Sasol is a reflection of demotivated managers

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A Moneyweb community member suggests labour legislation is behind the malaise.

While I have sympathy for your evaluation of the board and management at Sasol (JSE:SOL) and many other RSA corporates, I think you could be overlooking the impact of the following:-

By and large company management in RSA is demotivated because BEE forces them to employ people whom they would not under other circumstances.

Their demotivation is compounded by RSA's labour legislation which gives too much power to the representatives of the employee over the employer. This again forces companies to employ too many people and at costs to the company that management would not incur in, say, the USA or China. So, while you are entitled to criticise the rising expenses at Sasol, I ask myself just how much can management cut them back. It wasn't that long ago that Sasol executives were under extreme pressure from government related organisations - which executive team cares to endure that scenario again? Rather just take the soft option.

And additionally the corruption that is so prevalent in the public sector (and to a lesser extent in the private sector), especially where tender practices are concerned, is a cancer that spreads through the whole economy and leads to a lowering of the moral standards throughout the business sector. And in many other sectors of our society as well.

If you really want to criticise management in South Africa, then you need go no further than examining the accounts of Eskom and practices at that parastatal.

If you care to look at their accounts to March 31 2009 (the latest available), I think you may notice a provision for a R9bn loss in the derivatives market. I ask you - what is Eskom doing in the derivatives market? It buys its coal on tender and contract and sells its electricity similarly. So why are they speculating, and how much of the increased electricity tariffs are due to poor management at Eskom rather than a need to improve profitability by leaning spectacularly on its clients? Does Eskom employ the right number of people, or is it massively overstaffed with people remunerated excessively, which its clients are now being enforced to fund?

Personally I am against the practice of awarding share options to executives as ultimately there is no downside to the executive, but the practice has become so widespread that I think it will be almost an impossible task to change it now. I think executives should be paid fairly in cash for their services, full stop. And if they then want to buy shares in the equity of their employers, then they should be free to do so as any other member of the investing public does. I think there is one large RSA corporate that still allocates options to its executives at par. If this is still happening it is clearly wrong. Anther abuse of option granting is the occasional back dating of the award date to a period when the share price was more attractive.

And so there are many ills, actual and/or perceived in our economy. But I think we need a level playing field between employer and employee above all else to improve the productivity in our economy. For without productivity improvements, we will continue to fall behind in world competitiveness.

* William Shakespeare is the nom de plume of a longstanding member of the Moneyweb Community.

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