In December 2003, over twenty years ago, investors were given the chance to buy shares in a leading JSE blue chip company. At that time, Saddam Hussein had just been captured, CSI: Miami debuted on M-Net, and Rudolf Straeuli resigned from his position as Springbok coach following the Kamp Staaldraad scandal and a quarter-final departure from the Rugby World Cup. The cost of an original Spur burger was approximately R25.

Those shares were available for around R90. Fast forward twenty years, and we find ourselves back at that same share price level (which briefly dipped to R30 during the Covid-19 pandemic, only to recover strongly).

For more information:
The ‘high dividend’ stocks that look set to disappoint [Oct 2023]
The stock that’s paid 60% of its value in dividends since 2012 [Mar 2024]

This suggests that if you had opted to buy and hold, as is often advisable by most investment professionals (!), your capital appreciation would currently be zero. However, you likely would have received a significant amount in dividends over those 21 years, potentially surpassing the current share price. Unfortunately, these dividends have been inconsistent, as the company has faced various crises.

Common Errors

The company has committed numerous classic mistakes familiar to many other South African firms, where management teams and boards often wrongly believe they are exceptional, world-class leaders. Spoiler: They generally aren’t. The South African market is relatively small with limited competition and benefits from various protective measures (historical, structural, or recent).

From 2005 to 2011, under a stable South African CEO’s leadership, the firm thrived along with the rest of the market.

Even the global financial crisis did not disrupt the business or its share price.

After his exit, a foreign CEO with an impressive resume was appointed. As is common with many corporate choices in our sector, this decision didn’t yield positive results. Following him, the company saw co-CEOs take the reins, a strategy that rarely benefits shareholders.

It wasted billions—indeed, hundreds of billions—on significant international investments in regions where it had little to no established presence.

Much like many giants listed on the JSE, it set out to dominate globally.

Subsequent investigations uncovered anti-competitive practices across various markets, leading to substantial settlements and fines.

It shouldn’t be hard to identify the company: Sasol.

Catastrophic investments in a gas-to-liquids plant, an ethane cracker facility, and a chemical plant in Lake Charles, Louisiana, have resulted in losses amounting to hundreds of billions of rand.

Read: Sasol books R55.1bn writedowns as US business takes hit

These choices were made during David Constable’s tenure, and the ensuing delays with the plants, significant increases in construction costs, and billions in writedowns led to his dismissal in June 2016.

Fortunes Made and Lost

In the last two decades, shareholders and traders have seen profits from this stock. For instance, under Pat Davies, who led the company from 2005 to 2011, the share price rose more than threefold.

However, significant losses have also been realized. If you invested around R400 (not even at its peak exceeding R600) between 2015 and 2019, the sting of loss is surely felt today.

Conversely, those who dared to invest during the depths of the Covid-19 pandemic, when the world seemed on edge, would have seen a tenfold profit had they sold above R310 per share (which was nearly achievable at any point in 2022).

Additional information:
Sasol: Value, or value trap?
Is Sasol cheap yet?

The complexity of this situation makes Sasol both confusing and attractive to retail investors.

Private investors hold 4% of the company, a notable figure. The stock has yielded remarkable returns, provided one is disciplined enough to sell at the right time.

Conversely, if you had merely held onto your shares since those years ago, you would be left with no return at all, further diminished by inflation.

That R90 from December 2003 would now be equivalent to R270 today. In other words, R90 today reflects R30 from 2003.

Even consistently underperforming local unit trusts have surpassed inflation over the past twenty years. For instance, Old Mutual’s Investors’ Fund would have yielded average annual returns of 13%… R100 invested in 2003 would now be valued at over R1,200.

Read: These two flagship unit trusts have underperformed CPI over a decade

Keep up with Moneyweb’s extensive finance and business news on WhatsApp here.