Sasol Form 20-F for the year ended 30 June 2021 - Book - Page 21
the COVID-19 pandemic included a three-month
deferral for filing and first payment of carbon tax until
31 October 2020. Sasol paid its first carbon tax by 31
October 2020. Despite the continued implementation of
COVID-19 mitigation measures, no payment deferrals
were made available for 2021 and Sasol’s second
carbon tax payment was made by 31 July 2021. For the
first phase up to 2022, several transitional tax-free
allowances are provided for in legislation. We paid our
first carbon tax liability in 2020 of R320 million for the
first seven-month period since the gazetting of the
Carbon Tax Act. In 2021, we paid R579 million after
offsets and electricity levies. The tax is applicable to an
entity’s scope 1 emissions for each calendar year. The
headline carbon tax is R134 per ton of CO2e (carbon
dioxide equivalent) on emissions generated in calendar
2021 before tax-free allowances, for emissions above
the tax-free thresholds, escalating at CPI +2 percentage
points each year until 2022.
shareholders only if it meets the solvency and liquidity
tests set out in the South African Companies Act, 71 of
2008 (Companies Act), and is permitted to do so in
terms of the Memorandum of Incorporation (MOI).
Given these factors and our board’s discretion to
declare cash dividends or other similar payments,
dividends may not be paid in the future.
Given the risk of a prolonged period of
economic uncertainty and the company’s current level
of indebtedness, the board believes that it would be
prudent to continue with the suspension of dividends
until further notice. This will allow us to protect our
liquidity in the short term and focus on reducing
leverage in order to create a firm platform to execute
our strategy and drive long-term shareholder returns.
Risk related to our sustainability
Our strategy to respond to climate change could not
be successful in achieving its emission reduction
targets and could negatively impact our growth.
Concerns around climate change could reduce
supply/demand for our products, increase our
operational costs, reduce our competitiveness,
negatively impact our stakeholder relations,
adversely affect our legal licence to operate and our
access to capital and financing
The South African government is developing
carbon budgets in parallel. Currently, regulatory
confirmation on how mandatory carbon budgets will be
aligned to the associated carbon tax regime is awaited
and regulatory engagement is therefore ongoing. Sasol
faces uncertainty in respect of the group’s carbon tax
liability and/or potential penalties that may apply for
exceeding the carbon budgets for the subsequent
mandatory phases from 2023 onwards, if these
instruments lack effective alignment and the scale of
required mitigation is not possible in the timeframe
required.
Key manufacturing processes in South Africa,
especially coal gasification and combustion, result in
relatively high GHG emissions. Sasol’s ability to
develop and implement an appropriate climate change
mitigation response poses challenges to meet ambitious
emission reduction targets and in any event a
significant transitional risk for our business, most
notably in South Africa. This is heightened by the
necessity to appropriately address increasing societal
pressures and shifts away from carbon-intensive
processes and products, as well as meeting new and
anticipated policy and legislative requirements,
including carbon tax, carbon budgets and GHG
reduction targets. It is particularly challenging in South
Africa, amid a COVID-19-impacted society, where
access to low-carbon energies is limited and related
infrastructure is under-developed.
South Africa’s developmental challenges, civil
discontent, the structure of its economy, the impacts of
COVID-19, the downgrade of the sovereign credit
rating and the fact that the carbon tax design is not
currently aligned with the carbon budget system,
remains a risk. Sasol is supportive of carbon pricing
and in this instance, the alignment of the carbon budget
with the carbon tax offers an efficient and effective
mechanism for the South African economy to recover
from the COVID-19 pandemic, while transitioning to a
low-carbon economy. We actively engage with
government and various stakeholders to enable an
approach that appropriately manages and balances the
need for economic development, job creation, energy
security and GHG emission reductions.
A carbon tax was implemented in South Africa
on 1 June 2019. This significantly increases the
operational costs of our South African operations in the
first phase of its implementation and is anticipated to be
higher after 1 January 2023, when the second phase
commences. The tax relief measures implemented by
the South African government in 2020 in response to
Sasol foresees a low-carbon emission world
representing changes to energy demand, regulations and
commodity consumption patterns. Depending on the
extent and speed of these changes, companies that do
not effectively respond to these possible realities could
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