Government has taken note of the settlement, in particular, the structural remedy of divestiture that has been applied in this case.
We welcome efforts to increase competition in the fertiliser industry, directed at lowering prices, given the importance of agriculture and rural development to employment in South Africa.
In work undertaken to promote a new growth path for South Africa, agriculture, agro-processing and rural development emerged as an important means to expand employment and improve economic growth.
Fertiliser prices constitute a major input to farming costs in a number of products and local fertiliser prices have been cited as a key constraint to expanding agricultural output.
Our work on increasing employment in South Africa has pointed to the need for strong and consistent action to promote greater competitiveness in key sectors of the economy.
The commission has advised that further investigations into the fertiliser industry are continuing and that announcements will be made as soon as these are finalised.
The Competition Commission has recommended to me that government evaluates possible regulatory measures for the price of ammonia, where SASOL Chemical Industries is the sole local producer, in line with measures that apply to the price of natural gas.
It has motivated this recommendation on the basis of a local monopoly in the supply of an essential input to fertilisers. I have taken note of this recommendation.
We will carefully study this recommendation as part of a broader drive to reduce input costs into agriculture.
We will now carefully monitor the outcome of the settlement to determine whether fertiliser prices to end users are indeed more competitive and whether additional remedies may be necessary.
I have been informed of the terms of the settlement between SASOL Chemical Industries and the Competition Commission in respect of alleged contraventions of the Competition Act involving abuse of dominance in the form of exclusionary conduct and price discrimination in the fertiliser market.
The product involved is ammonium nitrate, which forms the base of a number of fertiliser products.
The commission has over a period of time investigated the allegations against SASOL Chemical Industries, following complaints lodged by two competitor companies.
SASOL currently has a vertically integrated business that involves distinct operations commencing from the production of ammonia nitrate (in which it is the sole producer in South Africa), to the blending of the chemical into a fertiliser product and its distribution to final consumers via a network of contracted agents.
The allegations essentially involve the contention that SASOL abused this vertically integrated business to lessen competition in the South African market and thus to increase prices.
In May 2009, the commission finalised one part of the referral, which resulted in SASOL agreeing to penalties amounting to R250 million for cartel related conduct. It undertook to desist from any price fixing behaviour.
The commission continued with investigations relating to other aspects of the alleged abuse of dominance. SASOL Chemical Industries has denied any wrongdoing in respect of these further investigations.
However, is has reached a settlement with the Competition Commission, in which SASOL undertook to divest the bulk of its operations in the downstream industry, in particular through selling five of its fertiliser blending facilities and in not restricting fertiliser agents from carrying competitor products.
If confirmed by the tribunal, this would be the first structural remedy that utilises divestiture of operations in a referred enforcement case. The Competition Commission advises that to date, this remedy was confirmed only to mergers.
SASOL Chemical Industry has further agreed to a set of transparent and non-discriminatory principles in the setting of its prices. The purpose of the undertakings is to address the concerns regarding market dominance and the Competition Commission advises that the actions that SASOL Chemical Industries will undertake as a result of the settlement should have a positive effect on competition in the sector and thus on the price of fertiliser products.
The commission advises that further investigations into the fertiliser industry are continuing and that announcements will be made as soon as these are finalised.
For more information on the terms of the settlement, kindly contact:
Oupa Bodibe, Manager: Advocacy and Stakeholder Relations, Competition Commission
Tel: 012 394 3267
Cell: 082 563 6970
Zubeida Jaffer
Cell: 082 698 6677
