The prevailing orthodoxy of modern corporate governance, famously articulated by Milton Friedman, posits that the "social responsibility of business is to increase its profits."
This is the doctrine of unadulterated shareholder insanity, where the singular, legally enshrined fiduciary duty of a corporation is to maximize returns for its owners, irrespective of the social, spatial, or long term sovereign consequences.
The story of Sasol, South Africa’s homegrown petrochemical giant, is the ultimate crucible for testing this doctrine.
It is a sobering parable that reveals the fatal flaw in applying shareholder primacy to a national asset. It demonstrates that a corporation, acting perfectly rationally within Friedman’s framework, can hollow out its sovereign host, even while its physical plants remain anchored to the soil.
The architecture of national necessity (the anomaly)
This makes us understand the tragedy. To do so, we must first understand the miracle. Sasolburg and Secunda are, as the Lehohla Ledger’s spatial diagnostics confirm, statistical anomalies. They are "green" (High High Progressed) islands in a sea of "Low Low" (Regressed) municipalities.
They were not built for profit in the conventional sense. They were built by the apartheid state, under extreme duress, to defy international sanctions and ensure sovereign energy survival. The goal was technological sovereignty at any cost.
This defiance created a unique physical and economic architecture: total physical value chain retention.
- Local input: Cheap, locally sourced coal.
- Industrial transformation: A massive, complex Fischer Tropsch petrochemical complex that processes that coal into high value liquid fuels and chemicals.
- Localized effect: Because the entire chain, from extraction to final refinement, is concentrated within a small municipal mesh, the economic value is forced to stick physically.
It created a self sustaining "green" island. High wages for a skilled workforce drive local retail and services. Corporate taxes and social investment stabilize the municipality.
This is the physical proof of concept: By localizing the entire physical value chain, you create a powerful engine of local prosperity.
The corporate siphon: enter shareholder insanity
This architecture of necessity became a publicly traded entity. And this is where the Friedman doctrine enters, acting as a corrosive agent on the national interest.
Sasol operates a global business, but its beating heart is the Secunda Synfuels complex. This complex generates immense free cash flow based on South African natural capital (coal). However, under shareholder insanity, Sasol’s fiduciary duty is to its global investors, not to the South African sovereign. This creates a structural conflict of interest:
• The sovereign need: Maximum reinvestment of profits into South Africa to drive further industrialization, transition to green energy, and fund broad based development.
• The shareholder mandate: Maximum return of capital to shareholders via dividends and share buybacks, and investment of capital wherever global returns are highest.
The sobering reality is that the shareholder mandate is winning. Sasol’s own financial architecture demonstrates that the current "shareholder insanity" model is leaking the nation's lifeblood.
Let's analyze Sasol's value distribution, based on publicly available data from its 2023 Integrated Report, and reframe it through the lens of the sovereign task.
The "sovereign contribution" (using Sasol's 2023 data)
Sasol generates the vast majority of its revenue from its South African operations, using South African coal and labor. Sasol's own reports break down where this revenue goes:
• Government (tax and royalties): R7.3 billion (Direct SA tax)
• Salaries and benefits (SA workforce): R15.7 billion
• Shareholders (dividends): R11.2 billion
This simple breakdown, using Sasol’s numbers, immediately reveals a sobering disparity.
The critical failure: the "siphon" is controlling the "anchor"
The "green" islands of Secunda and Sasolburg are proof that keeping the physical value chain local works. The problem is what happens to the surplus value (the economic rent) from that chain.
Under Friedman's doctrine of shareholder insanity, Sasol's sole mandate is to its shareholders.
The direct leakage: In 2023, Sasol paid R11.2 billion in dividends to its global shareholder base (which often owns 30 to 50% of the company). This capital, derived from South African natural resources, is legally expatriated. This is pure sovereign value leakage.
The misallocation (the lake charles disaster): Under shareholder pressure to achieve global scale, Sasol invested billions of dollars into the Lake Charles Chemicals Project in the USA. This was a rational decision for shareholders seeking diversification, but it was a sovereign disaster. It diverted billions of rand in capital, that could have been used to transition Sasol's South African operations to green hydrogen or modernize infrastructure, to the United States, where it was subsequently written down due to mismanagement.
The lesson of Sasol, viewed through the clear lens of the Lehohla Ledger, is not an indictment of the company's management, who are simply doing their jobs under the current legal framework. It is an indictment of the system that allows a sovereign's lifeblood to be treated as a mere asset class.
The green islands of Sasolburg and Secunda are a paradoxical proof of concept. They show that physical localization of the value chain works.
South Africa must architect a new relationship with its capital and its natural resources. It must legislate and regulate a new model of Total Sovereign Value Management, where:
The physical anchor is non negotiable.
The Sasol model of total in country value addition must be the baseline for all national champions exploiting sovereign natural capital.
The corporate siphon is capped and directed.
A significant, mandatory portion of corporate profit (the "siphon") from national resources must be legislatively directed into a Sovereign Development Fund, tasked with funding the nation's energy transition and broad based infrastructure, ensuring that the nation's wealth is not expatriated, but is actuated to build a resilient, inclusive economy for all its citizens.
We use Sasol’s own numbers to prove that Friedman’s insanity is draining the country. We do not need to misattribute other models to make this case. We only need a sovereign audit.
*Dr Pali Lehohla is the former Statistician General of South Africa, Director of the Pan African Institute for Evidence (PIE), and the founder of the Lehohla Ledger. He is a Professor of Practice at the University of Johannesburg and a Research Associate at Oxford University.
**The views expressed do not necessarily reflect the views of the National Media Group.