In many ways it is very good news that the Treasury has resisted the temptation — and pressure — to find yet more money to bail out chronically mismanaged SAA. But given the decision to place the national airline in business rescue and its evidently desperate need for another R4bn to implement the plan, perhaps now is not the time to be exhibiting such unwavering resolve. It does rather suggest there is limited united thinking on the matter at cabinet level.
Essentially, the Treasury is thinking like a banker rather than a shareholder. Now that it is in business rescue it would surely be far better for cabinet to be behaving like a shareholder that is keen to create some sort of viable operation out of the process. A viable operation would certainly be easier to sell than the mess that could be created from a poorly managed business rescue. Also needing to be considered are the thousands of jobs involved — directly and indirectly.
It is, of course, the classic dilemma — whether to provide more money in the hope a major loss-maker will come right or pull the plug now and avoid further waste.
The lack of money, claimed by the Treasury, is serious but not fatal. The government is sitting on just over R7bn worth of Telkom shares, a chunk of which could be cashed in reasonably easily. Or the Public Investment Corporation (PIC), which holds 9.2%, might be persuaded to warehouse 100-million or so Telkom shares.
It is unfortunate that Telkom is currently trading close to a five-year low and is in the midst of another major job cutting programme but perhaps the PIC could be persuaded of the recovery potential.
Why does no miner apart from Anglo want a cut-price asset in which $1.1bn has already been invested?
Anglo American is taking a R7.6bn bet on a relatively new fertiliser feedstock called polyhalite by buying Sirius Minerals, a British company developing a mine to extract the product.
This is before it invests another $3.3bn (about R48bn) to complete the partially built mine, processing plant and dedicated port facilities at Teesside in north east England.
Of interest to shareholders is how Anglo develops and sells the polyhalite, which is more commonly known as poly4 for its four elements, in a large and competitive fertiliser market.
As Russell Scrimshaw, Sirius’s chair, noted, only Anglo put forward a viable option for the board to consider, raising questions as to why no other major miner wanted a cut-price asset in which $1.1bn has already been invested.
The world derives its potassium fertilisers from phosphate deposits, creating two products. The first is muriate of potash (MOP), which is a 65-million tonnes a year market, and the second is the far more expensive sulphate of potash market (SOP) at about seven-million tonnes a year.
The combined total of potassium from these two fertilisers is 45-million tonnes a year, but each has its advantages and disadvantages and that’s where Anglo sees the gap.
Unlike MOP, poly4 has low levels of chloride, and it’s far cheaper to produce than either MOP or SOP, says Anglo.
Sirius set up agreements with key players in the fertiliser market to supply poly4 cheaply as a way to promote the material, which has potassium, manganese, sulphur and relatively low chloride levels.
Anglo estimates poly4 should have a price of $200/tonne based on the prices for the four components in it. Sirius set up offtake agreements over its 10-million tonnes of annual output from 2026 at $140/tonne as a way to share risk and benefit as a market is created for the product.
Anglo will rely heavily on its five decades of potash-mining, supply and marketing relationships to further these drives for what is essentially a new player in the fertiliser industry.
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