Sasol South Africa Annual Financial Statements 2018 · Group Company 2018 2017 2018 2017 Note Rm Rm...

Sasol South Africa Annual Financial Statements 2018 1

2 Sasol South Africa Annual Financial Statements 2018

Sasol South Africa Limited

Registration number 1968/013914/07

Annual Financial Statements for the year ended 30 June 2018

Contents

Page

Income statement 3

Statement of comprehensive income 3

Statement of financial position 4

Statement of changes in equity 5

Statement of cash flows 7

Notes to the financial statements 8

Preparer of the annual financial statementsMs Amelia van den Berg CA(SA), Vice President: Statutory Reporting and Mr Dawie van Schalkwyk CA(SA), is responsible for this set of financial statements and has supervised the preparation thereof in conjunction with Ms Sharika Balram CA(SA), Senior Manager Finance: Sasol South Africa Limited.

This annual financial statements has not been audited.


Income statementfor the year ended 30 June

Group Company2018 2017 2018 2017

Note Rm Rm Rm RmTurnover 2 88 123 81 099 85 326 80 083Materials, energy and consumables used 3 (32 826) (33 332) (38 307) (35 641)Selling and distribution costs (2 675) (2 622) (2 665) (2 624)Maintenance expenditure (5 088) (4 890) (4 959) (4 749)Employee-related expenditure 4 (14 772) (12 646) (14 412) (12 584)Exploration expenditure and feasibility costs (426) (591) (426) (591)Depreciation and amortisation (11 343) (9 204) (8 725) (8 594)Other expenses and income (4 143) (4 868) (3 659) (4 649)

Translation gains/(losses) 5 221 (654) 185 (619)Other operating expenses and income 6 (4 364) (4 214) (3 844) (4 030)

Equity accounted profits, net of tax 18 78 57 8 10Operating profit before remeasurement items 16 928 13 003 12 181 10 661Remeasurement items 8 (9 953) (25 236) (15 895) (9 272)Earnings/(loss) before interest and tax (EBIT) 6 975 (12 233) (3 714) 1 389Finance income 7 919 1 901 4 823 2 077Finance costs 7 (3 184) (3 018) (2 707) (2 578)Earnings/(loss) before tax 4 710 (13 350) (1 598) 888Taxation 10 (1 343) 3 365 1 953 1 393

Earnings/(loss) for the year 3 367 (9 985) 355 2 281Attributable toOwners of Sasol South Africa Limited 2 663 (10 586) 355 2 281Non-controlling interests in subsidiaries 704 601 - -

3 367 (9 985) 355 2 281

Statement of comprehensive incomefor the year ended 30 June

Group Company2018 2017 2018 2017

Rm Rm Rm RmEarnings/(loss) for the year 3 367 (9 985) 355 2 281Other comprehensive (loss)/income, net of taxItems that can be subsequently reclassified to the income statement – (29) – 3 Effect of cash flow hedges – (40) – 4 Tax on items that can be subsequently reclassified to the income statement – 11 – (1)Items that cannot be subsequently reclassified to the income statement 97 (5) 96 (5) Remeasurement on post-retirement benefit obligation 135 (7) 133 (7) Tax on items that cannot be subsequently reclassified to the income statement (38) 2 (37) 2

Total comprehensive income/(loss) for the year 3 464 (10 019) 451 2 279

Attributable toOwners of Sasol South Africa Limited 2 760 (10 604) 451 2 279

Non-controlling interests in subsidiaries 704 585 - -

3 464 (10 019) 451 2 279The notes on pages 8 to 58 are an integral part of these Consolidated Financial Statements.


Statement of financial positionat 30 June

Group Company2018 2017 2018 2017

Note Rm Rm Rm Rm

AssetsProperty, plant and equipment 15 77 633 75 401 60 957 66 979Assets under construction 16 13 417 14 451 13 089 14 226Goodwill and other intangible assets 17 37 302 42 307 1 195 1 370Equity accounted investments 18 282 257 11 11Investment in subsidiaries and joint ventures 19 - - 48 187 48 187Post-retirement benefit assets 30 436 475 436 475Long-term receivables and prepaid expenses 28 33 28 33Non-current assets 129 098 132 924 123 903 131 281

Assets in disposal groups held for sale - 24 - 24Inventories 20 10 442 10 489 10 432 10 182Tax receivable 11 2 583 2 684 2 789 2 745Trade and other receivables 21 16 203 13 793 15 711 13 431Short-term financial assets 1 1 1 1Cash restricted for use 24 733 885 315 296Cash 24 5 993 5 959 2 552 2 861Current assets 35 955 33 835 31 800 29 540Total assets 165 053 166 759 155 703 160 821

Equity and liabilitiesShareholders' equity 41 434 43 581 49 262 53 725Non-controlling interests 1 941 1 895 - -Total equity 43 375 45 476 49 262 53 725

Long-term debt 14 71 480 74 754 68 577 71 008Long-term provisions 28 5 848 6 188 5 446 5 775Post-retirement benefit obligations 30 3 442 3 361 3 425 3 345Long-term deferred income 220 232 220 230Deferred tax liabilities 12 20 462 21 612 9 292 11 884Non-current liabilities 101 452 106 147 86 960 92 242

Short-term debt 14 4 088 3 833 3 122 3 048Dividend payable 3 179 - 3 179 -Short-term provisions 29 1 261 1 191 1 222 1 152Trade and other payables 22 11 679 10 093 11 941 10 638Short-term deferred income 19 19 17 16Current liabilities 20 226 15 136 19 481 14 854Total equity and liabilities 165 053 166 759 155 703 160 821

The notes on pages 8 to 58 are an integral part of these Consolidated Financial Statements.


Statement of changes in equityfor the year ended 30 June

Group

Share capital

Share-based

payment reserve

Other Reserves

Re-measure-

menton post-

retirementbenefits

Retainedearnings

Share-holders'

equity

Non-controlling

interestsTotal

equityNote 13 Note 32

Rm Rm Rm Rm Rm Rm Rm RmBalance at 30 June 2016 55 849 1 552 22 (8) 6 115 63 530 1 575 65 105Share-based payment expense – 261 – – – 261 – 261Long-term incentives vested and settled – (28) – – 28 – – –Long-term incentive scheme converted to equity-settled* – 394 – – – 394 – 394Expiry of Sasol share incentive scheme – (6) – – 6 – – –

Total comprehensive loss for the year – – (13) (5) (10 586) (10 604) 585 (10 019) loss – – – – (10 586) (10 586) 601 (9 985) other comprehensive loss for the year – – (13) (5) – (18) (16) (34)Dividends paid – – – – (10 000) (10 000) (265) (10 265)Balance at 30 June 2017 55 849 2 173 9 (13) (14 437) 43 581 1 895 45 476Shares issued 4 734 – – – – 4 734 – 4 734Implementation of Sasol Khanyisa transaction – – 8 251 – – 8 251 – 8 251Long-term incentives vested and settled – (367) – – 367 – – –Movement in share-based payment reserve – 614 – – – 614 – 614 share-based payment expense – 549 – – – 549 – 549

deferred tax – 65 – – – 65 – 65Expiry of Sasol share incentive scheme – (1 617) – – 1 617 – – –Total comprehensive income for the year – – – 97 2 663 2 760 704 3 464 profit – – – – 2 663 2 663 704 3 367 other comprehensive income for the year – – – 97 – 97 – 97Dividends paid – – (8 251) – (10 255) (18 506) (658) (19 164)Balance at 30 June 2018 60 583 803 9 84 (20 045) 41 434 1 941 43 375

* Refer to note 32 for further detail on the conversion of the long term incentive scheme. The notes on pages 8 to 58 are an integral part of these Consolidated Financial Statements.


Statement of changes in equityfor the year ended 30 June

Company

Share capital

Share-based

payment reserve

Other Reserves

Re-measure-

menton post-

retirementbenefits

Retainedearnings

Totalequity

Note 13 Note 32

Rm Rm Rm Rm Rm RmBalance at 30 June 2016 55 849 1 552 5 (8) 3 393 60 791Share-based payment expense – 261 – – – 261Long-term incentives vested and settled – (28) – – 28 –Long-term incentive scheme converted to equity-settled* – 394 – – – 394Expiry of Sasol share incentive scheme – (6) – – 6 –Total comprehensive income for the year – – 3 (5) 2 281 2 279 profit – – – – 2 281 2 281 other comprehensive loss for the year – – 3 (5) – (2)Dividends paid – – – – (10 000) (10 000)Balance at 30 June 2017 55 849 2 173 8 (13) (4 292) 53 725Shares issued 4 734 – – – – 4 734Implementation of Sasol Khanyisa transaction – – 8 251 – – 8 251Long-term incentives vested and settled – (367) – – 367 –Movement in share-based payment reserve – 598 – – – 598 share-based payment expense – 535 – – – 535 deferred tax – 63 – – – 63Expiry of Sasol share incentive scheme – (1 617) – – 1 617 –Total comprehensive income for the year – – – 96 355 451 profit – – – – 355 355 other comprehensive income for the year – – – 96 – 96Dividends paid – – (8 251) – (10 246) (18 497)Balance at 30 June 2018 60 583 787 8 83 (12 199) 49 262

* Refer to note 32 for further detail on the conversion of the long term incentive scheme. The notes on pages 8 to 58 are an integral part of these Consolidated Financial Statements.


Statement of cash flowsfor the year ended 30 June

Group Company2018 2017 2018 2017

Note Rm Rm Rm RmCash receipts from customers 85 760 81 393 83 099 80 671Cash paid to suppliers and employees (58 560) (59 426) (63 599) (61 196)Cash generated by operating activities 25 27 200 21 967 19 500 19 475Dividends received from equity accounted investments 18 53 58 53 58Finance income received 7 789 981 4 656 1 107Finance costs paid 7 (3 270) (3 356) (2 855) (2 926)Tax paid 11 (2 192) (1 031) (554) (434)Cash available from operating activities 22 580 18 619 20 800 17 280Dividends paid 27 (15 327) (10 000) (15 318) (10 000)Cash retained from operating activities 7 253 8 619 5 482 7 280

Additions to non-current assets1 (12 846) (14 019) (12 589) (13 074) additions to property, plant and equipment 15 (136) (198) (137) (123) additions to assets under construction 16 (13 066) (13 327) (12 808) (12 457) additions to other intangible assets (2) – (2) – increase/(decrease) in capital project related payables 358 (494) 358 (494)Non-current assets sold 47 16 42 16Cash from businesses acquired 9 – 2 141 – 676Acquisition of business for cash consideration – (1 282) – (1 282)Decrease/(increase) in long-term receivables 5 (2) 5 (2)Cash used in investing activities (12 794) (13 146) (12 542) (13 666)

Share capital issued 4 734 – 4 734 –Implementation of Sasol Khanyisa transaction 8 251 – 8 251 –Dividends paid to non-controlling shareholders in subsidiaries (658) (265) – –Proceeds from long-term debt 14 1 681 16 806 1 581 15 486Repayment of long-term debt 14 (8 585) (3 516) (7 796) (3 053)Cash generated by financing activities 5 423 13 025 6 770 12 433

(Decrease)/increase in cash and cash equivalents (118) 8 498 (290) 6 047Cash and cash equivalents at the beginning of year 6 844 (1 654) 3 157 (2 890)Cash and cash equivalents at the end of the year 24 6 726 6 844 2 867 3 1571 Additions to non-current assets, including capital accruals, amount to R13 204 million (2017 - R13 525 million)

The notes on pages 8 to 58 are an integral part of these Consolidated Financial Statements.


1 Statement of compliance The annual financial statements are prepared in compliance with International Financial Reporting Standards (IFRS) and Interpretations of those standards, as issued by the International Accounting Standards Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council and the South African Companies Act, 2008. The financial statements were approved for issue by the Board of Directors on 8 August 2018.

Basis of preparation of financial results

The annual financial statements are prepared using the historic cost convention except that, certain items, including derivative instruments, liabilities for cash-settled share-based payment schemes, financial assets at fair value through profit or loss and available-for-sale financial assets, are stated at fair value. The annual financial results are presented in rand, which is Sasol South Africa Limited’s functional and presentation currency, rounded to the nearest million.

The financial statements are prepared on the going concern basis.

The comparative figures are reclassified or restated as necessary to afford a proper and more meaningful comparison of results as set out in the affected notes to the financial statements.

Certain additional disclosure has been provided in respect of the current year. To the extent practicable, comparative information has also been provided.

Accounting policies

Except as otherwise disclosed, the accounting policies applied in the annual financial statements are consistent with those applied in previous years. These accounting policies are consistently applied throughout the group.

Accounting standards, interpretations and amendments to published accounting standards

The new accounting standards listed below will become effective in future reporting periods and have not been adopted by the Group in these financial statements. The new standards will be implemented on their effective dates in accordance with the requirements of the new standards. There are no other standards and interpretations in issue but not yet adopted that will have a material impact on the group.

IFRS 9 'Financial Instruments' (Effective 1 January 2018)

IFRS 9 was issued in July 2014 and replaces IAS 39, Financial Instruments. The group will adopt IFRS 9 in the period commencing 1 July 2018.

IFRS 9 introduced new requirements for classifying and measuring financial assets and liabilities, including a new impairment model which will result in earlier recognition of losses and new rules for hedging accounting. Under IFRS 9, the group’s financial assets will be classified as measured at amortised cost, fair value through profit or loss, or fair value through other comprehensive income. Whilst financial assets will be reclassified into the categories required by IFRS 9, the group has not identified any significant impacts on the measurement of its financial assets and financial liabilities as a result of the classification and measurement requirements of the new standard. For financial liabilities the existing classification and measurement requirements of IAS 39 will remain the same.

The hedge accounting requirements has been simplified and are more closely aligned to an entity’s risk management strategy. The group, will however only implement these requirements once the impact thereof has been fully assessed.

The financial asset impairment requirements of IFRS 9 introduce a forward-looking expected credit loss model that results in earlier recognition of credit losses than the incurred loss model of IAS 39. Given the short-term nature of the majority of financial assets and the group’s active management of credit risk, the group does not expect a significant impact on adoption of IFRS 9’s impairment requirements. The adjustment to the 2018 opening balance sheet, which will reduce both the carrying amounts of financial assets and the retained earnings will not be material.


IFRS 15 ‘Revenue from contracts with customers' (Effective 1 January 2018)

IFRS 15 was issued in May 2014 and replaces IAS 18, Revenue and certain other standards and interpretations. The group will adopt IFRS 15 in the financial reporting period commencing 1 July 2018 and has elected to apply the “modified retrospective” approach to implementation.

IFRS 15 requires entities to recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This core principle is achieved through a five step methodology that is required to be applied to all contracts with customers. The group will adopt IFRS 15 in the financial reporting period commencing 1 July 2018 and has elected to apply the 'modified retrospective' transition approach to implementation.

Management has assessed the potential impact of IFRS 15 on the financial statements of the group and the new standard does not have a significant impact on the timing or amount of the group’s revenue recognition. However, the accounting for certain contracts, such as those with provisional pricing or take-or-pay arrangements, and for underlifts and overlifts, have been identified as areas of potential change. However, these do not have a significant effect on the group’s accounting or disclosures, and therefore no transition adjustment will be presented.

IFRS 15 requires the disclosure of revenue from contracts with customers to be disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. It is the group’s intention to provide additional disclosure of revenue from contracts with customers disaggregated by product grouping and reportable segments.

IFRS 16 ‘Leases' (Effective 1 January 2019)

IFRS 16 introduces a single lease accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right of use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

The group will adopt IFRS 16 on 1 July 2019. An implementation project was initiated in 2016 and work is progressing including a system solution to hold lease data and generate accounting entries. Work streams have also been initiated to cover data and processes, accounting policy development and the impacts on key performance indicators and financial metrics. On transition, the group intends to adopt the full retrospective approach permitted by the standard, which requires restatement of the comparatives period’s financial information.

The group’s evaluation of the effect of adoption of the standard is ongoing but it is expected that it will have a material effect on the group’s financial statements, significantly increasing the group’s recognised assets and liabilities. We expect a likely increase in the depreciation expense and also an increase in cash flows from operating activities as the lease payments will be disclosed as financing outflows in our cash flow statement. Variable lease payments that do not depend on an index or rate are not included in the lease liability and will continue to be presented as operating cash flows.

Information on the group’s leases currently classified as operating leases, which are not recognized on the balance sheet, is presented in Note 34 and provides an indication of the magnitude of assets and liabilities that will be recognised on the balance sheet from 2020. However, the commitments information provided in Note 34 is on an undiscounted basis whereas the amounts recognised under the new standard will be on a discounted basis. The discount rates to be used on transition will be incremental borrowing rates as appropriate for each lease based on factors such as the lessee country of operation, lease term and commencement date. Currently across the group, the incremental borrowing rates applicable to the significant portion of the undiscounted lease cash flows range from 9,95% to 11,95%. There will likely be other differences in the amounts recognised and our evaluation of the precise impacts is ongoing.

Based on the group’s current assessment, the impact is expected to be between R4,8 billion – R6,4 billion of additional liabilities that will be recognised on the balance sheet with a corresponding lease asset. The additional lease liabilities will add between 11% - 15% on gearing.

IAS 23 ‘Borrowing Costs’ (Effective 1 January 2019)

The amendment to IAS 23 clarifies that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.

The group has a number of projects to which borrowing costs are capitalised. The amendment would impact projects which reach “ready for operation” for which borrowing costs remain outstanding and is expected to result in a higher capitalisation interest which is currently recognized in earnings.


Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm Rm

2 TurnoverSale of products 86 130 76 513 83 710 78 091Services rendered 1 048 3 179 671 585Other trading income* 945 1 407 945 1 407

88 123 81 099 85 326 80 083

*Other trading income includes sale of accessories in the explosives industry.

Accounting policies:Revenue is recognised at the fair value of the consideration received or receivable net of indirect taxes, rebates and trade discounts and consists primarily of the sale of products, services rendered, licence fees and royalties.

Revenue is recognised when the following criteria are met:

■ evidence of an arrangement exists;

■ delivery has occurred or services have been rendered and the significant risks and rewards of ownership have been transferred to the purchaser;

■ transaction costs can be reliably measured;

■ the selling price is fixed or determinable; and

■ collectability is reasonably assured.The timing of revenue recognition is as follows. Revenue from:

■ the sale of products is recognised when the group has substantially transferred all the risks and rewards of ownership and no longer retains continuing managerial involvement associated with ownership or effective control;

■ services rendered is based on the stage of completion of the transaction, based on the proportion that costs incurred to date bear to the total cost of the project; and

■ licence fees and royalties are recognised on an accrual basis.The group enters into exchange agreements with the same counterparties for the purchase and sale of inventory that are entered into in contemplation of one another. When the items exchanged are similar in nature, these transactions are combined and accounted for as a single exchange transaction. The exchange is recognised at the carrying amount of the inventory transferred.

ChemicalsPerformance Chemicals markets commodity and differentiated performance chemicals. The key product lines are phenolics, carbon, ammonia and speciality gases (PCASG) and wax value chains. These are produced in various Sasol production facilities in South Africa.

Base Chemicals markets commodity chemicals based on the group’s upstream Fischer-Tropsch, ethylene, propylene and ammonia value chains. The key product lines are polymers, solvents, explosives and ammonia-based fertilisers. These are produced in various Sasol production facilities in South Africa.

The Chemicals businesses sell the majority of their products under contracts at prices determinable from such agreements. Turnover is recognised upon delivery to the customer which, in accordance with the related contract terms, is the point at which the title and risks and rewards of ownership transfer to the customer. Prices are determinable and collectability is reasonably assured. Turnover on consignment sales is recognised on consumption by the customer, when title and the risks and rewards of ownership pass to the customer. Prices are determinable and collectability is reasonably assured.


The date of delivery is determined in accordance with the contractual agreements entered into with customers which are as follows:

Delivery terms Title and risks, and rewards of ownership pass to the customer:Free Carrier When products are loaded into the customer’s vehicle or unloaded at the seller’s premises.Carriage Paid To When products are handed to the first carrier.

Free on BoardWhen the products cross the ship's rail at the port of loading, cleared for export by the seller.

Cost Insurance and Freight When the products cross the ship's rail at the port of loading.

Delivery at Place When products are available for unloading.

Consignment Sales As and when products are consumed by the customer.

EnergySecunda Synfuels Operations sells synthetic fuels components to Sasol Oil (Pty) Ltd under the Component Supply Agreement (CSA) at prices determined by the CSA. Turnover is recognised when the risks and rewards of ownership have passed to the customer, which is when the products have passed over the appropriate weigh bridge or flow meter.

Gas is sold under long-term contracts at a price determinable from the supply agreements. Turnover is recognised at the intake flange of the customer where it is metered, which is the point at which the title and risks and rewards of ownership pass to the customer, and where prices are determinable and collectability is reasonably assured. Gas analysis and tests of the specifications and content are performed prior to delivery.

Group Company2018 2017 2018 2017


3 Materials, energy and consumables usedCost of raw materials 27 088 28 805 32 572 31 115Cost of electricity and other consumables used in production process 5 738 4 527 5 735 4 526

32 826 33 332 38 307 35 641

Costs relating to items that are consumed in the manufacturing process, including changes in inventories and distribution costs up until the point of sale.

Group Company2018 2017 2018 2017

for the year ended 30 June Note Rm Rm Rm Rm

4 Employee-related expenditureAnalysis of employee costsLabour 14 708 13 519 14 357 13 414 salaries, wages and other employee related expenditure 14 257 13 141 13 907 13 036 post-employment benefits 451 378 450 378Share-based payment expenses 1 003 108 980 108 equity-settled 32 549 261 535 261 cash-settled 31 454 (153) 445 (153)

Total employee-related expenditure 15 711 13 627 15 337 13 522Costs capitalised to projects (939) (981) (925) (938)

Per income statement 14 772 12 646 14 412 12 584


The total number of permanent and non-permanent employees, in approved positions, excluding joint ventures' and associates' employees, is analysed below:

Group Company2018 2017 2018 2017

for the year ended 30 June Number Number Number NumberPermanent employees 17 339 16 825 17 026 16 825

Non-permanent employees 178 228 178 22817 517 17 053 17 204 17 053

Accounting policies:

Remuneration of employees is charged to the income statement, except where it is capitalised to projects in line with the accounting policy for assets under construction. Short-term employee benefitsShort-term employee benefits includes salaries, wages and costs of temporary employees, paid vacation leave, sick leave and incentive bonuses. Long-term employee benefits

Long-term employee benefits are those benefits that are expected to be wholly settled more than 12 months after the end of the annual reporting period, in which the services have been rendered and are discounted to their present value.Post-retirement benefitsFurther information on these benefits is provided in note 30, and include defined benefit contribution plans, as well as defined benefit plans.

Group Company2018 2017 2018 2017


5 Translation gains/(losses)Arising fromForward exchange contracts – 12 – (15)Trade and other receivables 298 (712) 282 (708)Trade and other payables (103) 91 (73) 89Foreign currency loans (1) (5) (1) (5)Other 27 (40) (23) 20

221 (654) 185 (619)

Differences arising on the translation of monetary assets and liabilities into functional currency.

Group Company2018 2017 2018 2017


6 Other operating expenses and incomeRentals 864 679 842 673Insurance 536 578 512 569Computer costs 1 626 1 592 1 622 1 592Hired labour 561 509 547 499Audit remuneration 38 39 36 39Professional fees 927 609 916 603Changes in rehabilitation provisions (917) 485 (917) 485Other expenses 4 212 3 616 3 981 3 479Other operating income (3 483) (3 893) (3 695) (3 909)

4 364 4 214 3 844 4 030


Group Company2018 2017 2018 2017


7 Net finance costsFinance incomeDividends received from investments – 826 4 203 1 146Interest received on 919 1 075 620 931 other long-term investments – 1 – – loans and receivables 134 99 127 98 cash and cash equivalents - fellow subsidiaries 35 746 948 487 818 cash and cash equivalents - external 39 27 6 15

Per income statement 919 1 901 4 823 2 077Less: dividend received from equity accounted investments – - (45) ( 50)Less: dividend received in specie - recognised in finance income – ( 824) – ( 824)Less: interest received on tax 11 (130) ( 96) (122) ( 96)

Per the statement of cash flows 789 981 4 656 1 107

Finance costsDebt 3 018 3 290 2 590 2 844Finance leases 263 78 263 77Other 3 5 2 5

3 284 3 373 2 855 2 926Amortisation of loan costs 14 13 5 – –Notional interest 28 630 392 595 386Total finance costs 3 927 3 770 3 450 3 312Amounts capitalised to assets under construction 16 (743) ( 752) (743) ( 734)

Per income statement 3 184 3 018 2 707 2 578Total finance costs before amortisation of loan costs and notional interest 3 284 3 373 2 855 2 926Less: interest accrued on long-term debt 14 (14) ( 17) – –

Per the statement of cash flows 3 270 3 356 2 855 2 926

Group Company2018 2017 2018 2017


8 Remeasurement items affecting operating profitEffect of remeasurement items for the subsidiariesImpairment of 9 467 24 997 15 426 10 231 property, plant and equipment 15 6 551 11 522 15 426 10 231 goodwill and other intangible assets 17 2 916 13 475 – –Reversal of impairment of – – – (1 191) investment in subsidiaries 19 – – – (1 191)Loss/(profit) on 486 239 469 232 disposal of property, plant and equipment (20) (6) (21) (6) disposal of other intangible assets 13 5 13 5 liquidation of investment in dormant subsidiaries – (15) – (15) scrapping of property, plant and equipment 372 159 367 156 scrapping of assets under construction 121 96 110 92

Remeasurement items per income statement 9 953 25 236 15 895 9 272Tax effect (2 787) (7 066) (4 448) (2 930)Total remeasurement items, net of tax 7 166 18 170 11 447 6 342


Impairment/reversal of impairments

The group's non-financial assets, other than inventories and deferred tax assets, are reviewed for impairment at each reporting date or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Recoverable amounts are estimated for individual assets or, where an individual asset cannot generate cash inflows independently, the recoverable amount is determined for the larger cash generating unit to which it belongs.

Impairment calculations

The recoverable amount of the assets reviewed for impairment is determined based on the higher of the fair value less costs to sell or value-in-use calculations. Key assumptions relating to this include the discount rate and cash flows. Future cash flows are estimated based on financial budgets covering a five year period and extrapolated over the useful life of the assets to reflect the long term plans for the group using the estimated growth rate for the specific business or project. Where reliable cash flow projections are available for a period longer than five years, those budgeted cash flows are used in the impairment calculation. The estimated future cash flows and discount rate are post-tax, based on the assessment of current risks applicable to the specific entity and country in which it operates. Discounting post-tax cash flows at a post-tax discount rate yields the same results as discount pre-tax cash flows at a pre-tax discount rate, assuming there are no significant temporary tax differences.

Main assumptions used for value-in-use calculationsGroup Company

2018 2017 2018 2017Growth rate – long-term Producer Price Index % 5,50 5,50 5,50 5,50Weighted average cost of capital** % 12,71 12,50 12,71 12,50Discount rate – risk adjusted % 12,71 12,50 12,71 12,50Long-term average ethane price (nominal)* US$c/gal 37,42 44,27 37,42 44,27Long-term average ammonia price* Rand/ton 5 807,46 6 392,85 5 807,46 6 392,85Long-term average wax price* Rand/ton 21 961,20 22 100,22 21 961,20 22 100,22Long-term average exchange rate* Rand/US$ 13,57 14,71 13,57 14,71* Assumptions are provided on a long-term average basis. The 2018 and 2017 exchange rate, wax and ammonia price assumptions are calculated based on

a five year period, while the ethane price is calculated based on a ten year period.

** Calculated using spot market factors on 30 June.

Areas of judgement:Management determines the expected performance of the assets based on past performance and its expectations of market development. The weighted average growth rates used are consistent with the increase in the long-term Producer Price Index. Estimations are based on a number of key assumptions such as volume, price and product mix which will create a basis for future growth and gross margin. These assumptions are set in relation to historic figures and external reports. If necessary, these cash flows are then adjusted to take into account any changes in assumptions or operating conditions that have been identified subsequent to the preparation of the budgets.The weighted average cost of capital rate (WACC) is derived from a pricing model based on credit risk and the cost of the debt. The variables used in the model are established on the basis of management judgement and current market conditions. Management judgement is also applied in estimating the future cash flows and defining of the cash generating units. These values are sensitive to the cash flows projected for the periods for which detailed forecasts are not available and to the assumptions regarding the long-term sustainability of the cash flows thereafter.

Significant impairments of assets in the group in 2018

Base Chemicals cash generating units (CGUs)

The Base Chemicals CGUs were impaired by R8 641 million at 30 June 2018 mainly due to a R4 723 million impairment in the Polythene CGU and a R3 918 million impairment in the Chlor Vinyls value chain. At 30 June 2018 the recoverable amounts of the Polythene CGU and Chlor Vinyls value chain are R6 258 million and R258 million respectively.

These impairments were largely driven by the strengthening of the Rand against the US$ and the resulting impact on the Base Chemicals margins. The performance of the Polythene CGU and Chlor Vinyls value chain is highly sensitive to Rand / US$ exchange rate and WACC movements. A 5% change in the exchange rate assumption could change the recoverable amount by approximately R2 372 million for the Polythene CGU and R1 969 million for the Chlor Vinyls value chain. A 1% change in the WACC could change the recoverable amount by approximately R454 million for the Polythene CGU and R30 million for the Chlor Vinyls value chain. The macroeconomic factors are outside of the control of management. The Base Chemicals CGU’s are also highly sensitive to variability in product prices driven by changes in the global market conditions. We continue to monitor these assets for further impairments or signs of recovery indicating a reversal of impairment.

Performance Chemicals CGUs

The Ammonia CGU was further impaired by R805 million at 30 June 2018. At 30 June 2018 the recoverable amount of the Ammonia CGU was R4 631 million.

The recoverable amount of the Ammonia CGU is largely impacted by global Ammonia prices and the Rand/US$ exchange rate. A 5% change in the global Ammonia price could change the recoverable amount by approximately R1 219 million and a 5% change in the Rand/US$ exchange rate assumption could change the recoverable amount by R604 million,. A 1% change in WACC could change the recoverable amount by approximately R469 million.

The global market prices and macroeconomic factors are outside the control of management. We continue to monitor this CGU for further impairments and signs of recovery indicating a reversal of impairment.


Significant impairments of assets in the group in prior periods

Base Chemicals cash generating units (CGUs)

The Methanol CGU was impaired by R1 172 million, due to the low global oil price outlook, which affects prices in these markets. At 30 June 2017 the recoverable amount of the Methanol CGU is R1 146 million.

Performance Chemicals CGUs

The Performance Chemicals CGUs were impaired by R23 825 million at 30 June 2017 due to the R14 626 million and R9 199 million impairments in the Wax and the Ammonia CGUs, respectively. At 30 June 2017 the recoverable amounts of the Wax and Ammonia CGUs are R10 766 million and R4 805 million, respectively.

The performance of the Wax CGU is highly sensitive to the prevailing market prices of Wax, the Rand/US$ and Rand/EUR exchange rate movements. The impairment was largely driven by lower margins resulting from lower sales prices and volumes as well as the strengthening of the Rand against the US$ and EUR, when compared to financial year 2016. A 5% change in the Wax sales prices would result in R 2 800 million change in the recoverable amount, whereas a 5% change in the Rand/US$ and Rand/EUR would result in a change of R2 016 million in the recoverable amount. A 1% change in WACC would change the recoverable amount by approximately R366 million.

The impairment in the Ammonia value chain CGU is as a result of the downturn in the commodity and agricultural industries impacting negatively on the performance of the Fertiliser and Explosive businesses within the Ammonia value chain CGU. A further decline in the Ammonia sales prices, due to a global over supply, also contributed to further lowering product margins in 2017.

The recoverable amount of the Ammonia CGU is largely impacted by global Ammonia prices and the Rand/US$ exchange rate. A 5% change in the global Ammonia price or Rand/US$ exchange rate assumptions, could change the recoverable amount by approximately R1 961 million. A 1% change in WACC could change the recoverable amount by approximately R218 million.

The global market prices and macroeconomic factors are outside the control of management. We continue to monitor these assets for further impairments and signs of recovery indicating a reversal of impairment.

Sensitivity to changes in assumptions

Management has considered the sensitivity of the impairment calculations to various key assumptions such as commodity prices, exchange rates and the WACC rate. These sensitivities have been taken into consideration in determining the required impairments and reversals of impairments.


Remeasurement items are items of income and expense recognised in the income statement that are less closely aligned to the operating or trading activities of the reporting entity and includes the impairment of non-current assets, profit or loss on disposal of non-current assets and scrapping of assets. The group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, to determine whether there is any indication of impairment. An impairment test is performed on all goodwill, intangible assets not yet in use and intangible assets with indefinite useful lives at each reporting date.

The recoverable amount of an asset is defined as the amount that reflects the greater of the fair value less costs of disposal and value-in-use that can be attributed to an asset as a result of its ongoing use by the entity. Value-in-use is estimated using a discounted cash flow model. The future cash flows are adjusted for risks specific to the asset. The recoverable amount may be adjusted to take into account recent market transactions for a similar asset.

Some assets are an integral part of the value chain but are not capable of generating independent cash flows because there is no active market for the product streams produced from these assets, or the market does not have the ability to absorb the product streams produced from these assets or it is not practically possible to access the market due to infrastructure constraints that would be costly to construct. Product streams produced by these assets form an input into another process and accordingly do not have an active market. These assets are classified as corporate assets in terms of IAS 36 when their output supports the production of multiple product streams that are ultimately sold into an active market.

The group’s corporate assets are allocated to the relevant cash generating unit based on a cost or volume contribution metric. Costs incurred by the corporate asset are allocated to the appropriate cash generating unit at cost. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the cash generating unit to which the corporate asset belongs.The gas value chain starts with the feedstock obtained in Mozambique and continues along the conversion processes in Secunda and Sasolburg, ultimately resulting in fuels and chemicals-based product lines. The groups of assets which support the different product lines, including corporate asset allocations, are considered to be separate cash generating units.

Certain products are sometimes produced incidentally from the main conversion processes and can be sold into active markets. When this is the case, the assets that are directly attributable to the production of these products, are classified as separate cash generating units. The cost of conversion of these products is compared against the revenue when assessing the asset for impairment.


Group Company2018 2017 2018 2017


9 Acquisition of businessProperty, plant and equipment – 3 324 – 1 152Assets under construction – 213 – 58Intangible assets – 40 467 – 100Post-retirement benefit assets – 34 – 34Deferred tax (liability)/asset – (11 333) – 43Inventory – 157 – 53Trade and other receivables – 2 299 – 1 095Long-term provisions – (813) – (449)Retirement benefit obligations – (148) – (132)Tax payable – (38) – –Trade and other payables – (2 141) – (1 339)Other short-term provisions – (36) – (9)Other – (7) – –Total fair value of assets and liabilities (excluding cash) – 31 978 – 606Cash acquired per cash flow statement – 2 141 – 676Total fair value of assets and liabilities – 34 119 – 1 282

Goodwill – 14 040 – –

Total consideration – 48 159 – 1 282

On 1 July 2016 Sasol South Africa (Pty) Ltd acquired the net book value of Sasol Technology (Pty) Ltd, excluding current registered intellectual property, for a cash consideration of R1,3 billion.

On 30 June 2017 Sasol South Africa Limited purchased 100% of the shareholding in Sasol Gas (Pty) Ltd for a consideration of R51,2 billion. The purchase was funded by a loan from Sasol Limited to Sasol South Africa Limited at 0% interest. The fair value of the consideration payable on initial recognition is R46,8 billion. The at acquisition fair value of the assets and liabilities is R32,8 billion resulting in goodwill of R14,0 billion.

Accounting policies:Common control transactions are business combinations between entities which are ultimately controlled by Sasol Limited, before and after the transaction.

Where a common control transaction occurs in line with a general group restructuring, where the objective is largely linked to structure efficiencies, legal simplifications and operating model enhancements, the group applies the predecessor accounting method when accounting, whereby the assets and liabilities of the combining entities are not adjusted to fair value but are rather transferred at their carrying amounts at the date of the transaction. Should there be any difference between the consideration paid or transferred and the net asset value ‘acquired’, this is recognised in retained earnings. No new goodwill will be recognised as a result of the common control transaction. The statement of financial position and income statement will be adjusted from the date of the transaction. Where a common control transaction occurs with underlying commercial or economic justification, and where the proceeds are determined with reference to the fair value of the purchased entity or business, this indicates that the transaction has substance, over and above a straightforward restructuring. In these cases, the group applies the acquisition method of IFRS 3 in accounting for the transaction. On acquisition date, fair values are attributed to the identifiable assets, liabilities and contingent liabilities. A non-controlling interest at acquisition date is measured at fair value or at its proportionate interest in the fair value of the net identifiable assets of the entity acquired on a transaction by transaction basis, including that component of the non-controlling interest which has a present ownership interest.Fair values of all identifiable assets and liabilities included in the business combination are determined by reference to market values of those or similar items, where available, or by discounting expected future cash flows using the discount rate to present values.On acquisition date, goodwill is recognised when the aggregate of the consideration transferred, the fair value of any previously held interests and the recognised amount of non-controlling interests exceeds the fair value of the net identifiable assets of the entity acquired.

To the extent that the fair value of the net identifiable assets of the entity acquired exceeds the consideration transferred and the recognised amount of non-controlling interests, the excess, or bargain purchase gain, is recognised in the income statement on acquisition date.

The profit or loss realised on disposal of an entity is calculated after taking into account the carrying amount of any related goodwill.


Group Company2018 2017 2018 2017


10 TaxationSouth African normal tax 2 089 (125) 631 (232) current year 2 251 440 802 213 prior years (162) (565) (171) (445)Foreign tax – current year 396 430 1 2 current year 456 304 1 2 prior years (60) 126 – –

Income tax 2 485 305 632 (230)Deferred tax – South Africa (1 142) (3 672) (2 585) (1 165) current year (1 259) (3 692) (2 692) (1 176) prior years 117 20 107 11

– –Deferred tax – foreign – prior year – 2 – 2

1 343 (3 365) (1 953) (1 393)

Group Company2018 2017 2018 2017

for the year ended 30 June % % % %

Reconciliation of effective tax rateThe table below shows the difference between the South African enacted tax rate (28%) compared to the effective tax rate in the income statement. Total income tax expense differs from the amount computed by applying the South African normal tax rate to profit before tax. The reasons for these differences are:South African normal tax rate 28,0 28,0 28,0 28,0Increase/(decrease) in rate of tax due to disallowed expenditure1 11,8 (13,5) (15,0) 28,0 disallowed share-based payment expenses 0,5 (0,1) (1,3) 1,5 different tax rates 1,9 (0,3) – –

reversal of impairment of investment in the Sasol Acrylates Group2 – – – (37,7) exempt income3 (0,8) 2,0 72,4 (38,0) energy efficiency allowances (9,8) 5,8 27,9 (87,6) prior year adjustments4 (2,2) 3,1 3,9 (48,7) other adjustments (0,9) 0,2 2,5 (2,4)Effective tax rate 28,5 25,2 118,4 (156,9)1 Includes non-deductible expenses incurred not deemed to be in the production of taxable income.2 The prior year impairment in the Sasol Acrylates group was fully reversed at 30 June 2017.3 Exempt income mainly comprises dividends received (company).4 The prior year adjustments relate mainly to the section 12L energy efficiency allowances.


Group Company2018 2017 2018 2017


11 Tax paidNet amounts receivable at beginning of year (2 684) (1 900) (2 745) (1 985)Acquisition of businesses – 38 – –Net interest on tax (130) (96) (122) (96)Income tax per income statement 10 2 485 305 632 (230)Foreign exchange differences recognised in income statement (62) – – –

(391) (1 653) (2 235) (2 311)

Net tax receivable per statement of financial position 2 583 2 684 2 789 2 745Per the statement of cash flows 2 192 1 031 554 434

ComprisingNormal tax

South Africa 1 871 632 553 432Foreign 321 399 1 2

2 192 1 031 554 434

Group Company2018 2017 2018 2017


12 Deferred taxReconciliationBalance at beginning of year 21 612 13 962 11 884 13 091Current year charge (1 169) (3 683) (2 611) (1 164) per the income statement (1 142) (3 670) (2 585) (1 163) per the statement of changes in equity (65) – (63) – per the statement of comprehensive income 38 (13) 37 (1)Acquisition of other businesses – 11 333 – (43)Transfer to other businesses 19 – 19 –Balance at end of year 20 462 21 612 9 292 11 884Deferred tax liabilities are determined based on the tax status and rate of the underlying entities.

Group Company2018 2017 2018 2017


Deferred tax is attributable to temporary differences on the following:Net deferred tax liabilities:Property, plant and equipment 16 490 16 313 13 014 15 349Intangible assets 8 031 9 069 – –Current assets (202) (35) (128) (24)Short- and long-term provisions (3 176) (3 236) (3 032) (3 090)Current liabilities (224) (200) (215) (193)Calculated tax losses (107) (144) – –Other (350) (155) (347) (158)

20 462 21 612 9 292 11 884


Accounting policies:The income tax charge is determined based on net income before tax for the year and includes deferred tax.

The current tax charge is the tax payable on the taxable income for the financial year applying enacted or substantively enacted tax rates and includes any adjustments to tax payable in respect of prior years.

Deferred tax is provided for using the liability method, on all temporary differences between the carrying amount of assets and liabilities for accounting purposes and the amounts used for tax purposes and on any tax losses. No deferred tax is provided on temporary differences relating to:■ the initial recognition of goodwill; ■ the initial recognition (other than in a business combination) of an asset or liability to the extent that neither accounting nor

taxable profit is affected on acquisition; and ■ investments in subsidiaries, associates and interests in joint arrangements to the extent that the temporary difference will

probably not reverse in the foreseeable future and the control of the reversal of the temporary difference lies with the parent, investor, joint venturer or joint operator.

The provision for deferred tax is calculated using enacted or substantively enacted tax rates at the reporting date that are expected to apply when the asset is realised or liability settled.Deferred tax assets and liabilities are offset when the related income taxes are levied by the same taxation authority, there is a legally enforceable right to offset and there is an intention to settle the balances on a net basis.

Group and Company2018 2017

for the year ended 30 June Rm Rm

13 Share capitalIssued share capital (as per statement of changes in equity) 60 583 55 849

Group and CompanyNumber of shares

2018 2017AuthorisedOrdinary shares of no par value 400 000 000 10 000

Issued - no par value sharesShares issued at beginning of year 167 167

Shares issued during the year 288 371 169 –Shares issued at end of year 288 371 336 167

Share Capital

The capital of the group is managed by its ultimate holding company, Sasol Limited, by means of an approved group funding policy, which determines each group entity’s required rate of return.

Accounting policies:Issued share capital is stated in the statement of changes in equity at the amount of the proceeds received less directly attributable issue costs.


Group Company2018 2017 2018 2017


14 Long-term debtFellow subsidiaries 35 67 435 73 588 67 023 73 177External 8 133 4 999 4 676 879Total long-term debt 75 568 78 587 71 699 74 056Short-term portion (4 088) (3 833) (3 122) (3 048)

71 480 74 754 68 577 71 008Analysis of long-term debtAt amortised costSecured debt 3 473 4 148 – –Finance leases* 34 4 474 684 4 474 684Unsecured debt 67 638 73 785 67 225 73 372Unamortised loan costs (17) (30) – –

75 568 78 587 71 699 74 056ReconciliationBalance at beginning of year 78 587 18 395 74 056 14 743Loans raised 5 517 63 700 5 417 62 380 proceeds from new loans 1 681 16 806 1 581 15 486 finance leases acquired 3 836 17 3 836 17 acquisition of Sasol Gas (Pty) Ltd – 46 877 – 46 877Loans repaid (8 585) (3 516) (7 796) (3 053)Interest accrued 7 (37) 17 (51) –Amortisation of loan costs 7 13 5 – –Translation effect of foreign currency loans 22 (14) 22 (14)Balance at end of year 75 517 78 587 71 648 74 056Interest-bearing statusInterest-bearing debt 75 064 78 392 71 195 73 861Non-interest-bearing debt 504 195 504 195

75 568 78 587 71 699 74 056Maturity profileWithin one year 4 088 3 833 3 122 3 048One to five years 13 729 62 816 10 826 59 070More than five years 57 751 11 938 57 751 11 938

75 568 78 587 71 699 74 056

*Mainly relate to finance leases for the Air Separation Unit, Sasolburg Oxygen plant and the BASF Catalyst plant in the Netherlands.

Fair value of long-term debt The fair value of long-term debt is based on the current rates available for debt with the same maturity profile and with similar cash flows. Market related rates ranging from 1,2% to 15,8% was used to discount estimated cash flows based on the underlying currency of the debt.

Group Company2018 2017 2018 2017

Rm Rm Rm Rm

Total long-term debt (before unamortised loan costs)* 80 051 82 996 76 068 78 425* The difference in the fair value of long term debt compared to the carrying value is mainly due to the 0% loan from Sasol Limited.


Group

Interest rate at 2018 2017

Terms of repayment Security Business Currency 30 June 2018 Rm RmSecured debtRepayable in bi-annual instalments ending June 2022

Secured by property,plant and equipment with a carrying value of R5 415 million (2017 - R5 888 million)

Energy (Rompco)

Rand Jibar + 1,75% 3 473 4 148

Finance leasesRepayable in equal monthly instalments ending June 2050

Underlying assets Energy Various Fixed 1,2% to 15,8%

3 707 –

Repayable in equal monthly instalments ending November 2030

Underlying assets Chemicals Various Fixed 3,7%to 13%

760 643

Other finance leases Underlying assets Various Various Various 7 414 474 684

Unsecured debtRepayable in annual instalments ending June 2026 Energy,

ChemicalsRand Jibar + 2,5% 20 257 26 713

Other Other Rand – 504 195Repayable on 30 days written notice from Sasol Limited1


Rand Fixed 0% 46 877 46 877

Total unsecured debt 67 638 73 785

Total long-term debt 75 585 78 617

Unamortised loan costs (amortised over period of debt using the effective interest rate method)

(17) (30)

75 568 78 587

Short-term portion of long-term debt (4 088) (3 833)

71 480 74 754

CompanyInterest rate at 2018 2017

Terms of repayment Security Business Currency 30 June 2018 Rm RmFinance leasesRepayable in equal monthly instalments ending June 2050

Underlying assets Energy Various Fixed 1,2% to 15,8%

3 707 –

Repayable in equal monthly instalments ending November 2030

Underlying assets Chemicals Various Fixed 3,7%to 13%

760 643

Other finance leases Underlying assets Various Various Various 7 414 474 684

Unsecured debtRepayable in annual instalments ending June 2026 Energy,

ChemicalsRand Jibar + 2,5% 19 844 26 300

Other Other Rand – 504 195Repayable on 30 days written notice from Sasol Limited1


Rand Fixed 0% 46 877 46 877

Total unsecured debt 67 225 73 372

Total long-term debt 71 699 74 056Short-term portion of long-term debt (3 122) (3 048)

68 577 71 0081 Sasol South Africa Limited (SSA) purchased 100% of the shares in Sasol Gas (Pty) Ltd from Sasol Limited on 30 June 2017 for R51,2 billion (fair value). The

purchase was funded by a loan from Sasol Limited at 0% interest. The loan is payable on 30 day’s written notice from Sasol Limited to SSA. Subsequent to the purchase, Sasol Limited made an election not to exercise its right to demand payment from SSA under the loan note for the 12 month period from 30 June 2018 to 30 June 2019.


Accounting policies:Debt, which constitutes a financial liability, includes short-term and long-term debt. Debt is initially recognised at fair value, net of transaction costs incurred and is subsequently stated at amortised cost. Debt is classified as short-term unless the borrowing entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.Debt is derecognised when the obligation in the contract is discharged, cancelled or has expired. Premiums or discounts arising from the difference between the fair value of debt raised and the amount repayable at maturity date are charged to the income statement as finance expenses based on the effective interest method.

Group

Land

Buildingand

improvements

Plant,equipment

and vehicles Total


15 Property, plant and equipmentCarrying amount at 30 June 2017 353 3 999 71 049 75 401Additions to sustain existing operations – – 3 972 3 972Prior year lease adjustment – – (221) (221)Net reclassification to other assets – – (8) (8)Reduction in rehabilitation provisions capitalised – – (49) (49)

Projects capitalised 27 237 14 325 14 589Reclassification from held for sale 24 – – 24Disposals and scrapping (3) (1) (374) (378)Current year depreciation charge – (254) (8 892) (9 146)Net impairment of property, plant and equipment – – (6 551) (6 551)Carrying amount at 30 June 2018 401 3 981 73 251 77 633

Group

Land

Buildingand

improvements

Plant,equipment

and vehicles Total

for the year ended 30 June Rm Rm Rm RmCarrying amount at 30 June 2016 358 3 480 74 724 78 562Additions – 21 216 237 to sustain existing operations – 21 142 163 to expand operations – – 74 74

Acquisition of other businesses 2 234 3 088 3 324

Net reclassification from other assets – – 58 58Reduction in rehabilitation provisions capitalised – – (8) (8)Projects capitalised – 463 13 366 13 829Disposals and scrapping (7) (4) (158) (169)Current year depreciation charge – (239) (8 671) (8 910)

Net impairment of property, plant and equipment – 44 (11 566) (11 522)Carrying amount at 30 June 2017 353 3 999 71 049 75 401

2018Cost 401 6 416 160 426 167 243

Accumulated depreciation and impairment – (2 435) (87 175) (89 610)401 3 981 73 251 77 633

2017Cost 353 6 185 146 310 152 848



Company

Land

Buildingand

improvements

Plant,equipment

and vehicles Total


Carrying amount at 30 June 2017 340 3 937 62 702 66 979Additions to sustain existing operations – – 3 973 3 973Acquisition of other businesses – – (221) (221)Net reclassification to other assets – – (8) (8)Projects capitalised 26 233 14 187 14 446Reclassification from held for sale 24 – – 24Disposals and scrapping (3) (1) (362) (366)Current year depreciation charge – (247) (8 197) (8 444)Impairment of property, plant and equipment – – (15 426) (15 426)Carrying amount at 30 June 2018 387 3 922 56 648 60 957

Company

Land

Buildingand

improvements

Plant,equipment

and vehicles Total

for the year ended 30 June Rm Rm Rm RmCarrying amount at 30 June 2016 347 3 440 68 733 72 520Additions to sustain operations – 21 140 161Acquisition of other businesses – 211 941 1 152

Net reclassification from other assets – – 52 52Projects capitalised – 463 11 330 11 793Disposals and scrapping (7) (4) (155) (166)Current year depreciation charge – (238) (8 064) (8 302)

Net impairment of property, plant and equipment – 44 (10 275) (10 231)Carrying amount at 30 June 2017 340 3 937 62 702 66 979

2018Cost 387 6 330 145 236 151 953


2017Cost 340 6 103 131 400 137 843


Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmAdditions to property, plant and equipment (cash flow)Current year additions 3 972 237 3 973 161Adjustments for non-cash items movement in environmental provisions capitalised – (22) – (21) other non-cash movements* (3 836) (17) (3 836) (17)Per the statement of cash flows 136 198 137 123* Includes plant,equipment and vehicles acquired by finance leases.


Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmLeased assetsCarrying value of capitalised leased assets (included in property, plant and equipment) 4 173 923 4 173 923 cost 4 866 1 307 4 866 1 307 accumulated depreciation (693) (384) (693) (384)

Capital commitments (excluding equity accounted investments)Capital commitments, excluding capitalised interest, include all projects for which specific board approval has been obtained. Projects still under investigation for which specific board approvals have not yet been obtained are excluded from the following:Authorised and contracted for 17 400 16 312 16 900 16 038Authorised but not yet contracted for 13 730 13 809 13 516 13 608

Less expenditure to the end of year (10 778) (11 694) (10 456) (11 473)20 352 18 427 19 960 18 173

to sustain existing operations 19 656 17 746 19 295 17 534to expand operations 696 681 665 639

Estimated expenditureWithin one year 15 730 12 267 15 431 12 077

One to five years 4 622 6 160 4 529 6 09620 352 18 427 19 960 18 173

FundingCapital expenditure will be financed from funds generated out of normal business operations, existing borrowing facilities, specific project financing and additional capital contributions from Sasol Limited.

Accounting policies:Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Land is not depreciated.When plant and equipment comprises major components with different useful lives, these components are accounted for as separate items.

Property, plant and equipment is depreciated to its estimated residual value on a straight- line basis over its expected useful life.

Areas of judgement:

The depreciation methods, estimated remaining useful lives and residual values are reviewed at least annually. The estimation of the useful lives of property, plant and equipment is based on historic performance as well as expectations about future use and therefore requires a significant degree of judgement to be applied by management.The following depreciation rates apply in the group:Buildings and improvements 2 – 5 %

Plant 3 – 5 %Equipment 10 – 33 %

Vehicles 20 – 33 %


GroupProperty plant

and equipmentunder

construction

Other intangibleassets underdevelopment Total

for the year ended 30 June Rm Rm Rm

16 Assets under constructionBalance as at 30 June 2017 14 328 123 14 451Additions 12 875 190 13 065 to sustain existing operations 12 596 190 12 786 to expand operations 279 – 279Net reclassification from other assets – 8 8Finance costs capitalised 743 – 743Projects capitalised (14 589) (140) (14 729)Disposals and scrapping (121) – (121)Balance at 30 June 2018 13 236 181 13 417

Property plantand equipment

under construction


for the year ended 30 June Rm Rm RmBalance as at 30 June 2016 14 182 111 14 293Additions 13 111 218 13 329 to sustain existing operations 11 624 218 11 842 to expand operations 1 487 – 1 487Acquisition of other businesses 210 3 213Net reclassification from/(to) other assets (1) 1 –Finance costs capitalised 752 – 752Projects capitalised (13 829) (210) (14 039)Disposals and scrapping (97) – (97)Balance at 30 June 2017 14 328 123 14 451


Company


underconstruction


for the year ended 30 June Rm Rm Rm

Balance as at 30 June 2017 14 107 119 14 226Additions 12 622 185 12 807 to sustain existing operations 12 371 185 12 556 to expand operations 251 – 251Net reclassification from other assets – 8 8Finance costs capitalised 743 – 743Projects capitalised (14 446) (139) (14 585)Disposals and scrapping (110) – (110)Balance at 30 June 2018 12 916 173 13 089


underconstruction


for the year ended 30 June Rm Rm RmBalance as at 30 June 2016 12 959 111 13 070Additions 12 241 218 12 459 to sustain existing operations 11 345 218 11 563 to expand operations 896 – 896Acquisition of other businesses 58 – 58Finance costs capitalised 734 – 734Projects capitalised (11 793) (210) (12 003)Disposals and scrapping (92) – (92)Balance at 30 June 2017 14 107 119 14 226

Group Company2018 2017 2018 2017


Additions to assets under construction (cash flow)Current year additions 13 065 13 329 12 807 12 459Adjustments for non-cash item: cash flow hedge accounting 1 (2) 1 (2)Per the statement of cash flows 13 066 13 327 12 808 12 457

The group hedges its exposure in South Africa to foreign currency risk in respect of its significant capital projects by means of forward exchange contracts. Cash flow hedge accounting is applied to these hedging transactions and accordingly, the effective portion of any gain or loss realised on these contracts is adjusted against the underlying item of assets under construction.


Accounting policies:Assets under construction are non-current assets, which includes land and expenditure capitalised for work in progress in respect of activities to develop, expand or enhance items of property, plant and equipment and intangible assets. The cost of self-constructed assets includes expenditure on materials, direct labour and an allocated proportion of project overheads. Cost also includes the estimated costs of dismantling and removing the assets and site rehabilitation costs to the extent that they relate to the construction of the asset as well as gains or losses on qualifying cash flow hedges attributable to that asset. When regular major inspections are a condition of continuing to operate an item of property, plant and equipment, and plant shutdown costs will be incurred, an estimate of these shutdown costs are included in the carrying value of the asset at initial recognition. Land acquired, as well as costs capitalised for work in progress in respect of activities to develop, expand or enhance items of property, plant and equipment are classified as part of assets under construction.

Finance expenses in respect of specific and general borrowings are capitalised against qualifying assets as part of assets under construction. Where funds are borrowed specifically for the purpose of acquiring or constructing a qualifying asset, the amount of finance expenses eligible for capitalisation on that asset is the actual finance expenses incurred on the borrowing during the period less any investment income on the temporary investment of those borrowings.

Where funds are made available from general borrowings and used for the purpose of acquiring or constructing qualifying assets, the amount of finance expenses eligible for capitalisation is determined by applying a capitalisation rate to the expenditures on these assets. The capitalisation rate is the weighted average of the interest rates applicable to the borrowings of the company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining qualifying assets. The amount of finance expenses capitalised will not exceed the amount of borrowing costs incurred.

Group Company2018 2 017 2018 2 017


17 Goodwill and other intangible assetsGoodwill* 7 371 8 487 – –Patents and trademarks 3 3 3 3Software 859 983 856 975Gas transportation agreement* 28 684 32 389 – –Other intangible assets 385 445 336 392

37 302 42 307 1 195 1 370

* Goodwill has been impaired by R5 553 million at 30 June 2017 and a further R1 116 million at 30 June 2018. The Gas transportation intangible asset has been impaired by R7 922 million at 30 June 2017 and a further R1 800 million.

Accounting policies:Intangible assets are stated at cost less accumulated amortisation and impairment losses. These intangible assets are recognised if it is probable that future economic benefits will flow to the entity from the intangible assets and the costs of the intangible assets can be reliably measured. Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. The amortisation methods and estimated remaining useful lives are reviewed at least annually. The estimation of the useful lives of other intangible assets is based on historic performance as well as expectations about future use and therefore requires a significant degree of judgement to be applied by management. The following amortisation rates, based on the estimated useful lives of the respective assets were applied:Software 17% – 33%Patents and trademarks 20%Other intangible assets 6% - 33%

Group Company2018 2017 2018 2017


18 Equity accounted investmentsAmounts recognised in the statement of cash flows:Dividends received from equity accounted investments 53 58 53 58


At 30 June, the company’s interest in equity accounted investments and the total carrying values were:

GroupInterest 2018 2017

NameCountry of incorporation Nature of activities % Rm Rm

Joint ventures and associates

Sasol Dyno Nobel (Pty) Ltd (joint venture) South AfricaManufacturing and distribution of explosives 50 271 246

Clariant Sasol Catalysts (Pty) Ltd (associate) South Africa Manufacturing and distribution of catalyst

20 11 11

Carrying value of investments 282 257

CompanyInterest 2018 2017

NameCountry of incorporation Nature of activities % Rm Rm

AssociatesClariant Sasol Catalysts (Pty) Ltd South Africa Manufacturing and

distribution of catalyst20 11 11

Summarised financial information for the company's share of equity accounted investments*

Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmOperating profit 109 80 14 14Profit before tax 109 80 12 14Taxation (31) (23) (4) (4)Profit and total comprehensive income for the year 78 57 8 10* The financial information provided represents the company's share of the results of the equity accounted investment.

Group Company2018 2017 2018 2017

Capital commitments relating to equity accounted investments Rm Rm Rm RmCapital commitments, excluding capitalised interest, include all projects for which specific board approval has been obtained. Projects still under investigation for which specific board approvals have not yet been obtained are excluded from the following:Authorised and contracted for 16 5 – –Authorised but not yet contracted for 1 2 – –Less expenditure to the end of year (12) (3) – –

5 4 – –

Impairment testing of equity accounted investments

Based on impairment indicators at each reporting date, impairment tests in respect of investments in joint ventures and associates are performed. The recoverable amount of the investment is compared to the carrying amount to calculate the impairment.

There are no significant restrictions on the ability of the joint venture and associate to transfer funds to Sasol South Africa Limited in the form of cash dividends or repayment of loans or advances.

Accounting policies:The financial results of associates and joint ventures are included in the group’s results according to the equity method from acquisition date until the disposal date. Under the equity method, investments in joint ventures and associates are recognised initially at cost. Subsequent to the acquisition date, the group’s share of profits or losses of associates is charged to the income statement as equity accounted earnings and its share of movements in equity reserves is recognised as other comprehensive income or equity as appropriate. A joint venture is a joint arrangement in which the parties have joint control with rights to the net assets of the arrangement. An associate is an entity, other than a subsidiary, joint venture or joint operation, in which the group has significant influence, but no control or joint control, over financial and operating policies.


Group Company2018 2017 2018 2017


19 Investment in subsidiaries and joint venturesReflected as non-current assetsInvestments at costBalance at the beginning of the year – 2 700 48 187 2 819Reversal of impairment of investment in subsidiary – – – 1 191Acquisition of investment in subsidiary – – – 46 877Repayment of capital – (2 700) – (2 700)

– – 48 187 48 187Reflected as non-current liabilitiesShort-term loans from subsidiariesBalance at the beginning of the year – 3 539 – 3 539Loans repaid – (3 539) – (3 539)

– – – –

Interest in operating subsidiaries and joint ventures

The following table presents each of the company’s subsidiaries (including direct and indirect holdings) and joint ventures, the nature of activities, the percentage of equity owned and the country of incorporation at 30 June.

There are no significant restrictions on the ability of the company’s subsidiaries and joint ventures to transfer funds to Sasol South Africa Limited in the form of cash dividends or repayment of loans or advances.

Company% of equity owned Investment at cost

2018 2017 2018 2017

NameCountry of incorporation Nature of activities % % Rm Rm

Operating subsidiaries and joint venturesDirectSasol Dyno Nobel (Pty) Ltd (joint venture)

South Africa Manufacturing and distribution of explosives

50 50 114 114

Sasol Acrylates (South Africa) (Pty) Ltd

South Africa Production of acrylic acid and acrylates

50 50 819 819

Sasol Acrylates (Pty) Ltd South Africa Marketing of acrylic acid and acrylates

100 100 372 372

The Republic of Mozambique Pipeline Investment Company (Pty) Ltd (Rompco)*

South Africa Owning and operating of the natural gas transmission pipeline between Temane in Mozambique and Secunda in South Africa for the transportation of natural gas produced in Mozambique to markets in Mozambique and South Africa

50 50 5 5

Sasol Gas (Pty) Ltd South Africa Marketing, distribution and transportation of pipeline gas and the maintenance of pipelines used to transport gas

100 100 46 877 46 877

48 187 48 187

* Through contractual arrangements Sasol South Africa exercises control over the relevant activities of Rompco.


Group Company

2018 2017 2018 2017


20 InventoriesCarrying valueRaw materials 293 296 257 236Process material 1 639 1 596 1 630 1 526Maintenance materials 3 415 3 513 3 267 3 365Work in process 750 644 750 644Manufactured products 4 283 4 384 4 467 4 356Consignment inventory 62 56 61 55

10 442 10 489 10 432 10 182

The impact of lower chemical product prices has resulted in a net realisable value write-down of R134 million in 2018 (2017 – R197 million).No inventories are encumbered. Inventory of R520 million (2017 - R886 million) is held at net realisable value.

Accounting policies:Inventories are stated at the lower of cost and net realisable value. Cost includes expenditure incurred in acquiring, manufacturing and transporting the inventory to its present location. Manufacturing costs include an allocated portion of production overheads which are directly attributable to the cost of manufacturing such inventory. The allocation is determined based on the greater of normal production capacity and actual production. The costs attributable to any inefficiencies in the production process are charged to the income statement as incurred.

By-products are incidental to the manufacturing processes, are usually produced as a consequence of the main product stream, and are immaterial to the company. Revenue from sale of by-products is offset against the cost of the main products.Cost is determined as follows:Raw materials First-in-first-out valuation method (FIFO)Process, maintenance and other materials Weighted average purchase priceWork in progress Manufacturing costs incurred

Manufactured products including consignment inventory Manufacturing costs according to FIFO

Group Company2018 2017 2018 2017


21 Trade and other receivablesTrade receivables 5 260 4 809 4 494 4 155Related party receivables – subsidiaries, fellow subsidiaries and joint ventures 35 10 158 8 042 10 414 8 331Other receivables 210 264 207 257Impairment of trade receivables (48) (37) (20) (24)Trade and other receivables 15 580 13 078 15 095 12 719Prepaid expenses 444 343 443 340Value added tax 179 372 173 372

16 203 13 793 15 711 13 431


Credit risk exposure in respect of trade receivables is analysed as follows:

Group

Carrying value Impairment

Carryingvalue Impairment

2018 2018 2017 2017


Age analysis of trade receivablesNot past due date 4 490 2 3 685 4Past due 0 – 30 days* 618 4 1 033 5Past due 31 – 150 days 96 10 67 10Past due 151 days – one year 40 19 15 9More than one year** 16 13 9 9

5 260 48 4 809 37

Company

Carrying value Impairment

Carryingvalue Impairment

2018 2018 2017 2017


Age analysis of trade receivablesNot past due date 3 883 2 3 590 4Past due 0 – 30 days* 589 4 538 5Past due 31 – 150 days 16 10 22 10Past due 151 days – one year 5 3 5 5More than one year** 1 1 – –

4 494 20 4 155 24* Past due debtors up to 30 days constitute mainly export customers which are settled at month-end, however funds only reflected in South Africa after

month-end.** More than one year relates to long outstanding balances for specific customers who have exceeded their contractual repayment terms.

Impairment of trade receivables

Trade receivables that are not past their due date are not considered to be impaired, except where they are part of individually impaired trade receivables. The individually impaired trade receivables mainly relate to certain customers who are trading in difficult economic circumstances.

The following customer represents more than 10% of the group’s trade and other receivables:

Sasol Oil (Pty) Ltd – R4 089 million (2017 – R2 645 million)

Fair value of trade receivables

The carrying value approximates fair value because of the short period to maturity of these instruments.

Collateral

The group holds no collateral over the trade receivables which can be sold or pledged to a third party.


Trade and other receivables are recognised initially at fair value and subsequently stated at amortised cost using the effective interest method, less impairment losses.


Group Company2018 2017 2018 2017


22 Trade and other payablesTrade payables external 4 357 3 788 4 115 3 595Capital project related payables 691 333 691 333Related party payables - subsidiaries, fellow subsidiaries and joint ventures 35 2 274 1 983 2 922 2 840Accrued expenses 1 462 1 110 1 385 1 074Related party payables - third parties 33 18 33 18Trade payables 8 817 7 232 9 146 7 860Other payables* 2 839 2 823 2 795 2 774Value added tax 23 38 – 4

11 679 10 093 11 941 10 638* Other payables includes employee-related payables.

The following vendor represents more than 10% of the group's trade payables:

Sasol Mining (Pty) Ltd – R1 767 million (2017 - R1 521 million)

Fair value of trade and other payables

The carrying value approximates fair value because of the short period to settlement of these obligations.

Accounting policies:Trade and other payables are initially recognised at fair value and subsequently stated at amortised cost. Capital project related payables are excluded from working capital, as the nature and risks of these payables are not considered to be aligned to operational trade payables.

Group Company2018 2017 2018 2017

Rm Rm Rm Rm

23 Increase in working capitalIncrease in inventories (87) (977) (384) (1 003)(Increase)/decrease in trade and other receivables (2 402) 2 439 (2 257) 1 514Increase/(decrease) in trade and other payables 1 228 (2 053) 945 (715)Movement in financial assets and liabilities 1 (32) 1 8Increase in working capital (1 260) (623) (1 695) (196)


Group Company2018 2017 2018 2017


24 Cash and cash equivalentsCash restricted for use 733 885 315 296Cash 5 993 5 959 2 552 2 861 fellow subsidiaries 35 4 560 5 234 1 336 2 294 external 1 433 725 1 216 567

Per the statement of cash flows 6 726 6 844 2 867 3 157

Cash restricted for useIn trust 315 296 315 296Other 418 589 – –

733 885 315 296

Included in cash restricted for use:Cash held in trust is restricted for use and held in escrow. Includes funds of R315 million (2017 – R296 million) for the rehabilitation of sites.

Other cash restricted for use includes deposits for decommissioning of pipelines and cash relating to the Sasol Gas pipeline in Mozambique which is unable to be repatriated to South Africa due to foreign exchange control regulations.

Fair value of cash and cash equivalentThe carrying value of cash and cash equivalents approximates fair value due to the short-term maturity of these instruments.

Accounting policies:Cash and cash equivalents comprises cash on hand and cash restricted for use. Cash and cash equivalents are stated at carrying amount which is deemed to be fair value. Cash restricted for use comprises cash and cash equivalents which are not available for general use by the group, including amounts held in escrow, trust or other separate bank accounts.

Group Company2018 2017 2018 2017


25 Cash generated by operating activitiesCash flow from operations 26 28 460 22 590 21 195 19 671Increase in working capital 23 (1 260) (623) (1 695) (196)

27 200 21 967 19 500 19 475


Group Company2018 2017 2018 2017


26 Cash flow from operationsOperating profit 6 975 (12 233) (3 714) 1 389Adjusted for share of profits of equity accounted investments 18 (78) (57) (8) (10) equity-settled share-based payment expense 32 549 261 535 261 depreciation and amortisation 11 343 9 204 8 725 8 594 effect of remeasurement items 8 9 953 25 236 15 895 9 272 impairment of trade receivables increased/(released) 11 (10) (4) (23) movement in long-term provisions income statement charge 28 (462) 332 (471) 332 utilisation 28 (370) (603) (366) (603) movement in short-term provisions (37) (82) (35) (82) movement in post-retirement benefits 273 213 270 212 movement in long-term deferred income (12) 139 (10) 140 movement in short-term deferred income – 5 1 6 write-down of inventories to net realisable value 20 134 197 134 197 other non-cash movements 181 (12) 243 (14)

28 460 22 590 21 195 19 671

Group Company2018 2017 2018 2017


27 Dividends paidFinal dividend 11 431 – 11 431 –Interim dividend 6 603 10 000 6 603 10 000Special dividend 472 – 463 –Per the statement of changes in equity 18 506 10 000 18 497 10 000Less: dividend payable (3 179) – (3 179) –Per the statement of cash flows 15 327 10 000 15 318 10 000


Group

Environ-mental

Share-based

payments* Other Totalfor the year ended 30 June Rm Rm Rm Rm

28 Long-term provisions2018Balance at beginning of year 6 449 640 81 7 170Capitalised in property, plant and equipment (49) – – (49)Per the income statement (916) 454 – (462) additional provisions and changes to existing provisions (3) 454 – 451 reversal of unutilised amounts (173) – – (173) effect of change in discount rate (740) – – (740)Notional interest 630 – – 630Utilised during year (cash flow) (39) (325) (6) (370)Balance at end of year 6 075 769 75 6 919

Environ-mental

Share-based

payments* Other Totalfor the year ended 30 June Rm Rm Rm RmLong-term provisions2017

Balance at beginning of year 5 286 1 266 64 6 616Capitalised in property, plant and equipment 22 – – 22Long-term incentive scheme converted to equity settled – (394) – (394)Reduction in capitalised rehabilitation provision (8) – – (8)Acquisition of other businesses 353 441 19 813Per the income statement 485 (153) – 332 additional provisions and changes to existing provisions 469 (153) – 316 reversal of unutilised amounts (40) – – (40) effect of change in discount rate 56 – – 56Notional interest 392 – – 392Utilised during year (cash flow) (81) (520) (2) (603)Balance at end of year 6 449 640 81 7 170* Refer note 31 for accounting policies and areas of judgement used in calculating the share based payment provision (cash-settled).


Company

Environ-mental

Share-based

payments* Other Totalfor the year ended 30 June Rm Rm Rm Rm2018Balance at beginning of year 6 036 631 79 6 746Per the income statement (916) 445 – (471) additional provisions and changes to existing provisions (3) 445 – 442 reversal of unutilised amounts (173) – – (173) effect of change in discount rate (740) – – (740)Notional interest 595 – – 595Utilised during year (cash flow) (39) (321) (6) (366)Balance at end of year 5 676 755 73 6 504

Environ-mental

Share-based

payments* Other Totalfor the year ended 30 June Rm Rm Rm RmLong-term provisions2017

Balance at beginning of year 5 225 1 267 63 6 555Capitalised in property, plant and equipment 21 – – 21Long-term incentive scheme converted to equity settled – (394) – (394)Acquisition of other businesses – 431 18 449Per the income statement 485 (153) – 332 additional provisions and changes to existing provisions 469 (153) – 316 reversal of unutilised amounts (40) – – (40) effect of change in discount rate 56 – – 56Notional interest 386 – – 386Utilised during year (cash flow) (81) (520) (2) (603)Balance at end of year 6 036 631 79 6 746* Refer note 31 for accounting policies and areas of judgement used in calculating the share-based payment provision (cash-settled).

Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmExpected timing of future cash flowsWithin one year 1 071 982 1 058 971One to five years 1 147 986 1 145 986More than five years 4 701 5 202 4 301 4 789

6 919 7 170 6 504 6 746Short-term portion (1 071) (982) (1 058) (971)Long-term provisions 5 848 6 188 5 446 5 775Estimated undiscounted obligation 72 405 74 065 70 540 72 148


Environmental provisions

In accordance with the Sasol group’s published environmental policy and applicable legislation, a provision for rehabilitation is recognised when the obligation arises, representing the estimated actual cash flows in the period in which the obligation is settled.

The environmental obligation includes estimated costs for the rehabilitation of gas and petrochemical sites. The amount provided is calculated based on currently available facts and applicable legislation.

The total environmental provision at 30 June 2018 amounted to R6 075 million (2017 – R6 449 million) for the group. Restricted cash of R315 million (2017 – R296) is held in escrow, primarily for the purpose of rehabilitation.

The following risk-free rates were used to discount the estimated cash flows based on the underlying currency and time duration of the obligation.

Group Company 2018 2017 2018 2017

for the year ended 30 June % % % %

South Africa 7,3 to 9,2 7,3 to 8,6 7,3 to 9,2 7,3 to 8,6

2018 2017 2018 2017for the year ended 30 June Rm Rm Rm Rm

A 1% point change in the discount rate would have the following effect on the long-term provisions recognisedIncrease in the discount rate (1 098) (1 254) (1 042) (1 192) amount capitalised to property, plant and equipment (56) (68) – (6)

income recognised in income statement (1 042) (1 186) (1 042) (1 186)

Decrease in the discount rate 1 509 1 752 1 442 1 677 amount capitalised to property, plant and equipment 67 83 – 8 expense recognised in income statement 1 442 1 669 1 442 1 669


Long-term provisions are determined by discounting the expected future cash flows using a pre-tax discount rate to their present value. The increase in discounted long-term provisions as a result of the passage of time is recognised as a finance expense in the income statement.Estimated long-term environmental provisions, comprising pollution control and rehabilitation, are based on the group’s environmental policy taking into account current technological, environmental and regulatory requirements. The provision for rehabilitation is recognised as and when the environmental liability arises. To the extent that the obligations relate to the construction of an asset, they are capitalised as part of the cost of those assets. The effect of subsequent changes to assumptions in estimating an obligation for which the provision was recognised as part of the cost of the asset is adjusted against the asset. Any subsequent changes to an obligation which did not relate to the initial construction of a related asset are charged to the income statement. The estimated present value of future decommissioning costs, taking into account current environmental and regulatory requirements, is capitalised as part of property, plant and equipment, to the extent that they relate to the construction of the asset, and the related provisions are raised. These estimates are reviewed at least annually.

Deferred tax is recognised on the temporary differences in relation to both the asset to which the obligation relates to and rehabilitation provision.Termination benefits are recognised as a liability at the earlier of the date of recognition of restructuring costs or when the group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. In the case of an offer to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits that are expected to be wholly settled more than 12 months after the end of the reporting period are discounted to their present value.

Areas of judgement:The determination of long-term provisions, in particular environmental provisions, remains a key area where management’s judgement is required. Estimating the future cost of these obligations is complex and requires management to make estimates and judgements because most of the obligations will only be fulfilled in the future and contracts and laws are often not clear regarding what is required. The resulting provisions could also be influenced by changing technologies and political, environmental, safety, business and statutory considerations.

It is envisaged that, based on the current information available, any additional liability in excess of the amounts provided will not have a material adverse effect on the group’s financial position, liquidity or cash flow.


Group Company2018 2017 2018 2017


29 Short-term provisionsOther provisions 30 67 5 40Short-term portion of long-term provisions 28 1 071 982 1 058 971 post-retirement benefit obligations 30 160 142 159 141

1 261 1 191 1 222 1 152

Group Company2018 2017 2018 2017


30 Post-retirement benefit obligationsPost-retirement benefit asset 436 475 436 475

The post-retirement benefit assets form part of the asset recognised in terms of the Sasol Pension Fund's defined benefit plan. Full disclosure is provided in the consolidated annual financial statements of Sasol Limited.

Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmPost-retirement benefit obligations 3 602 3 503 3 584 3 486Less short-term portion post-retirement healthcare benefits (160) (142) (159) (141)Total long-term post retirement benefit obligations 3 442 3 361 3 425 3 345

Post-retirement healthcare benefits

The group provides post-retirement healthcare benefits to certain of its retirees employed prior to 1 January 1998, who retire and satisfy the necessary requirements of the medical fund. The post-retirement healthcare liability forms part of the Sasol Limited group's post-retirement benefit obligation. Full disclosure is provided in the Sasol Limited consolidated annual financial statements.

Accounting policies:The group operates or contributes to defined contribution pension plans and defined benefit pension plans for its employees. These plans are generally funded through payments to trustee-administered funds as determined by annual actuarial calculations.Defined contribution pension plans are plans under which the group pays fixed contributions into a separate legal entity and has no legal or constructive obligation to pay further amounts. Contributions to defined contribution pension plans are charged to the income statement as an employee expense in the period in which related services are rendered by the employee.The group’s net obligation in respect of defined benefit pension plans is actuarially calculated separately for each plan by deducting the fair value of plan assets from the gross obligation for post-retirement benefits. The gross obligation is determined by estimating the future benefit attributable to employees in return for services rendered to date.This future benefit is discounted to determine its present value, using discount rates based on government bonds that have maturity dates approximating the terms of the group’s obligations and which are denominated in the currency in which the benefits are expected to be paid. Independent actuaries perform this calculation annually using the projected unit credit method.Defined contribution members employed before 2009 have an option to purchase a defined benefit pension with their member share. This option gives rise to actuarial risk, and as such, these members are accounted for as part of the defined benefit fund and are disclosed as such.Past service costs are charged to the income statement at the earlier of the following dates:■ when the plan amendment or curtailment occurs; and■ when the group recognises related restructuring costs or termination benefits.Actuarial gains and losses arising from experience adjustments and changes to actuarial assumptions, the return on plan assets (excluding amounts included in net interest on the defined benefit liability/(asset)) and any changes in the effect of the asset ceiling (excluding amounts included in net interest on the defined benefit liability/(asset)) are remeasurements that are recognised in other comprehensive income in the period in which they arise.Where the plan assets exceed the gross obligation, the asset recognised is limited to the lower of the surplus in the defined benefit plan and the asset ceiling determined using a discount rate based on government bonds.Surpluses and deficits in the various plans are not offset.The entitlement to healthcare benefits is usually based on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued on a systematic basis over the expected remaining period of employment, using the accounting methodology described in respect of defined benefit pension plans above. Independent actuaries perform the calculation of this obligation annually.


Healthcare benefits Pension benefits

Last actuarial valuation – South Africa 31 March 2018 31 March 2018Full/interim valuation Full FullValuation method adopted Projected unit credit Projected unit creditThe plans have been assessed by the actuaries and have been found to be in sound financial positions.

Principal actuarial assumptions

Weighted average assumptions used in performing actuarial valuations determined in consultation with independent actuaries.

South Africa2018 2017

at valuation date % %Healthcare cost inflation initial 7,5 7,5 ultimate 7,5 7,5Discount rate – post-retirement medical benefits 9,9 9,8Discount rate – pension benefits 9,9 10,1Pension increase assumption 4,5 5,2Average salary increases 5,5 * 5,5 *Weighted average duration of the obligation – post-retirement medical obligation 15 years 15 yearsWeighted average duration of the obligation – pension obligation 13 years 13 yearsAssumptions regarding future mortality are based on published statistics and mortality tables.* Salary increases are linked to inflation.

Group Company2018 2017 2018 2017


31 Cash-settled share-based payment provisionDuring the year, the following share-based payment expenses were recognised in the income statement relating to cash-settled arrangements (refer to note 32 for the equity settled share-based payment disclosure):Share-based payment expense – movement in long-term provisionsSasol Share Appreciation Rights Scheme 454 (227) 445 (227)Sasol Long-term Incentive Scheme* – 74 – 74

454 (153) 445 (153)*On 25 November 2016, the cash-settled LTI scheme was converted to an equity-settled share-based payment scheme.

Sasol's share price increased by 37% over the financial year to a closing price on 30 June 2018 of R502,86. This has resulted in a R454 million expense being recognised in the current year for the group.

The Sasol Share Appreciation Rights Scheme (closed since 2013)

Group Company2018 2017 2018 2017

Total rights/units granted Number Number Number NumberShare Appreciation Rights 4 969 521 8 195 893 4 876 843 8 062 023


The Share Appreciation Rights Scheme (SARs) allows eligible senior employees to earn a long-term incentive amount calculated with reference to the increase in the Sasol Limited share price between the offer date of SARs to exercise of such vested rights. No shares are issued in terms of this scheme and all amounts payable in terms of the Sasol SAR Scheme are settled in cash.

The offer price of these appreciation rights equals the closing market price of the underlying shares on the trading day immediately preceding the granting of the right. The fair value of the cash-settled liability is calculated at each reporting date. On resignation, SARs which have not yet vested lapse and SARs which have vested may be exercised at the employee’s election before their last day of service. On death, all SARs vest immediately and the deceased's estate has a period of 12 months to exercise these rights. On retrenchment or retirement, all SARs vest immediately and the employee has a period of 12 months to exercise these rights.

It is group policy that employees should not deal in Sasol Limited securities (and this is extended to the Sasol SARs) for the periods from 1 January for half year-end and 1 July for year-end until two days after publication of the results and at any other time during which they have access to price sensitive information.

Group Company2018 2017 2018 2017

SARs SARs SARs SARs

Rm Rm Rm Rm

Per statement of financial position 769 640 755 631

Total intrinsic value of rights vested, but not yet exercised 761 217 749 214

2018 2017

SARs with no CPTs

SARs with CPTs

SARs withno CPTs

SARswith CPTs

Binomial Binomial Binomial BinomialModel tree tree tree treeRisk-free interest rate (%) 6,46 - 7,09 6,88 - 7,63 7,03 - 8,75 7,03 - 8,75Expected volatility (%) 28,61 27,16 20,86 24,45Expected dividend yield (%) 4,97 2,25 3,42 3,42Expected forfeiture rate (%) * 5,00 * 9,00Vesting period – SARs issued between 2009 – 2011 2, 4, 6

years2, 4, 6years

2, 4, 6years

2, 4, 6years

Vesting period – SARs issued between 2012 – 2014

–3, 4, 5years –

3, 4, 5years

* All SARs with no CPTs have vested and therefore no forfeiture is applied.

The risk-free rate for periods within the contractual term of the rights is based on the Rand swap curve in effect at the time of the valuation of the grant.

The expected volatility in the value of the rights granted is determined using the historical volatility of the Sasol share price.

The expected dividend yield of the rights granted is determined using expected dividend payments of the Sasol ordinary shares.

The valuation of the share-based payment expense requires a significant degree of judgement to be applied by management.

Accounting policies:The cash-settled schemes allow certain senior employees the right to participate in the performance of the Sasol Limited share price, in return for services rendered, through the payment of cash incentives which are based on the market price of the Sasol Limited share. The vested portion of these rights are recognised as a liability at fair value, at each reporting date, in the statement of financial position until the date of settlement. The unvested portion is at each reporting date in the statement of financial position until the date of settlement and employee costs are recognised over the period that the employees provide services to the company until the date of settlement.

Areas of judgement:Fair value is measured using the Binomial tree option pricing models where applicable. The expected life used in the models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations such as volatility, dividend yield and the vesting period. The fair value takes into account the terms and conditions on which these incentives are granted and the extent to which the employees have rendered service to the reporting date.


Group Company2018 2017 2018 2017


32 Share-based payment reserveDuring the year, the following share-based payment expense was recognised in the income statement relating to the equity-settled share-based payment scheme:Equity-settled – recognised directly in equity 549 261 535 261 Sasol Inzalo share transaction 32.1 21 49 22 49 Sasol Khanyisa share transaction1 32.2 58 – 54 –

Tier 1 - Khanyisa Employee Share Ownership Plan 36 – 33 –Tier 2 - Khanyisa ESOP 22 – 21 –

Long-term incentives2 32.3 470 212 459 2121 In November 2017, Sasol Khanyisa a new Broad-Based Black Economic Empowerment (B-BBEE) scheme was approved by Sasol Limited shareholders at a

General Meeting.2 On 25 November 2016, the cash settled LTI scheme was converted to an equity-settled scheme.

Equity-settled share incentive schemes 32.1 The Sasol Inzalo share transaction

In May 2008, shareholders approved the Sasol Inzalo share transaction, a broad-based black economic empowerment (B-BBEE) transaction, which resulted in the transfer of beneficial ownership of 10% (63,1 million shares) of Sasol Limited's issued share capital before the implementation of this transaction to its employees and a wide spread of BEE participants. This award was financed using both external funding that was guaranteed by Sasol, and internal funding provided directly by Sasol to enable participants to purchase the shares in Sasol Limited.

The Sasol Inzalo Employee share transaction ended on 4 June 2018. Sasol exercised its right to repurchase the 25 231 686 Sasol Limited (SOL) shares held by the Sasol Inzalo Employee and Management Trusts at a nominal value of R0,01 per share in consideration for the notional vendor financing that was owed to Sasol by these participants. Consequently the relevant vested participants in the Inzalo Employee Schemes received no distribution of SOL Shares.

The Sasol Inzalo Groups share transaction terminated on 27 June 2018 and the Sasol Inzalo Public share transaction will terminate in September 2018.

Further disclosure is provided in the Sasol Limited group financial statements.

32.2 The Sasol Khanyisa share transaction

In November 2017, Sasol shareholders approved the implementation of a new black-economic empowerment scheme, Sasol Khanyisa. Sasol Khanyisa has been designed to comply with the revised B–BBEE legislation in South Africa and seeks to ensure on-going and sustainable B-BBEE ownership credentials for Sasol Limited.

Sasol Khanyisa contains a number of elements structured at both a Sasol Limited and a Sasol South Africa (SSA) level.

Sasol Khanyisa comprises of the following elements:

Tier 1 - Khanyisa Employee Share Ownership Plan – Eligible Inzalo participants

Inzalo Employee Scheme participants, who were still actively employed by Sasol were granted rights in SOL shares or SOLBE1 shares, at no cost to them, to the value of R100 000, all of which will vest after a three year service period. Black employees were able to choose to receive the award in SOL or SOLBE1 shares, whilst employees who are not black people received an award in SOL shares, as SOLBE1 shares may only be held by qualifying black people. Employees will receive dividends on these shares throughout the 3 year vesting period. This award will be recognised on a straight line basis over the three year vesting period. The employer companies made a cash contribution to the Khanyisa ESOP to enable this ownership plan.

Sasol Khanyisa – SSA (Tier 2 and Khanyisa Public)

Inzalo Groups, Inzalo Public and electing SOLBE1 shareholders; as well as qualifying Black employees, were invited to participate in the SSA element of the Khanyisa transaction. The BEE participation in SSA comprises two groups of participants, being the external public participants (made up of Inzalo Groups, Inzalo Public and electing SOLBE1 shareholders) who participate via Khanyisa Public, and qualifying black employees who participate via the Khanyisa Employee Share Ownership plan (ESOP).

Both Khanyisa Public and the Khanyisa ESOP have a beneficial interest, funded wholly by Sasol (vendor funding), in approximately 9% each in SSA. As dividends are declared by SSA, 97,5% of these will be utilised to repay the vendor funding, as well as the related financing cost, calculated at 75% of prime rate. 2,5% of dividends will be distributed directly to participants as a trickle dividend. At the end of the 10 year transaction term, or earlier, if the vendor funding is repaid, the net value in SSA shares exchanged for SOLBE1 shares will be distributed to participants. Any vendor funding not yet settled by the end of the transaction will be settled using the SSA shares, and will reduce any distribution made to participants. Since any ultimate value created for participants will be granted in the form of SOLBE1 shares, the accounting for this transaction is similar to an option over Sasol shares granted for no consideration.


Khanyisa ESOP (Tier 2)

The employees have service conditions over the 10 year transaction term, and as such, the expense will be recognised over this period, with R22 million having been recognised at 30 June 2018.

Further disclosure is provided in the Sasol Limited group financial statements.

32.3 Sasol Long – term Incentive Scheme

During September 2009, the group introduced the Sasol Long-term Incentive Scheme (LTI). The objective of the LTI scheme is to provide qualifying employees the opportunity of receiving an incentive linked to the value of Sasol Limited ordinary shares. The LTI scheme allows certain senior employees to earn a long-term incentive amount linked to certain Corporate Performance Targets (CPTs). Allocations of the LTI are linked to the performance of both the group and the individual. The employer companies will make a cash contribution to an independent service provider to enable this ownership plan.

On resignation, LTIs which have not yet vested will lapse. On death, retirement and retrenchment, the LTIs vest immediately, calculated to the extent that the CPTs are anticipated to be met, and are settled within 40 days from the date of termination. Accelerated vesting does not apply to top management. In November 2016, the scheme was converted from cash-settled to equity-settled. All the vesting conditions and all other terms and conditions of the scheme remain the same, including the standard vesting period of three years, with the exception of top management, who have five year vesting period for 50% of the awards.

The maximum number of shares issued under the equity-settled LTI scheme may not exceed 32,5 million representing 5% of Sasol Limited’s issued share capital at the time of approval.

Group

Movements in the number of incentives outstanding

Number ofincentives

Weighted averagefair value

Rand

Balance at 30 June 2016 – –Conversion of LTI scheme to equity-settled scheme on 25 November 2016 3 766 264 340,85LTIs granted 88 415 370,47LTIs vested (114 427) 359,92Effect of CPTs and LTIs forfeited (91 477) 343,03Balance at 30 June 2017 3 648 775 337,80LTIs granted 1 519 837 376,73LTIs vested (1 148 532) 347,93Effect of CPTs and LTIs forfeited (85 545) 349,95Balance at 30 June 2018* 3 934 535 348,19

Company

Movements in the number of incentives outstanding

Number ofincentives

Weighted averagefair value

Rand

Balance at 30 June 2016 – –Conversion of LTI scheme to equity-settled scheme on 25 November 2016 3 766 264 340,85LTIs granted 88 415 370,47LTIs vested (114 427) 359,92Effect of CPTs and LTIs forfeited (91 477) 343,03Balance at 30 June 2017 3 648 775 337,80LTIs granted 1 569 214 376,73LTIs vested (1 167 802) 347,93Effect of CPTs and LTIs forfeited (93 336) 349,95Balance at 30 June 2018* 3 956 851 348,19

* The incentives outstanding as at 30 June 2018 have a weighted average remaining vesting period of 1,5 years. The exercise price of these incentives is Rnil.

2018 2017for year ended 30 June Rand Rand

Average weighted market price of LTIs vested 396,02 375,43


32 Share-based payments reserve continued32.3 Sasol Long – term incentive scheme continued

Average fair value of incentives granted 2018 2017

Model Monte-Carlo Monte-CarloRisk-free interest rate - Rand (%) 6,98 - 7,34 7,03 - 9,22Risk-free interest rate - US$ (%) 1,01 - 1,47 0,76 - 0,91Expected volatility (%) 24,73 29,87Expected dividend yield (%) 3,65 3,42Expected forfeiture rate (%) 5,00 3 - 5Vesting period - top management 3 / 5 years 3 / 5 yearsVesting period - all other participants 3 years 3 years

The risk-free rate for periods within the contractual term of the rights is based on the Rand and US$ swap curve in effect at the time of the valuation of the grant.

The expected volatility in the value of the rights granted is determined using the historical volatility of the Sasol share price.

The expected dividend yield of the rights granted is determined using expected dividend payments of the Sasol ordinary shares.

The valuation of the share-based payment expense requires a significant degree of judgement to be applied by management.


The equity-settled schemes allow certain employees the right to receive ordinary shares in Sasol Limited after a prescribed period. Such equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of the equity-settled share-based payments is charged as employee costs, with a corresponding increase in equity, on a straight-line basis over the period that the employees become unconditionally entitled to the shares, based on management’s estimate of the shares that will vest and adjusted for the effect of non-market-based vesting conditions. These equity-settled share-based paymnets are not subsequently revalued.

To the extent that an entity grants shares or share options in a BEE transaction and the fair value of the cash and other assetsreceived is less than the fair value of the shares or share options granted, such difference is charged to the income statement inthe period in which the transaction becomes effective. Where the BEE transaction includes service conditions the difference willbe charged to the income statement over the period of these service conditions. Trickle dividends paid to participants during thetransaction term are taken into account in measuring the fair value of the award.


33 Contingent liabilities33.1 Litigation

Construction disputes – Fischer Tropsch Wax Expansion Project in Sasolburg (FTWEP)

After the conclusion of construction of FTWEP at the Sasol One site in Sasolburg, a number of contractual claims have been instituted by some contractors who were involved in the construction and project management relating to this project. Certain of these claims have already been resolved, either through settlement between the parties or through the contractual dispute resolution process. Two larger matters are still ongoing. The claimants are Fluor SA (Pty) Ltd and Wetback Contracts (Pty) Ltd.

Fluor SA (Pty) Ltd – FTWEP

Fluor claimed an additional amount of R485,7 million, plus interest (R83,6 million up to May 2015). This dispute turns on the nature and quantification of Fluor’s alleged entitlement to a change to the prices and completion dates for delayed access. In June 2015, Fluor referred the claim to adjudication. In September 2015 the adjudicator rejected Fluor’s entire claim. Thereafter, Fluor notified Sasol of its dissatisfaction with the outcome of the adjudication and Fluor’s intention to refer the matter to arbitration. The arbitration process commenced with Fluor filing its statement of claim during December 2016. Sasol filed two objections against the statement of claim which had the potential to dispose of the arbitration proceedings.

The arbitrator however did not decide in favour of Sasol on the objection applications and dismissed the application with costs. The objections will still be raised as a special jurisdictional plea and will be filed with Sasol’s statement of defence. The arbitrator has requested that the parties agree on the timetable going forward and Sasol has submitted a proposed timetable to Fluor for consideration. Sasol believes that Fluor’s claim is not justified. Accordingly, no provision was recognised at 30 June 2018.

Wetback Contracts (Pty) Ltd – FTWEP

Wetback instituted a claim of R634,2 million for additional compensation. Sasol submitted three counterclaims with an aggregate value of R229,2 million. The matter has been referred to arbitration. The hearing of this dispute commenced on 9 May 2016. During the first two weeks of the hearing, Sasol successfully applied for the separation of certain key issues relating to the interpretation of the contract to be decided before the remainder of the merits of the matter could be heard. This successful separation of issues dictated the framework within which the matter proceeded. After the arbitration hearing commenced in May 2016, the matter continued with various further hearings in 2017 and 2018. The arbitration hearing concluded on 31 May 2018 and the final decision by the arbitrator is expected before the end of 2018. Sasol South Africa Limited believes that Wetback’s claim is not justified. Accordingly, no provision was raised as at 30 June 2018.

Legal review of Sasol Gas National Energy Regulator of South Africa (NERSA) maximum price decision and NERSA gas

transmission tariff application (March 2013)

In October 2013, following the March 2013 decisions by NERSA (pursuant to the applications by Sasol Gas), seven of the customers of Sasol Gas brought a legal review application requesting the setting aside of the maximum price methodology used by NERSA in evaluating the maximum price application by Sasol Gas as well as the maximum price decision and gas transmission tariff decision. The basis of the challenge to the NERSA price decision is the allegation that the methodology used by NERSA to determine its approval of the maximum gas prices was unreasonable and irrational.

In October 2016 the High Court dismissed the review application due to it being brought outside of the time limits allowed in law for such applications. The Applicants were subsequently granted consent to appeal this decision to the Supreme Court of Appeal ("SCA"). On 10 May 2018 the SCA upheld the appeal by the Applicants. In terms of the SCA ruling, the 2013 NERSA decisions were overturned and NERSA is required to review the decisions. The SCA also ordered that any subsequent maximum price decision by NERSA will be applied from the date that the original decisions applied, i.e. 26 March 2014. The SCA did not direct the methodology to be used by NERSA in reviewing its decisions and accordingly NERSA would need to consider and evaluate alternative pricing methodologies as part of coming to a new maximum price approval decision.

Both Sasol Gas and NERSA launched an application to the Constitutional Court for leave to appeal the SCA decision. The Applicants are opposing these applications for leave to appeal. The decision by the Constitutional Court on allowing the appeal application remains pending.

The appeal application suspended the SCA decision. Furthermore, because the SCA decision relates to maximum prices it does not have an immediate impact on the actual gas price mechanism contractually agreed between Sasol Gas and its customers. The current NERSA gas transmission tariff decision, which relates to a period subsequent to the period of the overturned tariff decision is also not affected by the SCA decision.

As a result of the retrospective element of the SCA decision, a possible obligation may arise if NERSA approves new maximum gas prices for Sasol Gas at a level that is lower than the actual price charged by Sasol Gas during the period prior to such new NERSA decision. The arising of such an obligation is subject to the outcome of the ongoing appeal process. If the appeal process fails to maintain the 2013 NERSA decisions, it is not possible to determine at this time what the ultimate methodology is that NERSA will decide upon to make the required revised maximum gas price decisions, if required and it is therefore also not currently possible to determine the outcome of such a price decision by NERSA.

The likelihood of a future obligation cannot currently be determined and neither can an amount for such a possible obligation be reliably estimated. Therefore, no provision has been raised at 30 June 2018.

Other litigation matters

From time to time, Sasol South Africa Limited companies are involved in other litigation and similar proceedings in the normal course of business. A detailed assessment is performed on each matter and a provision is recognised where appropriate. Although the outcome of these proceedings and claims cannot be predicted with certainty, the company does not believe that the outcome of any of these cases would have a material effect on the group’s financial results.


33.2 Competition matters

Sasol South Africa Limited continuously evaluates its compliance programmes and controls in general, including its competition law compliance programmes and controls. As a consequence of these compliance programmes and controls, including monitoring and review activities, SSA has adopted appropriate remedial and/or mitigating steps, where necessary or advisable, lodged leniency applications and made disclosures on material findings as and when appropriate. These ongoing compliance activities have already revealed, and may still reveal, competition law contraventions or potential contraventions in respect of which we have taken, or will take, appropriate remedial and/or mitigating steps including lodging leniency applications.

33.3 Environmental orders

To ensure our on-going compliance with new air quality regulations in South Africa, Sasol applied for certain postponements to manage our short-term challenges relating to the compliance timeframes in adhering to the stricter emission standards. We have received decisions on our initial postponement applications from the National Air Quality Officer, are reflected in our atmospheric emission licences (“AEL”). Where shorter postponements were granted initially, applications have subsequently been made by our Secunda Synfuels and Sasolburg operations and further extensions until 2020 have been received to enable the progression of our committed environmental roadmaps. These extensions and associated conditions, which include stretched targets, are included in the relevant atmospheric emission licences (“AELs”) under which we now operate.

Our Sasolburg operations experienced challenges in meeting some emission limits in its AEL, applicable during the initial extended compliance period, and elected to voluntarily shut down its incinerators to mitigate against the risk of continued non-compliance. Although the authorities indicated that it will not proceed with administrative enforcement, Sasol’s commitment remains to re-commission these incinerators if compliance with the applicable emission limits, as reflected in its recently varied AEL, can be sustained. Our Synfuels operations are engaging with the local licensing authority on its varied AEL in the interest of sustained compliance.

Sasol South Africa Limited’s group environmental obligation accrued at 30 June 2018 was R6 075 million compared to R6 449 million at 30 June 2017. Included in this balance is an amount accrued of approximately R4 660 million in respect of the costs of remediation of soil and groundwater contamination and similar environmental costs. These costs relate to the following activities: site assessments, soil and groundwater clean-up and remediation, and on-going monitoring. Due to uncertainties regarding future costs the potential loss in excess of the amount accrued cannot be reasonably determined.

Although Sasol South Africa Limited has provided for known environmental obligations that are probable and reasonably estimable, the amount of additional future costs relating to remediation and rehabilitation may be material to results of operations in the period in which they are recognised. It is not expected that these environmental obligations will have a material effect on the financial position of the group.


34 Commitments under leasesOperating leases – Minimum future lease paymentsThe group leases buildings under long-term non-cancellable operating lease agreements and also rents offices and other equipment under operating leases that are cancellable at various short-term notice periods by either party.

Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmProperty, plant and equipmentWithin one year 866 388 850 374One to five years 3 510 1 920 3 432 1 848More than five years 13 560 11 963 13 369 11 750

17 936 14 271 17 651 13 972

Included in operating leases is the following:■ The lease for the Sasol Corporate office building. The lease term is

20 years with an option to extend for a further five years. This is a significant lease for the group.

■ The rental of a pipeline for the transportation of gas products. The rental payments are based on the quantity of gas transported. The lease may be extended by either party to the lease for a further three year period prior to the expiry of the current lease term of 16 years.

Water reticulation for Secunda Synfuels OperationsWithin one year 171 144 171 144One to five years 847 777 847 777More than five years 1 798 2 038 1 798 2 038

2 816 2 959 2 816 2 959

The water reticulation commitments of Secunda Synfuels Operations relate to a long-term water supply agreement. The rental payments are determined based on the quantity of water consumed over the 20 year period of the lease.

Total minimum future lease payments 20 752 17 230 20 467 16 931

These leasing arrangements do not impose any significant restrictions on the group or its subsidiaries.

Contingent rentals

The group has no contingent rentals in respect of operating leases that are linked to market related data such as inflation.

Finance leases – Minimum future lease payments

The group leases equipment under long-term non-cancellable finance lease agreements. These lease agreements contain terms of renewal and escalation clauses but exclude purchase options.

Group Company2018 2017 2018 2017


Property, plant and equipmentWithin one year 688 137 688 137One to five years 2 458 615 2 458 615More than five years 10 780 564 10 780 564Less amounts representing finance charges (9 452) (632) (9 452) (632)

Total minimum future lease payments 4 474 684 4 474 684

Contingent rentals

The group has no contingent rentals in respect of finance leases.


35 Related party transactionsParties are considered to be related if one party directly or indirectly has the ability to control or jointly control the other party or exercise significant influence over the other party or is a member of the key management of the reporting entity (Sasol South Africa Limited).

During the year the group, in the ordinary course of business, entered into various purchase and sale transactions with its holding company, fellow subsidiaries, subsidiaries, joint ventures and associates. The effect of these transactions is included in the financial performance and results of the group. Terms and conditions are determined on an arm's length basis.

Material related party transactions

The following table shows the material transactions that are included in the financial statements.

Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmSales and services rendered to related partiesfellow subsidiaries

Sasol Chemicals North America LLC 5 463 5 542 5 463 5 542Sasol Chemicals Pacific Limited 4 485 4 383 4 485 4 383Sasol Chemie Co GmbH 3 192 2 522 3 192 2 522Sasol Oil (Pty) Ltd 32 668 28 913 32 664 28 913Wesco China Limited 730 1 409 730 1 409Sasol Wax GmbH 1 354 1 128 1 354 1 128Sasol Middle East FZCO 2 018 1 566 2 018 1 283Sasol Germany GmbH 1 159 1 132 1 159 1 132Other (less than R1 billion) 2 388 2 366 2 068 2 444

subsidiariesSasol Gas (Pty) Ltd – 2 865 681 688Sasol Acrylates (South Africa) (Pty) Ltd – – 1 845 1 681

53 457 51 826 55 659 51 125Purchases from related partiesfellow subsidiaries

Sasol Mining (Pty) Ltd 16 349 16 014 16 349 16 013Sasol Petroleum Temane Limitada 2 467 7 – –Other (less than R1 billion) 725 448 725 448

subsidiariesSasol Gas (Pty) Ltd – 6 538 6 961 6 503Sasol Acrylates (South Africa) (Pty) Ltd – – 2 451 2 356

joint ventureSasol Dyno Nobel (Pty) Ltd 726 708 726 708

20 267 23 715 27 212 26 028


Group Company2018 2017 2018 2017

for the year ended 30 June Note Rm Rm Rm RmOther income statement items from related partiesAdministration fees paidfellow subsidiaries

Sasol Technology (Pty) Ltd 28 60 28 60Finance costsfellow subsidiaries

Sasol Financing Limited 2 582 2 843 2 541 2 794Sasol Financing International Limited 5 – – –Sasol Limited 51 – 51 –Sasol Oil (Pty) Ltd 49 50 49 50

2 687 2 893 2 641 2 844Finance incomefellow subsidiaries

Sasol Financing Limited 746 948 487 818subsidiaries

Sasol General Holdings (Pty) Ltd – 814 – 814Sasol Gas (Pty) Ltd – – 3 500 –Sasol Acrylates (Pty) Ltd – – – 5Price's Candles (Pty) Ltd – 12 – 12ROMPCO (Pty) Ltd – – 658 265

joint ventureSasol Dyno Nobel (Pty) Ltd – – 45 50

associateClariant Sasol Catalysts (Pty) Ltd* 8 8 8 8

754 1 782 4 698 1 972

*Not included as part of finance income but included in investment in associates

Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmAmounts reflected as non-current assetsInvestment in subsidiaries

Sasol Dyno Nobel (Pty) Ltd – – 114 114Sasol Acrylates (South Africa) (Pty) Ltd – – 819 819Sasol Acrylates (Pty) Ltd – – 372 372ROMPCO (Pty) Ltd – – 5 5Sasol Gas (Pty) Ltd – – 46 877 46 877

– – 48 187 48 187Amounts reflected as current assetsReceivablesfellow subsidiaries

Sasol Chemicals North America LLC 1 408 1 740 1 408 1 714Sasol Oil (Pty) Ltd 4 089 2 645 4 084 2 644Sasol Chemie Co GmbH 540 1 032 540 1 032Sasol Limited 1 160 5 1 140 –Other (less than R1 billion) 2 953 2 613 2 898 2 594

subsidiariesSasol Gas (Pty) Ltd – – 102 88Sasol Acrylates (South Africa) (Pty) Ltd – – 232 251ROMPCO (Pty) Ltd – – 2 1


10 158 8 042 10 414 8 331Cashfellow subsidiaries

Sasol Financing Limited 4 552 5 231 1 328 2 291Sasol Financing International Limited 8 3 8 3

4 560 5 234 1 336 2 294


Group Company2018 2017 2018 2017

for the year ended 30 June Rm Rm Rm RmAmounts reflected as non-current liabilitiesLong-term debtfellow subsidiaries

Sasol Oil (Pty) Ltd 302 314 302 314Sasol Financing Limited 20 256 26 397 19 844 25 986

holding companySasol Limited 55 179 46 877 55 179 46 877

75 737 73 588 75 325 73 177Amounts reflected as current liabilitiesPayablesfellow subsidiaries

Sasol Mining (Pty) Ltd 1 767 1 521 1 766 1 519Other (less than R1 billion) 443 406 187 186

subsidiariesSasol Gas (Pty) Ltd – – 645 693Sasol Acrylates (South Africa) (Pty) Ltd – – 260 386


2 274 1 983 2 922 2 840

Company

Remuneration 5

Gains on exercise/vesting

of share options, share

appreciation rights and long

term incentives 6 Total

for the year ended 30 June 2018 R 000 R 000 R 000

DirectorsServices as a non-executive director

Nomvume Magaqa 1 – – –Louisa Zondo 1,3 74 – 74

Service as a directorOther Services

Baijnath Brenda 4 5 103 3 392 8 495Booley Thabiet 1,4 4 742 1 981 6 723Fourie Louis Josephus 2,4 5 799 2 831 8 630Grobler Fleetwood Rawstone 2,4 15 053 6 088 21 141Kahla Vuyo Dominic 3,4 10 006 6 965 16 971Laxa Rightwell Mzimkhulu 3,4 4 659 1 293 5 952Klingenberg Bernard Ekhard 2,4 11 642 7 743 19 385Mokoena Charlotte 1,4 11 730 – 11 730Malherbe Francois Ernest Johannes 2,4 6 045 3 081 9 126Sieberhagen Marinus 2,4 6 960 2 836 9 796Solomon Martin 1,4 4 190 1 738 5 928Griffith Bradley Vernon 2,4 11 107 2 799 13 906Manoogian Peter Roy 2,4 16 736 1 380 18 116Stouder Eric Thayer 1,4 9 282 2 152 11 434

123 128 44 279 167 407


Company

Balance of long term incentives

at end of year

Intrinsic value of long term incentives at

end of year 7,8

for the year ended 30 June 2018 NumberR 000

and $ 000

DirectorsServices as a non-executive director

Nomvume Magaqa – –Louisa Zondo – –

Service as a directorOther Services

Baijnath Brenda 23 782 R 11 959Booley Thabiet 19 547 R 9 829Fourie Louis Josephus 17 544 R 8 822Grobler Fleetwood Rawstone 47 609 R 23 941Kahla Vuyo Dominic 51 548 R 25 921Laxa Rightwell Mzimkhulu 16 444 R 8 269Klingenberg Bernard Ekhard 61 445 R 30 898Mokoena Charlotte 22 936 R 11 534Malherbe Francois Ernest Johannes 21 020 R 10 570Sieberhagen Marinus 19 870 R 9 992Solomon Martin 12 887 R 6 480

314 632 $158 215

Griffith Bradley Vernon 22 078 $807Manoogian Peter Roy 21 935 $802

Stouder Eric Thayer 21 744 $79565 757 $2 404

Company

Remuneration 5

Gains on exercise/vesting

of share options, share

appreciation rights and long

term incentives 6 Total

for the year ended 30 June 2017 R 000 R 000 R 000

DirectorsService as a directorOther Services

Baijnath Brenda 4 4 464 2 684 7 148Fourie Louis Josephus 2,4 5 520 6 928 12 448Grobler Fleetwood Rawstone 2,4 11 347 3 094 14 441Kahla Vuyo Dominic 3,4 9 662 3 713 13 375Laxa Rightwell Mzimkhulu 3,4 4 230 2 212 6 442Klingenberg Bernard Ekhard 2,4 11 339 3 713 15 052Malherbe Francois Ernest Johannes 2,4 6 141 5 328 11 469Nqwababa Bongani 23 996 12 013 36 009Sichinga John 3 253 375 3 628Sieberhagen Marinus 2,4 6 789 1 945 8 734Victor Paul 13 562 4 538 18 100Griffith Bradley Vernon 2,4 7 794 5 504 13 298Manoogian Peter Roy 2,4 9 022 – 9 022O'Brien Thomas 11 078 4 472 15 550

128 197 56 519 184 716


Company

Balance of long term incentives

at end of year

Intrinsic value of long term incentives at

end of year 7,8

for the year ended 30 June 2017 NumberR 000

and $ 000DirectorsService as a directorOther Services

Baijnath Brenda 24 819 R 9 096Fourie Louis Josephus 45 400 R 16 639Grobler Fleetwood Rawstone 39 000 R 14 294Kahla Vuyo Dominic 43 000 R 15 760Laxa Rightwell Mzimkhulu 14 100 R 5 168Klingenberg Bernard Ekhard 49 500 R 18 142Malherbe Francois Ernest Johannes 25 700 R 9 419Nqwababa Bongani 110 000 R 40 315Sichinga John – –Sieberhagen Marinus 17 050 R 6 249Victor Paul 62 000 R 22 723

430 569 R 157 805

Griffith Bradley Vernon 52 464 $1 466Manoogian Peter Roy – –O'Brien Thomas 29 200 $816

81 664 $2 282

Prescribed officers for Sasol South Africa (Pty) Ltd are directors of the Company1 Appointed with effect from 1 June 20182 Resigned with effect from 1 June 20183 Includes remuneration in relation to another directorship held within the Sasol Group.4 The director is the permanent employee within the Sasol Group, full remunartion is disclosed.5 Short-term incentives included in remuneration approved based on the Group results for the 2018 financial year and payable in the 2019 financial year. Incentives are calculated as a percentage of total guaranteed package/base salary/net indicative expatriate salary as at 30 June 2018.

6 Long-term incentives for the 2018 financial year represent the number of units x corporate performance target achieved (2018) x closing share price on 16 August 2018. The actual vesting date for the annual awards made on 21 September 2015 is 21 September 2018. Dividend equivalents accrue at the end of the vesting period, to the extent that the LTI units vest. It represents: number of units awarded x corporate performance targets achieved during financial year 2018 x dividend equivalents up to 21 September 2018. 7 Intrinsic values at beginning and end of year have been determined using the closing share price of R502,86 ($36,54) and R366,50 ($27,95) on 30 June 2018 and 30 June 2017.8 Change in instrinsic value for the year results from a change in the share price.

Key management remuneration

Key management comprises of Executive and Non-executive Directors as well as other members of the Group Executive Committee (GEC).

Amounts due to and from related parties are included in the respective notes to the financial statements for those statement of financial position items.

36 Subsequent eventsThere were no events that occurred subsequent to 30 June 2018.

37 Ultimate holding companyThe ultimate holding company of Sasol South Africa Limited is Sasol Limited, incorporated and domiciled in the Republic of South Africa.


38 Going concernThe directors’ have made an assessment of the company’s ability to continue as a going concern and there is no reason to believe the business will not be a going concern in the year ahead.

39 Financial risk management and financial instruments

The group classifies all its financial instruments at amortised cost except for short-term financial assets and liabilities which are classified at fair value through profit and loss.

39.1 Financial risk management

The group is exposed in varying degrees to a number of financial instrument related risks. The directors have the overall responsibility for the establishment and oversight of the group's risk management framework. The directors are responsible for providing the board with the assurance that significant business risks are systematically identified, assessed and reduced to acceptable levels. A comprehensive risk management process has been developed to continuously monitor and control these risks. The directors and divisional committees of Sasol South Africa Limited meet regularly to review and, if appropriate, approve the implementation of optimal strategies for the effective management of financial risks. The committee reports on a regular basis to the Group Executive Committee (GEC) on its activities.

The Sasol group has a central treasury function that manages the financial risks relating to the group's operations.

Capital allocation

The group's objectives when managing capital (which includes share capital, borrowings, working capital and cash and cash equivalents) is to maintain a flexible capital structure that reduces the cost of capital to an acceptable level of risk and to safeguard the group's ability to continue as a going concern while taking advantage of strategic opportunities in order to grow shareholder value sustainably.

The group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new debt, issue new debt to replace existing debt with different characteristics and/or sell assets to reduce debt.

The group monitors capital utilising a number of measures, including the gearing ratio. The gearing ratio is calculated as net borrowings (total borrowings less cash) divided by shareholders' equity. Gearing takes into account the group's substantial capital investment and susceptibility to external market factors such as crude oil prices, exchange rates and commodity chemical prices. The group's gearing level for 2018 is 160% (2017 – 160%), mainly due to the loan raised of R46,9 billion with Sasol Limited to fund the acquisition of Sasol Gas (Pty) Ltd at fair value. Excluding the loan to finance the acquisition of Sasol Gas (Pty) Ltd the gearing for 2018 is 52%.

Financing risk

Financing risk refers to the risk that financing of the group’s net debt requirements and refinancing of existing borrowings could become more difficult or more costly in the future. This risk can be decreased by managing the group within the targeted gearing ratio, maintaining an appropriate spread of maturity dates and managing short-term borrowings within acceptable levels.

The group’s target for long-term borrowings include an average time to maturity of at least two years, and an even spread of maturities.

Risk profile

Risk management and measurement relating to each of these risks is discussed under the headings below (sub-categorised into credit risk, liquidity risk, and market risk) which entails an analysis of the types of risk exposure, the way in which such exposure is managed and quantification of the level of exposure in the statement of financial position.

Credit risk

Credit risk, or the risk of financial loss due to counterparties not meeting their contractual obligations.

How we manage the risk

The risk is managed by the application of credit approvals, limits and monitoring procedures. Where appropriate, the group obtains security in the form of guarantees to mitigate risk. Counterparty credit limits are in place and are reviewed and approved by the respective divisional credit management committees. The central treasury function provides credit risk management for the group-wide exposure in respect of a diversified group of banks and other financial institutions. These are evaluated regularly for financial robustness especially in the current global economic environment. Management has evaluated treasury counterparty risk and does not expect any treasury counterparties to fail in meeting their obligations.


Our exposure to and assessment of the risk

Trade and other receivables consist of a large number of customers spread across diverse industries and geographical areas. The exposure to credit risk is influenced by the individual characteristics, the industry and geographical area of the counterparty with whom we have transacted. Trade and other receivables and long-term receivables are carefully monitored for impairment. An allowance for impairment of trade receivables is made where there is an identified loss event, which based on previous experience, is evidence of a reduction in the recoverability of the cash flows. Details of the credit quality of trade receivables and the associated provision for impairment is disclosed in note 21. Long-term receivables are reviewed on a regular basis based on our credit risk policy, and none of it was impaired. The carrying value or receivables represents the maximum credit risk exposure.

Sasol Oil (Pty) Ltd represents more than 10% of the company’s total turnover and more than 10% of total trade and other receivables for the years ended 30 June 2018 and 2017. Approximately 68% (2017 – 60%) of the group’s total turnover is generated from sales within South Africa, while about 32% (2017 – 40%) relates to foreign sales. The concentration of credit risk within geographic regions is largely aligned with the geographic regions in which the turnover was earned.

Liquidity risk

Liquidity risk is the risk that the group will be unable to meet its obligations as they become due.


The group manages liquidity risk by effectively managing its working capital, capital expenditure and cash flows, making use of a central treasury function within Sasol Group to manage pooled business unit cash investments and borrowing requirements. Currently the group is maintaining a positive cash position, conserving the group's cash resources through continued focus on working capital improvement and capital reprioritisation. The group meets its financing requirements through a mixture of cash generated from its operations and, short and long-term borrowings. Adequate banking facilities and reserve borrowing capacities are maintained.


The maturity profile of the undiscounted contractual cash flows of financial instruments at 30 June was as follows:

Group

Contractual cash flows*

Within one year

One to five years

More than five years

Note Rm Rm Rm Rm2018Financial assetsNon-derivative instrumentsLong-term receivables 21 2 19 –Trade and other receivables 21 15 580 15 580 – –Cash restricted for use 24 733 733 – –Cash 24 5 993 5 993 – –

22 327 22 308 19 –Derivative instrumentsForward exchange contracts 421 421 – –

22 748 22 729 19 –

Financial liabilitiesNon-derivative instrumentsLong-term debt (93 357) (6 861) (21 172) (65 324)Trade and other payables** 22 (8 817) (8 817) – –

(102 174) (15 678) (21 172) (65 324)Derivative instrumentsForeign exchange contracts (420) (420) – –

(102 594) (16 098) (21 172) (65 324)* Contractual cash flows include interest payments.** Trade and other payables exclude employee related payables and VAT.


GroupContractual Within One to More thancash flows* one year five years five years

Note Rm Rm Rm Rm

2017Financial assetsNon-derivative instrumentsLong-term receivables 25 2 23 –Trade and other receivables 21 13 078 13 078 – –Cash restricted for use 24 885 885 – –Cash 24 5 959 5 959 – –


19 982 19 959 23 –


(100 725) (14 239) (71 726) (14 760)

Derivative instrumentsForward exchange contracts (34) (34) – –


CompanyContractual Within One to More thancash flows* one year five years five years

Note Rm Rm Rm Rm



18 404 18 385 19 –


(97 846) (14 709) (17 813) (65 324)Derivative instrumentsForward exchange contracts (420) (420) – –



CompanyContractual Within One to More thancash flows* one year five years five years

Note Rm Rm Rm Rm



15 936 15 913 23 –


(95 512) (13 652) (67 119) (14 741)

Derivative instrumentsForward exchange contracts (34) (34) – –


Market risk

Market risk is the risk arising from possible market price movements and their impact on the future cash flows of the business. The market price movements that the group is exposed to:

Foreign currency risk

Foreign currency risk is a risk that earnings and cash flows will be affected due to changes in exchange rates.


The Sasol Limited groups Hedging and Digital committee sets broad guidelines in terms of tenor and hedge cover ratios specifically to assess future currency exposure and large forward cover amounts for long periods into the future, which have the potential to materially affect our financial position. These guidelines and our hedging policy are reviewed from time to time. This hedging strategy enables us to better predict cash flows and thus manage our working capital and debt more effectively. Foreign currency risks are managed through the Sasol Limited group’s hedging policy and financing policies and the selective use of forward exchange contracts.


The group's transactions are predominantly entered into in the respective functional currency of the individual operations. However, the group’s operations utilise various foreign currencies on sales, purchases and borrowings, and consequently are exposed to exchange rate fluctuations that have an impact on cash flows and financing activities. Our chemical products are mostly commodity products whose prices are largely based on global commodity and benchmark prices quoted in US dollars and consequently are exposed to exchange rate fluctuations that have an impact on cash flows and financing activities. These operations are exposed to foreign currency risk in connection with contracted payments in currencies not in their individual functional currency.

Foreign exchange contractsForeign exchange contracts (FECs) are utilised by the group to hedge the risk of currency depreciation on committed and highly probable forecast transactions. Transactions hedged with FECs include capital and goods purchases (imports) and sales (exports).

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39 Financial risk management and financial instruments continued39.1 Financial risk management continued

The following significant exchange rates were applied during the year:

Average rate Closing rate2018 2017 2018 2017

Rm Rm Rm RmRand/Euro 15,34 14,83 16,04 14,92Rand/US dollar 12,85 13,61 13,73 13,06

The table below shows the significant currency exposure where entities within the group have monetary assets or liabilities that have exposure to the US dollar or the Euro. The amounts have been presented in rand by converting the foreign currency amount at the closing rate at the reporting date.

Group2018 2017

Euro US dollar Euro US dollar

Rm Rm Rm RmTrade and other receivables 1 610 3 904 1 832 3 772Cash restricted for use – 7 – 242Cash – 8 – 3Net exposure on assets 1 610 3 919 1 832 4 017

Long-term debt (153) (1 651) (103) (31)Trade and other payables (122) (820) (190) (668)Net exposure on liabilities (275) (2 471) (293) (699)Total net exposure 1 335 1 448 1 539 3 318

Company2018 2017

Euro US dollar Euro US dollar

Rm Rm Rm RmTrade and other receivables 1 610 3 573 1 832 3 541Cash – 8 – 3Net exposure on assets 1 610 3 581 1 832 3 544

Long-term debt (153) (1 651) (103) (31)Trade and other payables (110) (459) (188) (359)Net exposure on liabilities (263) (2 110) (291) (390)Total net exposure 1 347 1 471 1 541 3 154

Sensitivity analysis

The following sensitivity analysis is provided to show the foreign currency exposure of the group at the end of the reporting period. This analysis is prepared based on the statement of financial position balances that exist at year-end, for which there is currency risk, before consideration of currency derivatives, which exist at that point in time. The effect on equity is calculated as the effect on profit and loss.

A 10% weakening in the group's significant exposure to the foreign currency at 30 June would have increased either the equity or the profit by the amounts below, before the effect of tax. This analysis assumes that all other variables, in particular, interest rates, remain constant, and has been performed on the same basis for 2017.


Group Company

2018 2017 2018 2017

Income Income Income Income Equity Statement Equity statement Equity Statement Equity statement

Rm Rm Rm Rm Rm Rm Rm RmEuro 134 134 154 154 135 135 154 154US dollar 145 145 332 332 147 147 315 315

A 10% movement in the opposite direction in the group's exposure to foreign currency would have an equal and opposite effect to the amounts disclosed above.

Interest rate risk

Interest rate risk is the risk that the value of short term investments and financial activities will change as a result of fluctuations in the interest rates.

Fluctuations in interest rates impact on the value of short-term investments and financing activities, giving rise to interest rate risk. The group has significant exposure to interest rate risk due to the volatility in South African interest rates.


The group’s policy is to borrow funds at floating rates of interest as this is considered to give somewhat of a natural hedge against commodity price movements, given the correlation with economic growth (and industrial activity) which in turn shows a correlation with commodity price fluctuation.

The debt of the group is structured on a combination of floating rates. The benefits of fixing or capping interest rates on the group’s various financing activities are considered on a case-by-case and project-by-project basis, taking the specific and overall risk profile into consideration. For further details of long-term debt refer to note 14.

In respect of financial assets, the group’s policy is to invest cash at floating rates of interest and cash reserves are to be maintained in short-term investments (less than one year) in order to maintain liquidity, while achieving a satisfactory return for shareholders.


At the reporting date, the interest rate profile of the group’s interest-bearing financial instruments was:

Group CompanyCarrying value Carrying value

2018 2017 2018 2017

Rm Rm Rm RmVariable rate instrumentsFinancial assets 6 728 6 850 2 869 3 163Financial liabilities (23 713) (30 831) (19 844) (26 300)

(16 985) (23 981) (16 975) (23 137)

Fixed rate instrumentsFinancial liabilities (51 351) (47 561) (51 351) (47 561)

(51 351) (47 561) (51 351) (47 561)

Interest profile (variable: fixed rate as a percentage of total financial assets) 100:0 100:0 100:0 100:0Interest profile (variable: fixed rate as a percentage of total financial liabilities) 32:68 39:61 1 36:64

Cash flow sensitivity for variable rate instruments

Financial instruments affected by interest rate risk include borrowings, deposits, derivative financial instruments, trade receivables and trade payables. A change of 1% in the prevailing interest rate in that region at the reporting date would have increased/(decreased) earnings by the amounts shown below before the effect of tax. The sensitivity analysis has been prepared on the basis that all other variables, in particular foreign currency rates, remain constant and has been performed on the same basis for 2017.

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Group Company

Income statement - 1%

increase


decrease


increase


decrease

Rm Rm Rm Rm

30 June 2018 (170) 170 (170) 170

30 June 2017 (240) 240 (231) 231

39.2 Fair value

Various valuation techniques and assumptions are utilised for the purpose of calculating fair value.

The group does not hold any financial instruments traded in an active market. Fair value is determined using valuation techniques as outlined below. Where possible, inputs are based on quoted prices and other market determined variables.

Fair value hierarchy

The following table is provided representing the assets and liabilities measured at fair value at reporting date, or for which fair value is disclosed at reporting date.

The calculation of fair value requires various inputs into the valuation methodologies used.

The source of the inputs used affects the reliability and accuracy of the valuations. Significant inputs have been classified into the hierarchical levels in line with IFRS 13, as shown below.

There have been no transfers between levels in the current year. Transfers between levels are considered to have occurred at the date of the event or change in circumstances.

Level 1 Quoted prices in active markets for identical assets or liabilities.Level 2 Inputs other than quoted prices that are observable for the asset or liability (directly or indirectly).Level 3 Inputs for the asset or liability that are unobservable.

Group CompanyFair value Fair value Fair value

30 June 30 June hierarchy

Financial instrument 2018 2018 Valuation method Significant inputs of inputsFinancial assetsLong-term receivables 21 21 Discounted cash flow Market related interest rates. Level 3Trade and other receivables 15 580 15 095 Discounted cash flow Market related interest rates. Level 3*

Cash and cash equivalents 6 726 2 867 ** ** Level 1**

Financial liabilitiesUnlisted long-term debt 80 051 76 068 Discounted cash flow Market related interest rates Level 3

Trade and other payables 8 817 9 146 Discounted cash flow Market related interest rates Level 3*

* The fair value of these instruments approximates their carrying value, due to their short-term nature.** The carrying value of cash is considered to reflect its fair value.


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Sasol South Africa Annual Financial Statements 2018 · Group Company 2018 2017 2018 2017 Note Rm Rm...

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