Sasol occupies a pivotal yet precarious position in South Africa’s climate and energy transition. As the country’s second-largest carbon emitter, the company contributes approximately 11% of national emissions, primarily from its Secunda plant.

While this is significantly less than Eskom’s 42% contribution, Sasol remains a systemically important employer and will need to play a central role in driving decarbonisation. For long-term investors, this duality presents a complex dilemma, often referred to as the energy trilemma. How do we achieve environmental sustainability without sacrificing energy security and economic stability? Sasol sits at the centre of this debate.

Majority Polluters

Eskom and Sasol produce over half the nation’s greenhouse gas emissions.

Global structural pressures to decarbonise are accelerating. The European Union’s Carbon Border Adjustment Mechanism, set to come into effect in 2026, threatens the trade competitiveness of high-emission producers globally. Domestically, the South African government has committed to reducing national emissions by 15% to 30% by 2030, in line with its Nationally Determined Contribution under the Paris Agreement. Sasol’s emissions-intensive Fischer-Tropsch process, which relies heavily on coal and gas feedstock, makes decarbonisation a complex and costly task. While Eskom remains the largest lever for national emissions reductions, Sasol faces more direct and unavoidable consequences, particularly from a carbon tax perspective. The decline in carbon allowances post 2026 will intensify this burden, with significant implications for earnings.

At Old Mutual Investment Group, we believe divestment is not a solution for high-carbon sectors that remain economically critical. Sasol’s contribution to local GDP, employment, and fuel security makes active stewardship the more responsible path. The road to decarbonisation must be pragmatic, with a focus on transition rather than disruption. Climate progress cannot come at the expense of economic stability or social equity.

With this lens, our engagement with Sasol shifts from demanding immediate net zero outcomes to pushing for credible, staged transition plans with clear interim targets. We focus on how companies balance emissions reductions with economic realities, scrutinising capital allocation, operational changes and social impacts. Engagement becomes solution-oriented and collaborative, emphasising accountability and measurable progress over time.

Our engagement with Sasol focuses on several key areas:

• The company’s operational turnaround
• Capital allocation and balance sheet management
• Progress on the energy transition
• Governance and incentives, ensuring management is aligned with shareholder value creation.

At the company’s Capital Markets Day this year, despite changes in the emissions roadmap, Sasol reaffirmed its 30% emissions reduction target by 2030, using a 2017 baseline, and its net zero by 2050 commitment. The company moved away from plans to scale down synfuel volumes post 2030 and is now focused on transitioning alongside its customers. Central to this journey is renewable energy. Sasol has set a 1.2 Gigawatt renewable energy procurement target by 2030. To date, 550 Megawatt has been contracted, with the remainder in early-stage negotiation. This scale of renewable energy is expected to save the company over R4 billion in electricity costs over a five-year period.

Sasol has also created an integrated power business aimed at meeting its own electricity needs, with the potential to supply surplus power to the South African grid. The company has applied for an independent electricity trading licence, signalling its intention to become a more active participant in the country’s transition.

Renewable energy, coupled with nascent but growing opportunities in sustainable aviation fuel and renewable diesel, adds further pathways for Sasol’s decarbonisation journey. These initiatives support a reduction in overall carbon intensity, while positioning the company for longer-term relevance in a low-carbon economy.

Sasol’s transition is not only about reducing emissions. It is about reshaping the future of South Africa’s industrial economy. At Old Mutual Investment Group, we view capital as a tool for driving tangible change in the real economy, not as a passive investment. Active engagement, rather than divestment, remains the responsible path forward.