in the North Eastern Free State Province, a location 80 kilometres from Johannesburg or 27 kilometres from Vereeniging and 17 kilometres from Vanderbijlpark, the growing industrial hub of the South Eastern Transvaal Province. In Vanderbijlpark, ISCOR had a large plant, which assisted accessibility for SASOL to iron, steel and other mechanical equipment required for the construction of the gasification plant. Sasolburg is also on the banks of the Vaal River, a major source of water supply and located on top of a major coal field, which enabled the construction of SASOL’s Sigma mine.

  4. 4.

    The Prime Minister at the time was J.G. Strijdom.

  5. 5.

    In June 1958, Messers. Swift and Company, Ltd., Sydney, Australia, requested details about the availability of SASOL’s high-melting-point synthetic paraffin wax (SAB: HEN 3513/538/3: Letter Secretary Commerce and Industry—SASOL, 6/6/58).

  6. 6.

    The unappropriated profit of SASOL rose from R1,355,000 in 1960 to R7,640,000 in 1970—a rise of 464 % within only one decade.

  7. 7.

    Secunda, a purpose-built town, is located about 130 kilometres east of Johannesburg (in the modern-day Mpumalanga Province) in a region of extensive coal reserves and adequate water supplies and so-named by Sasol because it was South Africa’s second oil-from-coal extraction plant. The plants also produce a great variety of chemicals as well as gasoline; ancillary industries produce fertilizers, plastics, man-made fibres, and detergents.

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  1. Department of Accountancy, University of Johannesburg, Auckland Park, South Africa

    Grietjie Verhoef

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  1. Department of History, Humanities and Society, University of Rome “Tor Vergata”, Rome, Italy

    Daniela Felisini

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Verhoef, G. (2017). SASOL. From State-Owned Enterprise to Chemical Leader: Management and Strategy, 1952–1980. In: Felisini, D. (eds) Reassessing the Role of Management in the Golden Age. Central Issues in Contemporary Economic Theory and Policy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-48722-9_7

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  • DOI: https://doi.org/10.1007/978-3-319-48722-9_7

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