South Africa's biggest BEE share scheme turns sour - Sasol Inzalo records loss

Inzalo suffered a comprehensive loss of R1.4bn.

clipped from www.miningmx.com [miningmx.com] -- JSE-listed petrochemicals giant Sasol's black economic empowerment share scheme, Inzalo, has made a loss for the six months to end-December 2008. This is not a good start for what was last year hailed as SA largest empowerment transaction to date. Inzalo suffered a comprehensive loss of R1.4bn. The operating loss - that is, the difference between finance expenses and income for the period - was R191m. Fortunately Inzalo does not have major refinancing problems over the short term. The unsecured D preference shares, with issue value of R1 410 are held by Sasol. The first repayment on its secured A preference shares are only due in October 2011. Sasol will eventually have to write down the R1.4bn in D preference shares if there is no improvement in Sasol's profitability or an increase of its share price to R366 or more. The lesson: never buy shares with borrowed money, even in a popular company like Sasol and even more so for a BEE transaction.