Sasol Form 20-F for the year ended 30 June 2021 - Book - Page 38
which we operate, this could have a material adverse
effect on our business, operating results, cash flows,
financial condition and future growth.
For more information regarding pending tax
disputes and assessments see “Item 4.B—Business
overview—Legal proceedings and other
contingencies”.
Reliable supply of electricity is important to
run our plants optimally. The South African power
system remains very tight. Unplanned power outages,
as we experienced at our South African plants at the
start of 2021, had a negative impact on our production
volumes, cost and profitability. While we have the
capacity to generate half of our own requirements at our
South African plants, this only mitigates the risk
partially as we remain dependent on external electricity
supply from Eskom.
Any of these risks may materially and
adversely affect our business, results of operations,
cash flows and financial condition.
iii. Ownership rights
We operate in several countries where
ownership of rights in respect of land and resources is
uncertain and where disputes in relation to ownership
or other community matters may arise. For example,
the South African government is considering the
expropriation of land without compensation to enhance
land reform and redistribution. The impact of these
policy intentions and related disputes are not always
predictable and may cause disruption to our operations
or development plans.
Water, as a resource, is becoming increasingly
limited as global demand for water increases. A
significant part of our operations, including mining,
chemical processing and others, requires the use of
large volumes of water. South Africa is generally an
arid country and prolonged periods of drought or
significant changes to current water laws could increase
the cost or availability of our water supplies or
otherwise impact our operations. Water use by our
operations varies widely depending largely on
feedstock and technology choice. Water to our South
African operations is supplied from the Integrated Vaal
River System (IVRS), currently making up 81% of
Sasol’s total water demand. While the water supply to
these operations remains secure, expectations are for a
worsening of the water supply imbalance. This may
lead to issues of water availability or the imposition of
restrictions on its use. Seasonal changes, such as
deterioration in quality of water supplied from the
IVRS, results in feed water which is highly variable and
regularly of a poor quality. This increases the cost of
treating it. Although various technological advances
may improve the water efficiency of our processes,
these are capital intensive. We may also experience
limited water availability due to periodic drought
events aggravated by delays in completing phase 2 of
the Lesotho Highlands Water Project which is currently
underway. We may also experience a deterioration in
water quality and other infrastructure challenges related
to our South African operations, which could have a
material adverse effect on our business, operating
results, cash flows, financial condition and future
growth.
iv. Legal and regulatory uncertainties
Some of the countries where we have already
made investments, or other countries where we may
consider making investments, are in various stages of
developing institutions and legal and regulatory
systems that are characteristic of democracies and
market economies.
The procedural safeguards of the legal and
regulatory regimes in these countries in many cases are
still being developed and, therefore, existing laws and
regulations may be applied inconsistently. In some
circumstances, it may not be possible to obtain the legal
remedies provided under those laws and regulations in
a timely manner.
(d) Transportation, water, electricity and other
infrastructure
Our operations are located in multiple regions
across the world and are reliant upon stable supply of
electricity, availability of water and access to
transportation routes in order to optimally run our
operations and/or move our products. The infrastructure
in some countries in which we operate, such as rail
infrastructure, inland water systems, electricity and
water supply, may need to be further upgraded and
expanded, and in certain instances, possibly at our own
cost. Should we not have access to reliable electricity
supply, or should we have limited access to water or
experience infrastructure challenges in the regions in
The transportation of inbound materials to our
plants and of products to our customers is reliant on the
region’s available infrastructure. Numerous factors like
natural disasters, political unrest, pandemics or extreme
weather events may impact on transportation modes
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