Edgar Filing: SASOL LTD

Page 1

As filed with the United States Securities and Exchange Commission on 2 November 2006

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 – for the year ended 30 June 2006

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-31615

Sasol Limited

(Exact name of registrant as Specified in its Charter)

Republic of South Africa

(Jurisdiction of Incorporation or Organization)

1 Sturdee Avenue, Rosebank 2196

South Africa

(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

American Depositary Shares

New York Stock Exchange

Ordinary Shares of no par value*

New York Stock Exchange

Listed on the New York Stock Exchange not for trading or quotation purposes, but only in connection with the registration of
American Depositary Shares pursuant to the requirements of the United States Securities and Exchange Commission.

Securities registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the

period covered by the annual report:

622,866,948 ordinary shares of no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to

Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17

Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the

Exchange Act).

Yes No

TABLE OF CONTENTS

Page

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 3.

KEY INFORMATION

3.A

Selected financial data

3.B

Capitalization and indebtedness

3.C

Reasons for the offer and use of proceeds

3.D

Risk factors

ITEM 4.

INFORMATION ON THE COMPANY

4.A

History and development of the company

4.B

Business overview

4.C

Organizational structure

4.D

Property, plants and equipment

ITEM 4A.

UNRESOLVED STAFF COMMENTS

110

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

111

5.A

Operating results

111

5.B

Liquidity and capital resources

163

5.C

Research and development, patents and licenses

168

5.D

Trend information

169

5.E

Off-balance sheet items

169

5.F

Tabular disclosure of contractual obligations

171

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

172

6.A

Directors and senior management

172

6.B

Compensation

178

6.C

Board practices

180

6.D

Employees

185

6.E

Share ownership

189

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

193

7.A

Major shareholders

193

7.B

Related party transactions

193

7.C

Interests of experts and counsel

194

ITEM 8.

FINANCIAL INFORMATION

195

8.A

Consolidated statements and other financial information

195

8.B

Significant changes

195

Page

ITEM 9.

THE OFFER AND LISTING

196

9.A

Offer and listing details

196

9.B

Plan of distribution

196

9.C

Markets

196

9.D

Selling shareholders

196

9.E

Dilution

196

9.F

Expenses of the issue

196

ITEM 10.

ADDITIONAL INFORMATION

197

10.A

Share capital

197

10.B

Memorandum and articles of association

197

10.C

Material contracts

202

10.D

Exchange controls

202

10.E

Taxation

204

10.F

Dividends and Paying Agents

208

10.G

Statement by Experts

208

10.H

Documents on Display

208

10.I

Subsidiary Information

208

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

209

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

212

PART II

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

213

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
USE OF PROCEEDS

214

ITEM 15.

CONTROLS AND PROCEDURES

215

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

216

ITEM 16B. CODE OF ETHICS

216

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

216

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

217

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED

PURCHASERS

218

PART III

ITEM 17.

FINANCIAL STATEMENTS

219

ITEM 18.

FINANCIAL STATEMENTS

220

ITEM 19.

EXHIBITS

H–1

GLOSSARY OF TERMS

H–3

LOCATION MAPS

M–1

PRESENTATION OF INFORMATION

We are incorporated in the Republic of South Africa as a public company under South African Company

law. Our consolidated financial statements included in our corporate filings in South Africa were prepared in
accordance with International Financial Reporting Standards (IFRS), for the financial years ended 30 June 2002,
30 June 2003, 30 June 2004, 30 June 2005 and 30 June 2006.

For purposes of this annual report on Form 20-F, we have prepared our consolidated financial statements in

accordance with United States Generally Accepted Accounting Principles, or US GAAP. Our consolidated
financial statements for each of the financial years ended 30 June 2002, 30 June 2003, 30 June 2004, 30 June
2005 and 30 June 2006 have been audited by KPMG Inc., independent accountants.

As used in this Form 20-F:

• “rand” or “R” means the currency of the Republic of South Africa;

• “US dollars”, “dollars”, “US$” or “$” means the currency of the United States;

• “euro” or “€” means the common currency of the member states of the European Monetary Union;

• “GBP” means British Pound Sterling, the currency of the United Kingdom;

• “JPY” means Japanese Yen, the currency of Japan;

• “AUD” means Australian dollar, the currency of Australia.

We present our financial information in rand, which is our reporting currency. Solely for your convenience,

this Form 20-F contains translations of certain rand amounts into US dollars at specified rates. These rand
amounts do not represent actual US dollar amounts, nor could they necessarily have been converted into
US dollars at the rates indicated. Unless otherwise indicated, rand amounts have been translated into US dollars
at the rate of R7.76 per US dollar, which was the noon buying rate for customs purposes of the rand as reported
by the Federal Reserve Bank of New York on 29 September 2006.

All references in this Form 20-F to “years” refer to the financial years ended on 30 June.

Besides applying barrels (b) for reporting oil and gas reserves and production, Sasol applies the Système

International (SI) metric measures for all global operations. A ton or tonne denotes one metric ton equivalent to
1,000 kilograms (kg). Sasol’s reference to metric tons should not be confused with an imperial ton equivalent to
2,240 pounds (or about 1,016 kg). Barrels per day or bpd is used to refer to our oil and gas production.

All references to billions in this Form 20-F are to thousands of millions.

All references to the “group”, “us”, “we”, “our”, “the company”, or “Sasol” in this Form 20-F are to Sasol

Limited, its group of subsidiaries and its interests in associates and joint ventures. All references in this Form
20-F are to Sasol Limited or the companies comprising the group, as the context may require. All references to
“(Pty) Limited” refers to (Proprietary) Limited, a form of corporation in South Africa which restricts the right of
transfer of its shares, limits the number of members and prohibits the public offering of its shares.

All references in this Form 20-F to “South Africa” and “the government” are to the Republic of South

Africa and its government. All references to the “JSE” are to the JSE Limited (formerly known as the JSE
Securities Exchange, South Africa). All references to “SARB” refer to the South African Reserve Bank and all
references to “PPI” refer to the Producer Price Index, which is a measure of inflation in South Africa. All
references to “GTL” and “CTL” refer to our gas-to-liquids and coal-to-liquids processes, respectively.

Certain industry terms used in this Form 20-F are defined in the Glossary of Terms.

Unless otherwise stated, presentation of financial information in this annual report on Form 20-F will be

under US GAAP. Our discussion of business segment results follows the basis on which management measures
business segment performance. Presentation of business segment results on a management basis differs from
results on a US GAAP basis in certain respects. For more information on the reconciliation of segmental
turnover and operating profit see Note 3 to our consolidated financial statements.

FORWARD-LOOKING STATEMENTS

We may from time to time make written or oral forward-looking statements, including in this Form 20-F, in

other filings with the United States Securities and Exchange Commission, in reports to shareholders and in other
communications. These statements may relate to analyses and other information which are based on forecasts of
future results and estimates of amounts not yet determinable. These statements may also relate to our future
prospects, developments and business strategies. Examples of such forward-looking statements include, but are
not limited to:

• statements regarding our future results of operations and financial condition and regarding future

economic performance;

• statements regarding recent and proposed accounting pronouncements and their impact on our future

results of operations and financial condition;

• statements of our business strategy, plans, objectives or goals, including those related to products or

services;

• statements regarding future competition and changes in market share in the South African and

international industries and markets for our products;

• statements regarding our existing or anticipated investments (including the GTL projects in Qatar and

Nigeria, the Arya Sasol Polymer Project, the potential development of two CTL projects in China
and other investments), acquisitions of new businesses or the disposition of existing businesses;

• statements regarding our estimated oil, gas and coal reserves;

• statements regarding future development in legal and regulatory matters, including initiatives for the

economic empowerment of historically disadvantaged South Africans;

• statements regarding future fluctuations in refining margins and crude oil, natural gas and petroleum

product prices;

• statements regarding the demand and the cyclicality of petrochemical product prices;

• statements regarding changes in the manufacturers’ fuel pricing mechanism in South Africa and their

effects on fuel prices and our operating results and profitability;

• statements regarding future fluctuations in exchange and interest rates;

• statements regarding our plans in respect of the South African retail and commercial markets for liquid

fuels;

• statements regarding our current or future products and anticipated customer demand for these products;

• statements regarding acts of war, terrorism or other events that may adversely affect the group’s

operations or that of key stakeholders to the group; and

• statements of assumptions underlying such statements.

Words such as “believe”, “anticipate”, “expect”, “intend”, “seek”, “will”, “plan”, “could”, “may”,

“endeavor” and “project” and similar expressions are intended to identify forward-looking statements, but are
not the exclusive means of identifying such statements.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and

specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will
not be achieved. If one or more of these risks materialize, or should underlying assumptions prove incorrect, our
actual results may differ materially from those anticipated in this Form 20-F. You should understand that a
number of important factors could cause actual results to differ materially from the plans, objectives,
expectations, estimates and intentions expressed in such forward-looking statements. These factors include
among others, and without limitation:

• the outcomes in developing regulatory matters and the effect of changes in regulation and government

policy;

• the political, social, fiscal regime and economic conditions and developments in the world, especially

those countries in which we operate;

• our ability to maintain key customer relations in important markets;

• our ability to improve results despite unusual levels of competition;

• the continuation of substantial growth in significant developing markets, such as China;

• the ability to benefit from our capital spending policies;

• the capital cost of projects (including material, engineering and construction cost);

• growth in significant developing areas of our business;

• changes in the demand for and international prices of crude oil, petroleum and chemical products and

changes in foreign currency exchange rates;

• gaining access to sufficient competitively priced gas reserves;

• our success in continuing technological innovation and commercialization;

• our ability to maintain sustainable earnings despite fluctuations in foreign exchange rates and interest

rates;

• our ability to attract and retain sufficient skilled employees; and

• our success at managing the risks of the foregoing.

The foregoing list of important factors is not exhaustive. When relying on forward-looking statements to

make investment decisions, you should carefully consider the foregoing factors and other uncertainties and
events. Such forward-looking statements apply only as of the date on which they are made, and we do not
undertake any obligation to update or revise any of them, whether as a result of new information, future events
or otherwise.

ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES

We are a public company incorporated under the Company law of South Africa. All of our directors and

officers reside outside the United States, principally in South Africa. You may not be able, therefore, to effect
service of process within the United States upon those directors and officers with respect to matters arising
under the federal securities laws of the United States.

In addition, substantially all of our assets and the assets of our directors and officers are located outside the

United States. As a result, you may not be able to enforce against us or our directors and officers judgments
obtained in United States courts predicated on the civil liability provisions of the federal securities laws of the
United States.

A foreign judgment is not directly enforceable in South Africa, but constitutes a cause of action which will

be enforced by South African courts provided that:

• the court which pronounced the judgment has jurisdiction to entertain the case according to the

principles recognized by South African law with reference to the jurisdiction of foreign courts;

• the judgment is final and conclusive, that is, it cannot be altered by the court which pronounced it;

• the judgment has not been prescribed;

• the recognition and enforcement of the judgment by South African courts would not be contrary to

public policy, including observance of the rules of natural justice which require that the documents
initiating the proceeding were properly served on the defendant and that the defendant was given the
right to be heard and represented by counsel in a free and fair trial before an impartial tribunal;

• the judgment was not obtained by fraudulent means;

• the judgment does not involve the enforcement of a penal or revenue law; and

• the enforcement of the judgment is not otherwise precluded by the provisions of the Protection of

Businesses Act, 99 of 1978, as amended, of the Republic of South Africa.

It is the policy of South African courts to award compensation for the loss or damage actually sustained by

the person to whom the compensation is awarded. Although the award of punitive damages is generally
unknown to the South African legal system that does not mean that such awards are necessarily contrary to
public policy. Whether a judgment was contrary to public policy depends on the facts of each case. Exorbitant,
unconscionable, or excessive awards will generally be contrary to public policy. South African courts cannot
enter into the merits of a foreign judgment and cannot act as a court of appeal or review over the foreign court.
South African courts will usually implement their own procedural laws and, where an action based on an
international contract is brought before a South African court, the capacity of the parties to the contract will
usually be determined in accordance with South African law. It is doubtful whether an original action based on
United States federal securities law can be brought before South African courts. A plaintiff who is not resident in
South Africa may be required to provide security for costs in the event of proceedings being initiated in South
Africa. Furthermore the Rules of the High Court of South Africa require that documents executed outside South
Africa must be authenticated for the purpose of use in South Africa.

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable

ITEM 3.

KEY INFORMATION

3.A

Selected financial data

The following information should be read in conjunction with “Item 5. – Operating and financial review

and prospects” and the consolidated financial statements, the accompanying notes and other financial
information included elsewhere in this annual report on Form 20-F.

The US GAAP financial data set forth below has been extracted from the audited consolidated financial

statements for the years ended and as at 30 June 2006, 30 June 2005 and 30 June 2004 which are included in
this Form 20-F and which have been prepared in accordance with US GAAP. The US GAAP financial
information for the two years ended and as at 30 June 2003 and 30 June 2002 has been extracted from audited
financial statements not included in this annual report on Form 20-F. The IFRS financial data set forth below for
the years ended as at 30 June 2006, 30 June 2005, 30 June 2004, 30 June 2003 and 30 June 2002 has been
derived from audited consolidated financial statements prepared in accordance with IFRS.

Year ended

30 June

2002

2003

2004

2005

2006

restated

(US$ in

(Rand in millions)

millions)

(except per share information and weighted average shares in issue)

Income statement data:

US GAAP

Continuing operations

Turnover

55,667

63,769

43,606

50,687

61,857

7,973

Operating profit

14,158

10,860

8,546

14,377

20,688

2,666

Income from continuing operations

9,368

7,193

5,376

9,611

14,159

1,825

Discontinued operations

Net (loss)/income from discontinued operations (including
fair value write-down), net of tax

(139)

108

(2,860)

(369)

Earnings attributable to shareholders

9,368

7,193

5,237

9,719

11,299

1,456

IFRS

Continuing operations

Turnover

59,590

64,555

44,999

52,497

63,850

8,228

Operating profit

14,671

11,767

9,136

14,383

20,732

2,672

Profit from continuing operations

9,743

7,762

5,949

9,836

13,909

1,792

Discontinued operations

Loss from discontinued operations, net of tax

(88)

(289)

(3,360)

(433)

Total profit

9,743

7,762

5,861

9,547

10,549

1,359

Year ended

30 June

2002

2003

2004

2005

2006

restated

(US$ in

(Rand in millions)

millions)

(except per share information and weighted average shares in issue)

Per share information (Rand and US$):

US GAAP

Basic earnings/(loss) per share

15.29

11.81

8.58

15.83

18.22

2.35

from continuing operations

15.29

11.81

8.81

15.66

22.83

2.94

from discontinued operations

(0.23)

0.17

(4.61)

(0.59)

Diluted earnings/(loss) per share

14.99

11.61

8.54

15.65

17.93

2.31

from continuing operations

14.99

11.61

8.77

15.48

22.47

2.90

from discontinued operations

(0.23)

0.17

(4.54)

(0.59)

IFRS

Basic earnings/(loss) per share

15.84

12.59

9.50

15.37

16.73

2.15

from continuing operations

15.84

12.59

9.64

15.85

22.15

2.85

from discontinued operations

(0.14)

(0.48)

(5.42)

(0.70)

Diluted earnings/(loss) per share

15.53

12.39

9.40

15.11

16.42

2.11

from continuing operations

15.53

12.39

9.55

15.58

21.74

2.80

from discontinued operations

(0.15)

(0.47)

(5.32)

(0.69)

Dividends per share

450

540

710

Weighted average shares in issue (in millions):

Average shares outstanding—basic

612.5

609.3

610.0

613.8

620.0

Average shares outstanding—diluted (IFRS)

625.0

619.6

616.2

624.4

631.7

Average shares outstanding—diluted (US GAAP)

625.0

619.6

613.0

620.9

630.2

Balance Sheet data:

IFRS

Total assets

65,730

69,619

73,346

87,869

102,802

13,247

Total shareholders’ equity

31,315

33,518

35,029

43,533

52,352

6,746

Share capital

2,706

2,783

2,892

3,203

3,634

468

US GAAP
Total assets

62,493

67,905

68,765

80,428

93,888

12,099

Total shareholders’ equity

30,944

32,793

33,669

40,945

50,668

6,529

Share capital

2,772

2,842

2,976

3,814

4,414

569

Translations into US dollars in this table are for convenience only and are computed at the noon buying rate of the Federal Reserve
Bank of New York on 29 September 2006 of R7.76 per US dollar. You should not view such translations as a representation that such
amounts represent actual US dollar amounts.

In accordance with the adoption of SFAS 123(R), Share-based compensation, in 2006, the financial statement amounts for prior
periods presented have been adjusted to reflect the grant-date fair value of equity awards issued through the Sasol Share Incentive
Scheme.

In accordance with the adoption of IFRS 2, Share-based payment, in 2006, the financial statement amounts for prior periods presented
have been adjusted to reflect the grant-date fair value of equity awards issued through the Sasol Share Incentive Scheme.

Includes the final dividend which was declared subsequent to the balance sheet date and is presented for information purposes only.
No provision for this final dividend has been recognized.

Restated for IFRS reporting purposes for the reclassification of certain transaction fees incurred in 2004 in raising finance.

All financial statement amounts in the periods previously presented have been adjusted to reflect the presentation of Sasol Olefins &
Surfactants as discontinued operations.

Exchange rate information

The following table sets forth certain information as published by the Federal Reserve Bank of New York

with respect to the noon buying rate of US dollars in terms of rand for the years shown:

Rand per US dollar for the year ended 30 June or the respective month

Average

High

Low

2002

10.20

13.60

8.23

2003

9.04

10.90

7.18

2004

6.88

7.80

6.17

2005

6.21

6.92

5.62

2006

6.41

7.43

5.99

2007

7.15

7.76

6.72

April 2006

6.08

6.17

5.99

May 2006

6.31

6.71

6.00

June 2006

6.97

7.43

6.63

July 2006

7.07

7.23

6.83

August 2006

6.95

7.20

6.72

September 2006

7.45

7.76

7.16

The average exchange rates for each full year are calculated using the average exchange rate on the last day of each
month during the period. The average exchange rate for each month is calculated using the average of the daily
exchange rates during the period.

Through 29 September 2006.

The rate on 29 September 2006 was R7.76 per US dollar.

3.B

Capitalization and indebtedness

Not applicable.

3.C

Reasons for the offer and use of proceeds

Not applicable.

3.D

Risk factors

Fluctuations in exchange rates may adversely affect our business, operating results, cash flows and
financial condition

The rand is our principal operating currency. However, a large part of our group’s turnover is denominated

in US dollars and some part in euro, derived either from exports from South Africa or from our manufacturing
and distribution operations outside South Africa. Also, a significant part of our turnover is determined by the
US dollar, as petroleum prices in general and the price of most petroleum and chemical products in South Africa
are based on global commodity and benchmark prices which are quoted in US dollars. Hence, a large part of our
group turnover is denominated in US dollars or influenced by the underlying global commodity and benchmark
prices which are quoted in US dollars. Furthermore, a significant part of our capital expenditure is also
US dollar-denominated, as it is directed to investments outside South Africa or constitutes equipment or plant
imported into South Africa. In our South African operations the majority of our costs are rand based and in our
European operations a large part of our costs are euro based. Accordingly, fluctuations in the exchange rates
between the rand and US dollar, the rand and the euro and the euro and the US dollar may have a material effect
on our business, operating results, cash flows and financial condition.

During the 2006 financial year the rand/US dollar exchange rate averaged R6.41 and fluctuated between

R5.99 and R7.43. This compares to an average exchange rate of R6.21 during the 2005 financial year,
fluctuating between R5.62 and R6.92. The rand exchange rate is impacted by various international and South

African economic and political factors and we are unable to forecast whether the relatively stable performance
of the rand in the 2005 and 2006 financial years will continue in the foreseeable future. Subsequent to 30 June
2006 the rand has weakened significantly against the US dollar and euro.

In addition, although the exchange rate of the rand is primarily market-determined, its value at any time

may not be an accurate reflection of its underlying value, due to the potential effect of, among other factors,
exchange controls. For more information regarding exchange controls in South Africa see “Item 10.D –
Exchange controls”.

We use derivative instruments to protect us against adverse movements in exchange rates on certain

transactional risks in accordance with our group hedging policies see “Item 11 – Quantitative and qualitative
disclosures about market risk”.

Fluctuations in refining margins and crude oil, natural gas and petroleum product prices may adversely
affect our business, operating results, cash flows and financial condition

Market prices for crude oil, natural gas and petroleum products may fluctuate as they are subject to local

and international supply and demand fundamentals and factors over which we have no control. Worldwide
supply conditions and the price levels of crude oil may be significantly influenced by international cartels, which
control the production of a significant proportion of the worldwide supply of crude oil, and by political
developments, especially in the Middle East. Other factors which may influence the aggregate demand and
hence affect the markets and prices for petroleum products in regions which influence South African fuel prices
through the Basic Fuel Price (BFP) price formula (used for the calculation of the refinery gate price in South
Africa) and/or where we market these products, may include changes in economic conditions, the price and
availability of substitute fuels, changes in product inventory, product specifications and other factors. In recent
years, prices for petroleum products have fluctuated widely. For most of the 2006 financial year the crude oil
price fluctuated at levels above US$60 per barrel. See “Item 5 – Operating and financial review and prospects”.

A substantial proportion of our turnover is derived from sales of petroleum and petrochemical products.

Through our equity participation in the National Petroleum Refiners of South Africa (Pty) Limited (Natref)
crude oil refinery, we are exposed to fluctuations in refinery margins resulting from differing fluctuations in
international crude oil and petroleum product prices. We are also exposed to changes in absolute levels of
international petroleum product prices through our synthetic fuels and oil operations. Fluctuations in
international crude oil prices affect our results mainly through their indirect effect on the BFP price formula, see
“Item 4.B – Business overview – Sasol Synfuels” and “Sasol Oil”, as well as the impact on oil derived
feedstock. Prices of petrochemical products and natural gas are also affected by fluctuation in crude oil prices.
Fluctuations in the price of crude oil and petroleum products can have a material adverse effect on our business,
operating results, cash flows and financial condition.

We use derivative instruments to protect us against day-to-day US dollar oil price and rand to US dollar

exchange rate fluctuations affecting the acquisition cost of our crude oil needs. During the course of the 2006
financial year, we have again hedged a portion of our synthetic fuel production against falling oil prices in
respect of the 2007 financial year. See “Item 11 – Quantitative and qualitative disclosures about market risk”.
While the use of these instruments may provide some protection against short-term fluctuation in crude oil
prices it does not protect us against longer term fluctuations in crude oil prices or differing trends between crude
oil and petroleum product prices.

We are unable to accurately forecast fluctuations in refining margins and crude oil, natural gas and

petroleum products prices. Fluctuations in any of these may have a material adverse effect on our business,
operating results, cash flows and financial condition.

Cyclicality in petrochemical product prices may adversely affect our business, operating results, cash
flows and financial condition

The demand for chemicals and especially products such as solvents, alkylates, fertilizers and polymers is

cyclical. Typically, higher demand during peaks in the industry business cycles leads producers to increase their
production capacity. Although peaks in the business cycle have been characterized by increased selling prices
and higher operating margins, in the past such peaks have led to overcapacity and supply exceeding demand
growth. Low periods in the business cycle are then characterized by decreasing prices and excess capacity,
which can depress operating margins and may result in operating losses. We believe that some areas within the
chemicals industry currently show overcapacity with the possibility of further capacity additions in the next few
years. We cannot assure you that future growth in demand will be sufficient to absorb current overcapacity or
future capacity additions without downward pressure on prices of chemical products. Such pressure may have a
material adverse effect on our business, operating results, cash flows and financial condition.

We may not be able to exploit technological advances quickly and successfully

Most of our operations, including the gasification of coal and the manufacture of synfuels and

petrochemical products, are highly dependent on the development and use of advanced technologies. The
development, commercialization and integration of the appropriate advanced technologies can affect, among
other things, the competitiveness of our products, the continuity of our operations, our feedstock requirements
and the capacity and efficiency of our production.

It is possible that new technologies or novel processes may emerge and that existing technologies may be

further developed in the fields in which we operate. Unexpected rapid advances in employed technologies or the
development of novel processes can affect our operations and product ranges in that it could render the
technologies we utilize or the products we produce obsolete or less competitive in the future. Difficulties in
accessing new technologies may impede us from implementing them and competitive pressures may force us to
implement these new technologies at a substantial cost. Examples of new technologies which may in the future
affect our business include the following:

• The development and commercialization of non-hydrocarbon-dependent energy carrier technologies,

including the further development of fuel cells or the large scale broadening of the application of
electricity to drive motor vehicles. These may be disruptive to the use of hydrocarbon and refined crude
oil-derived fuels.

• The development of improved fuels (and associated automotive technologies) from a crude oil base with

equivalent properties to that of Fischer-Tropsch derived fuels, which may erode the competitive
advantage of Fischer-Tropsch fuels.

• The development by competitors of next generation catalysts in which catalyst performance is

manipulated, resulting in highly selective and high purity chemical products, which may render the use
of our mixed feed stream catalytic-based production processes uncompetitive.

We cannot predict the effect of these or other technological changes or the development of novel processes

on our business or on our ability to provide competitive products. Our ability to compete will depend on our
timely and cost-effective implementation of new technological advances. It will also depend on our success in
commercializing these advances in spite of competition we face by patents registered by our competitors. If we
are unable to implement new technologies in a timely or cost-efficient manner, or penetrate new markets in a
timely manner in response to changing market conditions or customer requirements, we could experience a
material adverse effect on our business, operating results, cash flows and financial condition.

Our GTL projects may not prove sufficiently viable or as profitable as planned

We are currently developing GTL projects in Qatar and Nigeria. In addition we are considering

opportunities for further GTL investments in other areas of the world. The development of these projects, either

solely or through our joint venture with Chevron Corporation (Chevron), is a capital-intensive process and
requires us to commit significant capital expenditure and devote considerable management resources in utilizing
our existing experience and know-how, especially in connection with Fischer-Tropsch synthesis technologies.
See “Item 4.B – Business overview – Sasol Synfuels International”. This process and its products may also give
rise to patent risks in connection with the use of our GTL technology. See below, “Intellectual property risks
may adversely affect our products or processes and our competitive advantage”.

We consider the development of our GTL projects a major part of our strategy for future growth and

believe that GTL fuels will in time develop to become an efficient and widely used alternative and/or
supplement to conventional diesel fuel. In assessing the viability of our GTL projects, we make a number of
assumptions relating to specific variables, mainly including:

• access to sufficient competitively priced gas reserves;

• prices of crude oil, petroleum products and gas;

• fluctuations in the exchange rate of the US dollar against the rand;

• fluctuations in interest rates;

• fiscal dispensation in the countries in which we invest;

• capital cost of our facilities, including material, engineering and construction costs;

• various operating costs;

• technology and catalyst performance;

• conditions in the countries in which we invest, including factors relating to political, social and

economic conditions;

• availability of skilled workers to construct and operate the plants; and

• timely completion of projects.

Significant variations in any one or more of the above factors which are beyond our control, or any other

relevant factor, may adversely affect the profitability or even the viability of our GTL investments. Should we
not be successful in the implementation of our GTL projects, we may be required to write off significant
amounts devoted to them and we may need to redirect our strategy for future growth. In view of the resources
invested in these projects and their importance to our growth strategy, problems we may experience as a result of
these factors may have a material adverse effect on our business, operating results, cash flows and financial
condition and opportunities for future growth.

There are risks relating to countries in which we operate that could adversely affect our business,

operating results, cash flows and financial condition

Several of our subsidiaries, joint ventures and associates operate in countries and regions that are subject to

significantly differing political, social, economic and market conditions. See “Item 18 – Financial statements –
Note 3 – Segmental analysis” for a description of the extent of our operations in the main countries and regions
in which we operate. We are a South African domiciled company. The majority of our operations are located in
South Africa and 81% of our turnover from continuing operations is generated from our South African facilities.
Specific aspects of country risks that may have a material impact on our business, operating results, cash flows
and financial condition include:

(a) Political, social and economic issues

We have invested or are in the process of investing in significant operations in African, Southeast Asian and

Middle Eastern countries that have in the past to a greater or lesser extent experienced social, economic and
political uncertainty. More recently certain countries in which we operate have achieved greater social, political
and economic stability. Since 1994 South Africa, in particular, has experienced significantly improved social,
economic and political conditions.

(b) The possible imposition of windfall taxes on our synthetic fuel operations

A task team was appointed by the South African Minister of Finance during May 2006 to investigate

possible reforms to the fiscal regime applicable to windfall profits in South Africa’s liquid fuel energy sector,
with particular reference to the synthetic fuel industry. A discussion document for public comment was released
in this regard. We have presented our submissions in writing to the task team and have made oral submissions at
the public hearings. We cannot predict whether this investigation will lead to amendments to the current fiscal
regime, which we are presently subject to.

Over recent years, the South African economy has had relatively low and stable levels of inflation and

interest rates. Should increases in these rates occur, our costs could increase and our operating margins could be
affected. High interest rates could also adversely impact on our ability to ensure cost-effective debt financing in
South Africa.

(d) Transportation, water and electricity and other infrastructure

The infrastructure in some countries in which we operate, such as rail infrastructure and electricity and

water supply in South Africa, may need to be further upgraded and expanded and in certain instances possibly at
our own cost.

(e) Unionized Labor

The majority of our employees worldwide belong to trade unions. These employees comprise mainly

general workers, artisans and technical operators. Although we have had minor labor disruptions in South Africa
during 2006 we have not experienced significant labor disruptions in recent years. We have constructive relations
with our employees and their unions, but we cannot assure you that significant labor disruptions will not occur
in the future.

(f) Southern African regional issues

There have been some instances of social, political, and economic instability in some of the countries in the

Southern African region. Although we believe South Africa’s growing stature has increasingly separated it from
the effects of regional issues, such political or economic instability in neighboring countries could negatively
affect market conditions in South Africa.

(g) Exchange control regulations

South African law provides for exchange control regulations which restrict the export of capital from the

Common Monetary Area, which includes South Africa, subject to South African Reserve Bank dispensation.
These regulations apply to transactions involving South African residents, including both natural persons and
legal entities. These regulations also affect our ability to borrow funds from non-South African sources for use in
South Africa or to repay these funds from South Africa and, in some cases, our ability to guarantee the
obligations of our subsidiaries with regard to these funds. These restrictions have affected the manner in which
we have financed our acquisitions outside South Africa and the geographic distribution of our debt. See
“Item 10.D – Exchange controls” and “Item 5.B – Liquidity and capital resources”.

(h)

HIV/AIDS in sub-Saharan Africa

Based on the results of our voluntary counseling and testing program which had an 82% uptake amongst all

levels of the organization, we estimate that 7% of our South African workforce may be currently infected, with
the highest concentration of infections in our mining operations. This is less than the 10% to 15% initially
estimated during 2004. Based on an actuarial study, which excludes the positive impact of any prevention and
management intervention program, we estimate that, while the percentage of infected employees may not rise
significantly in the forthcoming years, there will be a significant increase in the number of AIDS-related
fatalities. See “Item 6.D – Employees”.

We incur costs relating to the medical treatment and loss of infected personnel, as well as the related loss of

productivity. We also incur costs relating to the recruitment and training of new personnel. We are not in a
position to accurately quantify these costs. Based on our actuarial models, we estimate that the impact of
HIV/AIDS on our payroll expenses should be less than 1% of our current payroll for our South African
employees by the year 2007. This calculation is based on the estimated financial impact on production resulting
from the projected prevalence of HIV/AIDS among our workforce, but does not take into account indirect costs
of productivity losses. We are investing human and financial resources to establish and maintain programs to
address the HIV/AIDS pandemic. In September 2002, we launched the Sasol HIV/AIDS Response Programme
(SHARP), which is our initiative to respond to the HIV/AIDS pandemic, on which we have spent a total amount
of approximately R22 million to June 2006. We are committed to the on-going funding of SHARP.

We cannot assure you that the costs we are currently incurring and will incur in the future in connection

with the HIV/AIDS pandemic will not have a material adverse effect on our business, operating results, cash
flows and financial condition.

(i) Transformation issues

In some countries our operations are required to comply with local procurement, employment equity,

ownership and other regulations which are designed to address country specific social and economic
transformation issues.

As a leading and patriotic South Africa-based company, we embrace and will engender or participate in

initiatives to bring about meaningful transformation to assist in correcting the imbalances and injustices of the
apartheid era. We consider these initiatives to be a strategic imperative and we acknowledge the risk of not
vigorously pursuing them or of them not succeeding and adversely impacting on the long-term sustainable
performance and reputation of our company. It is not currently known what additional costs or implications will
arise for us to comply with these transformation initiatives.

As part of an initiative of the government of South Africa to advance the participation of historically

disadvantaged South Africans in the country’s economy, in November 2000, we became party to an agreement
with the government and the liquid fuels industry, the Charter for the South African Petroleum and Liquid Fuels
Industry on Empowering Historically Disadvantaged South Africans in the Petroleum and Liquid Fuels Industry
(the Liquid Fuels Charter). The Charter deals with the following key matters:

• participation in ownership and control in all facets of the industry by historically disadvantaged South

Africans;

• addressing the skills gap in the industry;

• employment equity; and

• procurement from historically disadvantaged South Africans.

See “Item 4.B – Business overview – Sasol Oil” and “- Empowerment of historically disadvantaged South

Africans”.

The Liquid Fuels Charter requires us, amongst other things, to ensure that historically disadvantaged South

Africans hold at least 25% equity ownership of our liquid fuels business by the year 2010. We entered into a
25% equity transaction with Tshwarisano LFB Investment (Pty) Limited (Tshwarisano), on 1 July 2006 and we
are now compliant with the equity ownership targets of the Liquid Fuels Charter. See “Item 8.B – Significant
changes”.

The financing arrangements for the Tshwarisano transaction are set out in “Item 5.A – Operating results –

Our operations are subject to various laws and regulations in the countires in which we operate” and “Item 8.B –
Significant changes”.

In October 2002, the government and representatives of South African mining companies and mineworkers’

unions reached broad agreement on a charter (the Mining Charter), designed to facilitate the participation of
historically disadvantaged South Africans in the country’s mining industry. The Charter’s stated objectives
include the:

• expansion of opportunities for persons disadvantaged by unfair discrimination under the previous

political dispensation;

• expansion of the skills base of such persons;

• promotion of employment and advancement of the social and economic welfare of mining communities;

and

• promotion of beneficiation of ore into higher value substances.

The Mining Charter, together with the scorecard to facilitate the interpretation of and compliance with the

Mining Charter, requires mining companies to ensure that historically disadvantaged South Africans hold at least
15% ownership of mining assets or equity in South Africa within 5 calendar years (i.e. by 2009) and 26%
ownership within 10 calendar years (i.e. by 2014) from the effective date of the Mineral and Petroleum
Resources Development Act which was on 1 May 2004. The Charter further specifies that the mining industry is
required to assist historically disadvantaged South Africans in securing finance to fund their equity participation
up to an amount of R100 billion within the first 5 calendar years after the implementation of the aforementioned
Act. Beyond this R100 billion commitment, the Mining Charter requires that participation of historically
disadvantaged South Africans should be increased towards the 26% target on a willing buyer-willing seller basis.
See “Item 4.B – Business overview – Sasol Mining” and “Empowerment of historically disadvantaged South
Africans”.

Various principles of the Mining Charter have been incorporated in regulations promulgated by the

Minister of Minerals and Energy under the new Mineral and Petroleum Resources Development Act with respect
to the South African mining industry. We have commenced a process to apply for the conversion of our existing
mining licenses under the new Mineral and Petroleum Resources Development Act. See below “New mining
legislation may have an adverse effect on our mineral rights”. When considering applications for the conversion
of existing mining licenses under the Mineral and Petroleum Resources Development Act, the Minister of
Minerals and Energy must take into account, among other factors, the applicant company’s compliance with the
Mining Charter. We have entered into a transaction with Eyesizwe Coal (Pty) Limited (Eyesizwe) for our mining
export activities which is expected to be effective in 2007. This venture will result in approximately an 8%
indirect black economic empowerment (BEE) equity ownership in Sasol Mining and together with other BEE
transactions under consideration by Sasol Mining would result in 15% BEE equity ownership by 2009 and 26%
by 2014.

In December 2004 the Minister of Trade and Industry issued certain draft Codes of Good Practice for

Broad-based Black Economic Empowerment for public comment pursuant to the Broad-based Black Economic
Empowerment Act of 2003. These codes are intended to provide businesses with guidance on implementing the
requirements of the Act. These Codes have been published for comments and we have commented on the Codes
and await publication in the South African Government Gazette.

It is not currently known what additional costs or implications will arise for us to comply with the said Act

and other requirements of both the Liquid Fuels and Mining Charters or the Codes of Good Practice for Broad-
based Black Economic Empowerment and we cannot assure you that these costs or implications will not have a
material adverse effect on our shareholders or business operating results, cash flows and financial condition.

(j) Engineering and construction contract costs

The increase worldwide in the sanctioning of large engineering and construction contracts has resulted in a

shortage of engineering and construction resources and strains in these industries. These have impacted on some
of our projects and have affected construction timing schedules and costs. Whilst higher international crude oil
prices may boost post-commissioning income streams and compensate for construction delays and higher capital
costs, these strains in the engineering and construction industries are nevertheless a cause for concern and may
impact on our project plans and growth ambitions.

(k) Other specific country risks that are applicable to countries in which we operate and which may have a

material impact on our business include:

• external acts of warfare and civil clashes;

• government interventions, including protectionism and subsidies;

• regulatory, taxation and legal structure changes;

• the control of oil and gas field developments and transportation infrastructure;

• failure to receive new permits and consents;

• cancellation of contractual rights;

• expropriation of assets;

• lack of capacity to deal with emergency response situations; and

• the introduction of selective environmental and carbon taxes.

Some of the countries where we have already made, or other countries where we may consider making,

investments are in various stages of developing institutions and legal and regulatory systems that are
characteristic of parliamentary democracies. However, institutions in these countries may not yet be as firmly
established as they are in parliamentary democracies in South Africa, the United States and some European
countries. Some of these countries are also transitioning to a market economy and, as a result, experience
changes in their economies and their government policies that could affect our investments in these countries.
Moreover, the procedural safeguards of the new legal and regulatory regimes in these countries are still being
developed and, therefore, existing laws and regulations may be applied inconsistently. In some circumstances, it
may not be possible to obtain the legal remedies provided under those laws and regulations in a timely manner.

As the political, economic and legal environments remain subject to continuous development, investors in

these countries face uncertainty as to the security of their investments. Any unexpected changes in the political
or economic conditions in the countries in which we operate (including neighboring countries) may have a
material adverse effect on the investments that we have made or may make in the future, which may in turn have
a material adverse effect on our business, operating results, cash flows and financial condition.

New mining legislation may have an adverse effect on our mineral rights

The Mineral and Petroleum Resources Development Act came into effect on 1 May 2004. The fundamental

principle of the Act is that mineral resources are the common heritage of all South Africans and collectively
belong to all the people of South Africa. The Act provides that the right to prospect and mine, including the right
to grant prospecting and mining rights on behalf of the nation, be administered by the government of South
Africa which will have the right to exercise full and permanent custodianship over mineral resources.

The Act requires mining companies, including our company, to apply for conversion of their existing

prospecting and mining permits. A wide range of factors and principles must be taken into account by the
Minister of Minerals and Energy when considering these applications. These factors include the applicant’s
access to financial resources and appropriate technical ability to conduct the proposed prospecting or mining
operation, the environmental impact of the operation and, in the case of prospecting rights, considerations
relating to fair competition. Other factors include considerations relevant to promoting employment and the
social and economic welfare of all South Africans and showing compliance with the provisions of the Mining
Charter for the empowerment of historically disadvantaged South Africans in the mining industry. See “Item 4.B
– Business overview – Regulation of mining activities in South Africa” and “– Empowerment of historically
disadvantaged South Africans”.

The Act also provides that a mining right granted under the Act may be cancelled if the mineral to which

such mining right relates is not mined at an optimal rate. Furthermore, royalties from mining activities will
become payable to the state under provisions contained in the “Mineral and Petroleum Resources Royalty Bill”.
This Bill was first published in March 2003 and has since been revised, with the final Bill was published on
11 October 2006. The Bill provides for a royalty rate of 1% on coal with an ash content of higher than 15% for
South African energy consumption and 3% on coal with an ash content lower than 15%. The royalty is revenue
based, payable bi-annually in arrears, and will take effect from 1 May 2009. The royalty will be deductible for
normal income tax purposes. It is the declared intent of the South African government not to disrupt operations
as a result of the introduction of the new legislation and we intend to undertake the appropriate actions in order
to ensure conversion of our existing prospecting and mining rights. However, we cannot assure you that we will
be successful in all our applications for conversion and that our rights on existing coal mine reserves will not be
affected, which could have a material adverse effect on our business, operating results, cash flows and financial
condition.

New legislation on petroleum and energy activities may have an adverse impact on our business,

operating results, cash flows and financial condition

The Petroleum Products Amendment Act became effective on 17 March 2006. This Act amends the existing

Petroleum Products Act, enacting provisions regulating a range of matters including the licensing of persons
involved in the manufacturing, wholesale and retail sale of petroleum products. As the Act and regulations to be
promulgated there under regulate matters pertaining to wholesale and retail sales of petroleum products, Sasol
Oil, Natref and Sasol Synfuels are currently in the process of applying for licenses for manufacturing and
wholesale and site licenses for our plants, wholesale activities and retail sites as required by the Act and
regulations. We cannot assure you that these licenses will be granted and if they are granted that the conditions
of the licenses will not have a material adverse impact on our business, operating results, cash flows and
financial condition. New retail site development could be delayed given the requirements under the new
regulations. See “Item 4.B – Business overview – Sasol Oil” and “- Regulation of petroleum-related activities in
South Africa”.

The Petroleum Pipelines Act became effective on 1 November 2005. The Act regulates petroleum pipelines

and storage and loading facility activities, including the construction and operation of petroleum pipelines and
the delivery of certain commercial services in connection with these pipelines and facilities. The Petroleum
Pipelines Act grants broad discretion to the Minister of Minerals and Energy to adopt different pricing
methodologies in connection with the setting of tariffs, which may prove advantageous for some competitors,
because of different market and geographic positions. The regulations pertaining to pricing methodologies have
not been issued yet, but the regulations that may be promulgated under the Act may affect our advantage due to
the location in the economic heartland of the country of our Natref refinery and our synfuels facilities at
Secunda. See “Item 4.B – Business overview – Sasol Oil” and “- Regulation of petroleum-related activities in
South Africa”. We have applied for licenses under the Petroleum Pipelines Act and the rules issued by the
National Energy Regulator of South Africa (NERSA) for our depots and related infrastructure and await the
issue of licenses. Notwithstanding continuous interaction and comments submitted in respect of regulations to be
issued under these statutes, we cannot assure you that the enactment of new legislation or the amendment of

existing laws and regulations will not have a material adverse effect on our business, operating results, cash
flows and financial condition. Among the matters governed by the Petroleum Pipelines Act, of particular
significance to our business are issues relating to the discretion granted to the South African Minister of
Minerals and Energy with respect to the exercise of executive powers, the determination or approval of tariffs
and the issue of open access to pipelines and depots.

The Gas Act came into effect on 1 November 2005. The Act regulates matters relating to gas transmission,

storage, distribution, liquefaction and re-gasification activities. Although we negotiated a ten year regulatory
dispensation (8 years remaining until 2014) with the South African government covering the supply of
Mozambican natural gas to the South African market, we cannot assure you that the enactment of the Gas Act
and the appointment of the NERSA (appointed pursuant to the National Energy Regulator Act which became
effective on 1 November 2005) will not have a material adverse impact on our business, operating results, cash
flows and financial condition. See “Item 4.B – Business overview – Sasol Gas” and “- Regulation of gas related
activities in South Africa”.

The South African government issued guidelines relating to new fuel specifications, portions of which

came into effect in January 2006 and resulted in regulations being issued on 23 June 2006. These specifications
relate to the phasing out of lead from the petroleum products we manufacture, a reduction in the sulfur content
in certain of these products and a new national octane structure. The clean fuels introduction plans have been
successfully completed and in order to meet these new specifications we have made significant capital
investments at our manufacturing sites to modify our current petroleum production processes. It is as yet
uncertain what the final market demand will be for the various new products. Should the demand for particular
products outstrip our ability to manufacture them as a result of a delay in completing modifications to our plants
and/or anticipated demand projections being exceeded this could have a material adverse effect on our business,
operating results, cash flows and financial condition.

The guidelines regarding the importation and exportation of petroleum products were issued for public

comment on 23 June 2006. From the guidelines it can be concluded that there may be more flexibility afforded
to oil companies and wholesalers, including airline companies, to directly import petroleum products. No
protection will be granted to local and domestic manufacturers to satisfy their needs from local production
before imports are undertaken.

The Consumer Protection Bill was issued for public comment on 23 June 2006 and intends to establish

national norms and standards relating to consumer protection and prohibits certain unfair marketing and business
practices and to promote responsible consumer behavior.

It remains uncertain what the impact on our business will be when the guidelines and the Consumer

Protection legislation are passed. This could have a material adverse effect on our business, operating results,
cash flows and financial condition.

We may not be successful in attracting and retaining sufficient skilled employees

We are highly dependent on the continuous development and successful application of new technologies. In

order to achieve this, we need to maintain a focus on recruiting and retaining qualified scientists and engineers.
In the past, we have been successful in recruiting and retaining such personnel. We have also established certain
research and development facilities overseas. However, demand for personnel with the range of capabilities and
experience required in our industry is high globally and success in attracting and retaining such employees is not
guaranteed. The risk exists that our scientific, engineering and project execution skills base may be depleted over
time because of, for example, natural attrition and a shortage of people being available in these disciplines.
Failure to attract and retain people with the right capabilities and experience could negatively affect our ability to
introduce and maintain the appropriate technological improvements to our business and our ability to
successfully construct and commission new plants. This may have a material adverse effect on our business,
operating results, cash flows and financial condition.

Intellectual property risks may adversely affect our products or processes and our competitive advantage

Our various products and processes, including most notably, our chemical, CTL and GTL products and

processes have unique characteristics and structures and, as a result, are subject to patent protection, the extent
of which varies from country to country. The expiry of a patent results in increased competition in the market for
the previously patented products and processes. In addition, aggressive patenting by our competitors may result
in an increased patent infringement risk.

A high percentage of our products can be regarded as commodity chemicals, some of which have unique

characteristics and structure. These products are normally utilized by our clients as feedstock to manufacture
specialty chemicals or application-type products. We have noticed a worldwide trend of increased filing of
patents relating to the composition of application-type products. These patents may create pressure on our clients
who market these application-type products which may adversely affect our sales to these clients. Patent-related
pressures may adversely affect our business, operating results, cash flows and financial condition.

We believe that our proprietary technology, know-how and trade secrets, especially in the Fischer-Tropsch

area, provide us with a competitive advantage. A possible loss of experienced personnel to competitors, and a
possible transfer of know-how and trade secrets associated therewith, may negatively impact this advantage.
Similarly, operating and licensing technology in countries in which intellectual property laws are not well
established and enforced may result in some transfer of our know-how and trade secrets to our competitors. This
may adversely affect our business, operating results, cash flows and financial condition.

Increasing competition from products originating from countries with low production costs may adversely
affect our business, operating results, cash flows and financial condition

Certain of our chemical production facilities are located in developed countries, including the United States

and Europe. Economic and political conditions in these countries result in relatively high labor costs and, in
some regions, inflexible labor markets, compared to others. Increasing competition from regions with lower
production costs, for example the Middle East and China, exercises pressure on the competitiveness of our
chemical products and, therefore, on our profit margins and may result in withdrawal of particular products or
closure of facilities. We cannot assure you that increasing competition by products originating from countries
with low production costs will not result in withdrawal of our products or closure of our facilities, which may
have a material adverse effect on our business, operating results, cash flows and financial condition.

Changes in consumer and safety, health and environmental regulations and legislation and public opinion
may adversely affect our business, operating results, cash flows and financial condition

Our products are required to comply with legislation relating to the protection of the environment, health

and safety of employees, the public and/or the end consumer, as well as customer needs. As these regulations
may grow stricter, we may be required in some cases to incur additional expenditure in providing additional test
data in order to register our products or to adjust the manufacturing processes for certain of our products,
including liquid fuels and chemicals, or even withdraw some of them, in order to be in a position to comply with
market needs or more stringent regulatory requirements. For example, compliance with the registration,
evaluation and authorization of chemicals (REACH) procedure proposed by the European Commission (EC)
may have significant cost implications as we may be required, among other things, to provide risk assessments
and apply for registration of our products. Similarly, public opinion is growing more sensitive to consumer
health and safety and environmental protection matters, and, as a result, markets may apply pressure on us
concerning certain of our products. Should we be required to comply with REACH requirements we may incur
significant additional costs. We may be required to withdraw from the market certain products which we
consider uneconomical given these additional costs of compliance or otherwise due to public opinion
considerations. These factors may have a material adverse effect on our business, operating results, cash flows
and financial condition.

Our exploration, mining and production operations are required to conform to legislation relating to the

protection of the environment, health and safety of the workforce and/or neighboring communities. As these
regulations may grow stricter, we may be required in some cases to incur additional expenditure in order to
provide additional protection or to adjust specifications or manufacturing processes or transport and distribution
arrangements for certain of our operations or products. Should we make changes or incur such costs this may
have a material adverse effect on our business, operating results, cash flows and financial condition. More
specifically:

• the National Environmental Management: Air Quality Act, in terms of which the Vaal Triangle area (in

which our Sasolburg operations are located) has been declared a Priority Area for purposes of
implementation of an emission reduction and management plan by the South African Department of
Environmental Affairs and Tourism. The Department is also in the process of setting ambient air quality
and emission standards, which will form the basis for a review of atmospheric emission licenses for our
operations in Sasolburg and Secunda. More stringent air quality standards may have significant cost
implications for us; and

• the nature of some of our processes, like the gasification of coal to produce synthetic fuels and

petrochemicals, result in relatively high emission of carbon dioxide, a greenhouse gas. Although certain
countries in which we operate are exempt from greenhouse gas reduction targets set in terms of the
Kyoto Protocol, it is uncertain how any future developments in carbon dioxide restrictions will affect our
group.

We may face potential costs in connection with industry-related accidents or deliberate acts of terror
causing property damage, personal injuries or environmental contamination

We operate coal mines, explore for and produce oil and gas and operate a number of plants and facilities

for the storage, processing and transportation of oil, chemicals and gas related raw materials, products and
wastes. These facilities and their respective operations are subject to various risks, including, but not limited to,
fire, explosion, leaks, ruptures, discharges of toxic hazardous substances, soil and water contamination, flooding
and land subsidence, among others. As a result, we are subject to the risk of experiencing, and have in the past
experienced, industry-related incidents.

The terrorist attacks in the United States on 11 September 2001 and subsequent attacks in various parts of

the world demonstrated the increased risk posed by the threat of terrorism. Our facilities, located mainly in
South Africa, the United States and various European countries, as well as in various African countries, the
Middle East and Southeast Asia, are subject to the risk of experiencing deliberate acts of terror.

Industry-related accidents and acts of terror may result in damages to our facilities and may require

shutdown of the affected facilities, thereby disrupting production and increasing production costs. Furthermore,
acts of terror, accidents or our historical operations may cause, or may have caused, environmental
contamination, personal injuries, health impairment or fatalities and may result in exposure to extensive
environmental remediation costs, civil litigation, the imposition of fines and penalties and the need to obtain
costly pollution control technology.

We obtain insurance cover over our assets and against business interruption. We also obtain insurance to

limit certain of our exposures. In some cases we also have indemnity agreements with the previous owners of
acquired businesses which limit certain of our exposures to environmental contamination. As a result of the
terrorist attacks on 11 September 2001 and more recently hurricanes Katrina and Rita, our insurance costs and
deductibles (retained risk) have increased significantly. We are implementing a number of programs, including
on-the job safety training, in order to increase safety, and we closely monitor our safety, health and
environmental procedures. However, there can be no assurance that accidents or acts of terror will not occur in
the future, that insurance will adequately cover the entire scope or extent of our losses or that we may not be
found directly liable in connection with claims arising from these events.

In general, we cannot assure you that costs incurred as a result of the above or related factors will not have

a material adverse effect on our business, operating results, cash flows and financial condition.

Failure to comply with safety, health and environmental and other laws may adversely affect our market
position and our business, operating results, cash flows and financial condition

We are subject to a wide range of general and industry-specific environmental, health and safety and other

legislation in jurisdictions in which we operate. Environmental requirements govern, among other things, land
use, air emissions, use of water, wastewater discharge, waste management and site remediation. These
regulations often require us to obtain and operate in compliance with the conditions of permits, licenses and
authorizations from the appropriate regulatory authorities. Compliance with these laws, regulations, permits,
licenses and authorizations is a significant factor in our business, and we incur, and expect to continue to incur,
significant capital and operating expenditures in order to continue to comply, in all material respects, with
applicable laws, regulations, permits and authorizations.

Failure to comply with applicable safety, health and environmental laws, regulations or permit requirements

may result in fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or
curtailing operations or requiring corrective measures, installation of pollution control equipment or other
remedial actions, any of which could entail significant expenditures.

We are also continuing to take remedial actions at a number of sites due to soil and groundwater

contamination. The process of investigation and remediation can be lengthy and is subject to the uncertainties of
site specific factors, changing legal requirements, developing technologies, the allocation of liability among
multiple parties and the discretion of regulators. Accordingly, we cannot estimate with certainty the actual
amount and timing of costs associated with site remediation.

In order to comply with these safety, health and environmental licenses, laws and regulations we may have

to incur costs which we could finance from our available cash flows or from alternative sources of financing. We
may be required to provide for financial security for environmental rehabilitation in the form of a trust fund,
guarantee, deposit or any other method as may be required by the regulations (not yet promulgated) under the
Petroleum Products Act in respect of the rehabilitation of environmental impacts. However, this is not required
in terms of the Petroleum Products Amendment Act and the regulations if a license applicant at the time of the
commencement of the Petroleum Products Amendment Act, held or was in the process of developing a site,
manufactured or wholesaled or retailed petroleum products. No assurance can be given that changes in safety,
health and environmental laws and regulations or their application or the discovery of previously unknown
contamination or other liabilities will not have a material adverse effect on our business, operating results, cash
flows and financial condition.

Whilst it is our policy that asbestos-containing materials will be phased out on a risk-based order of

priority, there are currently certain asbestos-containing materials at our facilities. In addition, our manufacturing
processes may utilize and result in the emission of substances with potential carcinogenic properties. We also
manufacture products which may contain carcinogenic components. Although we implement occupational health
and safety, product stewardship and other measures to eliminate or mitigate potential risks we cannot assure you
that no liabilities may arise as a result of the use or exposure to these materials.

In addition to undertaking internal investigations we are also subject to review from time to time by

government authorities on our compliance with, inter alia, tax, customs and excise duty, anti-trust laws and
regulations impacting our operations. Our product pricing structures are also reviewed from time to time by
regulatory authorities. Whilst it is our policy to conduct our operations in accordance with applicable laws and
regulations and we have established control systems to monitor such compliance, no assurance can be given that
these control systems will not fail or that some of our product pricing structures will not change in the future.
Failure to interpret correctly and comply with such laws and regulations and/or changes to our product pricing
and cost structures may have a material adverse impact on our business, operating results, cash flows and
financial condition.

Our coal, crude oil and natural gas reserve estimates may be materially different from reserves that we
may actually recover

Our reported coal reserves are estimated quantities based on applicable reporting regulations that under

present and anticipated conditions have the potential to be economically mined and processed. Our proved
developed and undeveloped crude oil and natural gas reserves are estimates based on applicable reporting
regulations. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting
potential future rates of coal, oil and natural gas production, including many factors beyond our control. In
addition, reserve/reservoir engineering is a subjective process of estimating underground deposits of reserves that
cannot be measured in an exact manner and the accuracy of any reserve estimate is a function of the quality of
available data and engineering and geological interpretation and judgment. Estimates of different engineers may
vary and results of our mining/drilling and production subsequent to the date of an estimate may justify revision
of estimates. Reserve estimates may require revision based on actual production experience and other factors. In
addition, several factors including the market price of coal, oil and natural gas, reduced recovery rates or
increased production costs due to inflation or other factors may render certain of our estimated proved and
probable coal reserves and proved developed and undeveloped oil and natural gas reserves uneconomical to
exploit and may ultimately result in a restatement of reserves. This may have a material adverse effect on our
business, operating results, cash flows and financial condition. See “Item 4.D – Property, plants and equipment”.

There is a possible risk that sanctions may be imposed by the US government as a result of our Iran
related activities

There are possible risks posed by the potential imposition of US economic sanctions in connection with

activities we are undertaking in the polymers field and considering in respect of a GTL opportunity (with respect
to which no investment decision has yet been made) in Iran. For a description of our activities in Iran see
“Item 4.B – Business overview – Sasol Polymers” and “Sasol Synfuels International”. The risks relate to two
sanctions programs administered by the US government that we have considered: the Iranian Transactions
Regulations (ITR) administered by the US Treasury Department Office of Foreign Assets Control (OFAC) and
the Iran and Libya Sanctions Act (ILSA) administered by the
US Department of State.

The ITR prohibit or restrict most transactions between US persons and Iran. The ITR, administered by

OFAC, do not apply directly to either Sasol or the group entities involved in activities in Iran, because none of
them would be considered a US person under these regulations. Nonetheless, because the group is a
multinational enterprise, we are aware that the ITR may apply to certain entities associated with the group,
including US employees, investors and certain subsidiaries.

We are taking measures to ensure that US employees, investors and certain subsidiaries of the group to

which the ITR applies will not violate the ITR as a result of their respective affiliations with the group. For
instance, to that end, we are taking measures to:

• ensure that no US persons are involved in our Iranian activities, either as directors and officers, or in

other positions, including engineering, financial, administrative and legal;

• ensure that funds dedicated to projects in Iran will be kept segregated from general group funds;

• ensure that no funds of US investors will be utilized in the projects by using separate bank accounts for

any funds directed to, or to be received from, these projects and monitoring the flow of funds to and
from these projects; and

• separate the results of these businesses into separate legal entities.

By undertaking these steps, we believe that any risks posed by the ITR to US persons and entities affiliated

with the group will be mitigated. Nevertheless, we cannot predict OFAC’s enforcement policy in this regard and
it is possible that OFAC may take a different view of the measures described above. In such event, US persons
or affiliates associated with the group may be subject to a range of civil and criminal penalties.

ILSA was adopted by the US government with the objective of denying Iran and Libya the ability to

support acts of international terrorism and fund the development or acquisition of weapons of mass destruction.
ILSA is now only applicable to Iran following the removal of sanctions imposed against Libya. ILSA grants the
President of the United States discretion in imposing sanctions on companies found to be in violation of its
provisions involving investment in the petroleum industry in Iran. Should the US government determine that
some or all of our activities in Iran are investments in the petroleum industry, as statutorily defined by ILSA, the
President of the United States may in his discretion impose, among other sanctions, restrictions on our ability to
obtain credit from US financial institutions, restrictions on our ability to procure goods, services and technology
from the United States or restrictions on our ability to make sales into the United States.

We cannot predict future interpretations of ILSA or the implementation policy of the US government with

respect to ILSA. Although we believe that our polymers project is not in the petroleum industry and we were
only involved in a feasibility study in connection with other activities in Iran, we cannot assure you that our
activities in Iran would not be considered investments as statutorily defined by ILSA or that the imposition of
sanctions on the company or other entities of the group would not have a material adverse impact on our
business, operating results, cash flows and financial condition.

The exercise of voting rights by holders of American Depositary Receipts is limited in some circumstances

Holders of American Depositary Receipts (ADRs) may exercise voting rights with respect to the ordinary

shares underlying their American Depositary Shares (ADSs) only in accordance with the provisions of our
deposit agreement (Deposit Agreement) with The Bank of New York, as the depositary (Depositary). For
example, ADR holders will not receive notice of a meeting directly from us. Rather, we will provide notice of a
shareholders meeting to The Bank of New York in accordance with the Deposit Agreement. The Bank of New
York has undertaken in turn, as soon as practicable after receipt of our notice, to mail to holders of ADRs voting
materials. These voting materials include information on the matters to be voted on contained in our notice of
the shareholders meeting and a statement that the holders of ADRs on a specified date will be entitled, subject to
any applicable provision of the laws of South Africa and our Articles of Association, to instruct The Bank of
New York as to the exercise of the voting rights, pertaining to the shares underlying their respective ADSs on a
specified date. In addition, holders of our ADRs will be required to instruct The Bank of New York how to
exercise these voting rights.

Upon the written instruction of an ADR holder, The Bank of New York will endeavor, in so far as

practicable, to vote or cause to be voted the shares underlying the ADSs in accordance with the instructions
received. If instructions from an ADR holder are not received by The Bank of New York by the date specified in
the voting materials, The Bank of New York will not request a proxy on behalf of such holder. The Bank of New
York will not vote or attempt to exercise the right to vote other than in accordance with the instructions received
from ADR holders. We cannot assure you that you will receive the voting materials in time to ensure that you
can instruct The Bank of New York to vote the shares underlying your ADSs. In addition, The Bank of New York
and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out
voting instructions. This means that you may not be able to exercise your right to vote and there may be no
recourse if your voting rights are not exercised as you directed.

Sales of a large amount of Sasol’s ordinary shares and ADSs could adversely affect the prevailing market
price of the securities

Historically, trading volumes and liquidity of shares listed on the JSE have been low in comparison with

other major markets. The ability of a holder to sell a substantial number of Sasol’s ordinary shares on the JSE in
a timely manner, especially in a large block trade, may be restricted by this limited liquidity. Sales of ordinary
shares or ADSs, if substantial, or the perception that these sales may occur and be substantial, could exert
downward pressure on the prevailing market prices for the Sasol ordinary shares or ADSs, causing their market
prices to decline.

ITEM 4.

INFORMATION ON THE COMPANY

4.A

History and development of the company

Sasol Limited, the ultimate holding company of our group, is a public company. It was incorporated under

the laws of the Republic of South Africa in 1979 and has been listed on the JSE since October 1979. Our
registered office and corporate headquarters are at 1 Sturdee Avenue, Rosebank, 2196, South Africa, and our
telephone number is +27 11 441 3111. Our agent for service of process in the United States is Puglisi and
Associates, 850 Library Avenue, Suite 204, P.O. Box 885, Newark, Delaware 19715.

In 1947, the South African Parliament enacted legislation detailing the establishment of an oil-from-coal

industry in South Africa. This followed 20 years after the publication of a White Paper by Parliament, aiming to
protect the country’s balance of payments against increasing crude oil imports in view of the lack of domestic
crude oil reserves. As a result of this initiative, the South African government in 1950, through the Industrial
Development Corporation of South Africa Limited (IDC), a state-owned entity, formed our predecessor company
known as the South African Coal, Oil and Gas Corporation Limited to manufacture fuels and chemicals from
indigenous raw materials.

Construction work on our synthetic fuels plant at Sasolburg (Sasol One), in the Free State province, about

80 kilometres (km) south of Johannesburg, commenced in 1952, and in 1955, the original Sasol One production
units were commissioned. We supplied our first gasoline and diesel to motorists at Sasolburg in November 1955.
The operation of this plant was based on a combination of the German fixed-bed and the US fluidized-bed
Fischer-Tropsch technologies, together with German Lurgi coal gasification technologies for the synthetic
production of gasoline, diesel, other liquid fuels and chemical feedstock from coal.

During the 1960s, we became a major supplier of raw materials for the chemical industry. This included

products such as solvents for paints, butadiene and styrene for synthetic rubber and ammonia for nitrogenous
fertilizer. When our first naphtha cracker became operational in the mid-1960s, we added ethylene and propylene
for the plastics industry to our product portfolio.

In 1966, we completed construction of our first gas pipeline, which connected 250 industrial companies in

the greater Johannesburg area to pipeline gas.

In December 1967, Natref was incorporated and, at the same time, construction of the oil refinery

commenced at Sasolburg. The refinery was commissioned in February 1971. Currently, we, as the major
shareholder, and Total South Africa (Pty) Limited (Total), a subsidiary of Total S.A. of France, hold 63.64% and
36.36%, respectively, in Natref.

The increased oil prices of the early seventies presented us with an opportunity to increase our synfuels

production capacity and assist in reducing South Africa’s dependence on imported crude oil. We commenced the
construction of Sasol Two in Secunda, 145 km southeast of Johannesburg in the Mpumalanga province, in 1976,
and in March 1980, this plant produced its first synthetic fuel. During the final construction phases of Sasol Two
in 1979, work commenced on the construction of our third synfuels and chemicals plant, Sasol Three, which was
completed in 1982. The virtually identical operations of Sasol Two and Sasol Three were merged in 1993 to
form Sasol Synthetic Fuels, now Sasol Synfuels.

Towards the time of the completion of the Sasol Three project, all our technical and research and

development services were consolidated into a new company, Sasol Technology. Since then, Sasol Technology
has been an important area of our activities, responsible for research and development, technology development
and commercialization, project management and specialist engineering skills.

In October 1979, Sasol Limited was listed on the JSE, and 70% of its share capital was privatized. We used

the proceeds from the private and public issue to acquire 100% shareholding in Sasol One and 50% shareholding
in Sasol Two and Sasol Three from the IDC. During 1983 we acquired the IDC’s remaining interest in Sasol
Two and the remaining interest in Sasol Three was acquired effective 1 July 1990. Subsequently, the interest in
our share capital held by the South African government through the IDC was further reduced to its current 7.8%.

In 1982, our ADRs were quoted on the NASDAQ National Market through an unsponsored ADR program,
which was later converted to a sponsored ADR program in 1994. With effect from 9 April 2003 we transferred
our listing to the New York Stock Exchange (NYSE) from NASDAQ.

Our technology enabled us to enter the downstream production of higher-value chemicals, including

nitrogenous fertilizers and commercial explosives in 1983 and 1984, respectively, and also of solvents,
phenolics, waxes and alpha olefins.

During 1988 and 1989, we undertook the construction of a large polypropylene plant that incorporated

BASF gas-phase technology. Between 1990 and 1993, Sasol One underwent a R820 million renovation, during
which we discontinued the production of synfuels and increased the production of higher-value chemicals,
including ammonia, solvents, phenolics, paraffin and waxes.

Polifin Limited (Polifin) was established in Johannesburg in January 1994, as a joint venture with AECI

Limited (AECI), a South African listed chemicals and explosives company. The joint venture manufactured and
marketed monomers and polymers. In 1996, Polifin was listed on the JSE. In 1999, pursuant to a takeover offer,
we acquired Polifin’s remaining share capital from AECI and the public, delisted Polifin and subsequently it
became part of our chemicals portfolio and was renamed Sasol Polymers.

In June 1994, the first alpha olefins plant at Secunda was commissioned to produce 1-hexene and 1-pentene

for the international copolymers market.

In 1995, we founded Sasol Petroleum International (SPI) to undertake oil and gas exploration and

production in selected high potential areas in West and Southern Africa. SPI is active in South Africa, Gabon,
Equatorial Guinea, Nigeria and, most notably, in Mozambique. In 2000 and 2001, we signed agreements with
the government of Mozambique for the development of natural gas fields and the construction of a gas pipeline
transporting gas to the South African market. The construction of this pipeline was completed in 2004. We
introduced natural gas to the South African pipeline gas market as of 2004 and use natural gas as part of our
feedstock for our chemicals and synfuels operations in both Secunda and Sasolburg.

The Schümann Sasol International wax manufacturing and marketing venture was established in 1995 after

a merger of Sasol Waxes and the Hamburg-based Schümann wax operations. It produces paraffin and Fischer-
Tropsch waxes and operates in various countries. Effective 1 July 2002, we acquired from Vara Holdings GmbH
and Co KG the remaining third of the share capital of Schümann Sasol, for approximately 51.1 million euro
(approximately R521 million at actual rates), and this group of companies, now 100% owned, has been renamed
Sasol Wax.

By early 1999, Sasol Synfuels had commissioned the last of its eight new generation Sasol Advanced

Synthol (SAS) reactors at Secunda, and a ninth reactor was commissioned in 2001. The 1-octene plant, also at
Secunda, was commissioned in April 1999 by Sasol Alpha Olefins and commenced supply to The Dow
Chemical Company polyethylene plants in May 1999.

In recent years, we have been exploring opportunities through Sasol Synfuels International (SSI) to exploit

the Sasol Slurry Phase Distillate (Sasol SPD™) process technology for the production of high-quality,
environment-friendly diesel and other higher-value hydrocarbons from natural gas. In October 2000, we signed
agreements with Chevron for the creation of Sasol Chevron, a 50:50 global joint venture founded on GTL
technology. Sasol Chevron was formed in order to take advantage of the synergies of Sasol’s and Chevron’s
GTL strengths. Sasol has advanced Fischer-Tropsch technology and Chevron has extensive global experience
with respect to natural gas utilisation, product marketing and hydrotreating technology.

Sasol Chevron is currently involved in the development of a GTL project in collaboration with the Nigerian

National Petroleum Corporation (NNPC) and Chevron Nigeria Limited at existing oil and gas facilities at
Escravos in Nigeria. In April 2005, the engineering, procurement and construction contract for this project was
awarded to Team JKS, a consortium of the Japan Gasoline Corporation; Kellogg, Brown and Root (KBR), a
subsidiary of Halliburton and Italy’s Snamprogetti. SSI and Sasol Chevron continue to explore opportunities to
develop other GTL plants over the next decade.

To promote the performance and environmental merits of cleaner synthetic fuels, Sasol Chevron co-

founded the Alliance for Synthetic Fuels in Europe (ASFE) with DaimlerChrysler, Renault, Royal Dutch Shell
and Volkswagen, which was launched in Brussels in March 2006.

In July 2001, we signed a joint venture agreement with Qatar Petroleum (Qatar Petroleum 51% and Sasol

49%) to establish Oryx GTL. The joint venture is constructing, on behalf of both venture partners, a GTL plant
based at Ras Laffan Industrial City to produce high quality synfuels from Qatar’s natural gas resources. The
inauguration ceremony of the ORYX GTL plant was held at Ras Laffan Industrial City in Qatar on 6 June 2006.
The plant is scheduled to commence operations during the second quarter of 2007.

We acquired Condea in March 2001 from German-based RWE-DEA AG for 1.3 billion euro (R8.3 billion).

Most of this business was subsequently hosted in Sasol Olefins & Surfactants with production facilities mainly
in the US, Europe and South Africa. In 2003, it was determined that we would continue to grow our chemical
businesses conditional upon projects leveraging our technology or securing integrated and highly cost-
competitive feedstock positions. We announced in August 2005 that we are considering the divestment of the
Sasol Olefins & Surfactants business excluding our comonomers activities in South Africa. The Sasol Olefins &
Surfactants business is not vertically integrated to our required standards; is not adequately linked to our
proprietary Fischer-Tropsch technology process and has not adequately provided the integration benefits which
we require. The financial impact of changes in the input costs of the business – together with current market-
place dynamics – exceeds the benefits of significant reductions that have successfully been achieved in the fixed
costs of the business and various other productivity improvements. After a review of valuations and bids received
from interested parties, which confirmed our valuation, it was necessary to write-down the net asset value of the
business to its fair value. By 30 June 2006, we had substantially completed most of the activities required to
prepare this business for sale and are presently in negotiations with potential buyers. It is envisaged that the
disposal of the Sasol Olefins & Surfactants business will be completed within the next 12 months, subject to
obtaining the relevant regulatory and other approvals. Until the business is sold, we remain committed to the
strategic and operational goals of Sasol Olefins & Surfactants and will continue to provide the business with the
support necessary to uphold its effectiveness and success.

In 2004 we initiated Project Turbo, our fuel enhancement project, intended to liberate further chemical

feedstock and enable concomitant investments by Sasol Polymers to expand its South African polymer
production capacity by more than 80%. The synfuels catalytic cracker (SCC) at Secunda is being commissioned
in four sections. The first three are currently being commissioned and the commissioning of the fourth section
commenced in June 2006. The SCC is expected to commence beneficial operation in October 2006.

Effective 1 January 2004, Sasol Oil entered the South African retail fuel market with the establishment of

its first Sasol-branded retail convenience center (service station). Sasol Oil also completed the acquisition and
integration of Exel Petroleum in a major step towards forming Sasol Oil. We now have 376, compared to 345 in
2005, Sasol- and Exel-branded retail convenience centres.

We announced on 16 March 2006 the first phase implementation of Sasol Mining’s broad-based

empowerment strategy through the formation of Igoda Coal (Pty) Limited (Igoda Coal), an empowerment
venture with Eyesizwe Coal (Pty) Limited (Eyesizwe), a black-owned mining company. Igoda Coal will
comprise the full value chain of Sasol Mining’s coal export business – the Twistdraai mine and beneficiation
plant at Secunda, the marketing and logistics components of its coal export business, and Sasol Mining’s 5%
shareholding in Richards Bay Coal Terminal.

In June 2006 we announced the signing of a co-operation agreement with a consortium led by Shenhua

Corporation of the People’s Republic of China to proceed with the second stage of feasibility studies to
determine the viability of an 80,000 barrels per day (bpd) CTL plant in the Shaanxi Province, about
650 kilometres west of Beijing in China and for another 80,000 bpd CTL plant in the Ningxia Hui Autonomous
region, about 1,000 kilometres west of Beijing.

On 30 June 2006 we announced that our R1.45 billion broad-based black economic empowerment (BEE)

transaction, through partnership with Tshwarisano LFB Investment (Pty) Limited (Tshwarisano), was
successfully concluded following the prohibition by the Competition Tribunal of the proposed merger of our
liquid fuels business with Engen Limited, a South African subsidiary of Petroliam Nasional Berhad (Petronas).
In terms of the agreement, Tshwarisano has acquired a 25% shareholding in Sasol Oil effective 1 July 2006.

Since May 2000 we have undertaken share repurchases, which may be made at times and at prices deemed

appropriate by management and consistent with the authorization of the shareholders. No repurchases were
made during the year ended 30 June 2006. At 30 June 2006, a total of 60,111,447 shares, representing 8.8% of
the issued share capital of the company, had been repurchased since 9 May 2000 at an average price of R60.67
per share. At a general meeting held on 3 October 2006, shareholders approved that we acquire 60,111,477 Sasol
Limited shares held by our subsidiary, Sasol Investment Company (Pty) Limited. These shares were cancelled on
10 October 2006. Except for the related transaction costs, the repurchase and cancellation of these shares had no
effect on the consolidated financial position of the group. At the meeting of 3 October 2006, shareholders also
approved that we be granted the authority to acquire Sasol Limited shares by way of a general repurchase. We
may consider repurchasing additional shares on the open market.

As of 29 September 2006, we were the largest JSE listed South African domiciled company by market

capitalization (R174.8 billion), with total consolidated turnover from continuing operations of approximately
R61,857 billion in 2006. We employ approximately 27,933 people in our continuing operations.

Capital expenditure

In 2006 we invested approximately R13 billion, compared with R12 billion and R11 billion in respect of

2005 and 2004, respectively, in capital expenditure (on a cash flow basis excluding capitalized interest and
including projects and investments incurred by our equity accounted investees) to enhance our existing facilities
and to expand operations. Capital expenditure incurred on key projects to expand our operations includes:

30 June

Projects and investments

Business categories

2006

2005

2004

(Rand millions)

Project Turbo – low-density

polyethylene and polypropylene

Sasol Polymers

2,608

3,321

936

Oryx GTL and Escravos GTL

Sasol Synfuels International

1,734

1,245

1,235

Arya Sasol Polymers (Iran)

Sasol Polymers International Investments

1,590

823

295

and 3

Octene trains

Sasol Solvents

714

288

519

Sasol Oil distribution network

Sasol Oil

191

294

114

Mozambique Natural Gas

Sasol Gas and Sasol Petroleum International

244

2,077

Clean Fuels Project

Sasol Oil

–

215

–

Tar Naphta Phenolic Extraction

Other

–

105

–

Acrylic acid and acrylates

Sasol Solvents

–

740

Oxygen train

Sasol Synfuels

–

104

Other smaller projects

Various

820

722

1,771

7,695

7,257

7,791

The amounts include business development costs and our group’s share of capital expenditure of equity accounted
investees. The amounts exclude borrowing costs capitalized. These amounts were approved by our board of directors
and are stated on a management reporting basis. We hedge all our major capital expenditure in foreign currency
immediately upon commitment of the expenditure or upon approval of the project.

Key projects to address environmental matters and enhance existing assets during the 2006 year include:

30 June

Projects and investments

Business categories

2006

2005

(Rand millions)

Project Turbo – fuel enhancement

Sasol Synfuels

1,867

2,520

Clean fuels project

Sasol Oil

224

–

Mining renewal

Sasol Mining

171

177

Waste recycling facility

Sasol Synfuels

263

Reconstruction of the ethylene

plant (Unit 24) and the revamp
of the furnaces

Sasol Polymers

185

Other smaller projects

Various

2,968

2,018

5,331

5,163

In addition, we invested approximately R428 million in intangible assets (including investments made by

equity accounted investees), mainly in respect of software, patents and trademarks during the year. For a
discussion of the method of financing for our capital expenditures, see “Item 5.B – Liquidity and capital
resources – liquidity”.

Capital commitments

As at 30 June 2006, we had authorized approximately R34 billion of group capital expenditure, of which

we had spent R20 billion at 30 June 2006. Of the unspent capital commitments of R14 billion, R8 billion has
been contracted for. We expect to spend R9 billion in 2007, R5 billion in 2008 and the remainder in 2009 and
thereafter of our unspent capital commitments. For more information regarding our capital commitments see
“Item 5.B – Liquidity and capital resources – liquidity” and “Item 5.F – Tabular disclosure of contractual
obligations”.

We expect to spend approximately R7 billion of our capital commitments on projects in South Africa,

R5 billion in other African countries, R2 billion in the Middle East and the remainder on projects in other
regions.

The following table reflects key projects approved and contracted which were not completed at

30 June 2006:

Total project

Scheduled

Project

Business categories

cost

operation date

(Rand in millions)

Syferfontein Kriel South Phase 2

Sasol Mining

310

June 2007

Mooikraal underground coal mine

Sasol Mining

229

June 2007

Project Turbo – fuel-optimization

Sasol Synfuels

5,369

October 2006

Black product site remediation

Sasol Synfuels

145

February 2015

Oryx GTL (Qatar)

Sasol Synfuels International

3,795

December 2006

Escravos GTL (Nigeria)

Sasol Synfuels International

9,778

December 2009

Octene train

Sasol Solvents

2,087

September 2007

Project Turbo – polymers projects

– low-density polyethylene and
polypropylene

Sasol Polymers

9,381

June 2007

Arya Sasol Polymer (Iran)

Sasol Polymers International
Investments

4,881

April – June 2007

The amounts include business development costs and our group’s share of capital expenditure of equity accounted

investees.

The project cost of US$489 million and has been translated at a rate of R7.76 per US$1.00 solely for the reader’s
convenience.

Sasol provides risk-based financing for 50% of the capital expenditure on the Escravos GTL joint venture. The project
cost is under review. Sasol’s portion is not expected to exceed US$ 1.45 billion. Due to concurrent increases in
commodity values, this development is not expected to materially affect the returns of this project. This amount has
been translated at a rate of R7.76 per US$1.00 solely for the reader’s convenience.

Sasol Polymers’ share of the estimated cost to establish the Arya Sasol Polymer production facilities is
494 million euro and has been translated at a rate of R9.88 per euro 1.00 solely for the reader’s convenience.

4.B

Business overview

Sasol is an integrated oil and gas company with complementary interests in coal, chemicals and the

international development of synthetic-fuel ventures based on our proprietary Fischer-Tropsch (FT) technology.
We mine coal in South Africa. Through Sasol Synfuels, we convert this coal, along with Mozambican natural
gas, into fuels and chemical feedstock through our FT technology.

We also have chemical manufacturing and marketing operations in Europe, Asia and the Americas.

Our larger chemical portfolios include polymers, solvents, waxes, phenolics and nitrogenous products.
We are advancing the divestiture process of Sasol Olefins & Surfactants business excluding its comonomers
activities in South Africa. The Sasol Olefins & Surfactants business has been presented in the financial
statements as discontinued operations.

The group explores for, and produces, crude oil offshore Gabon, refines crude oil into liquid fuels in South

Africa and retails liquid fuels and lubricants produced in our refinery and by Sasol Synfuels through a growing
network of retail service centers. Our liquid fuels business includes wholesaling in South Africa and overland
exports to several sub-Saharan African countries.

We produce natural gas in Mozambique for supply to customers and as feedstock for some of our fuel and

chemical production in South Africa.

We shall commission our first GTL plant in Qatar during 2007 and a second GTL plant is under

construction in Nigeria, for planned commissioning in 2010. These two GTL plants will incorporate our
proprietary Sasol SPD™ process.

Our activities

The financial information presented to our Group Executive Committee (GEC), including the financial

information in the reportable segments, is presented based on IFRS. Since IFRS financial information is the
basis for segmental financial decisions, resource allocation and performance assessment, it forms the accounting
basis for segmental reporting that is disclosed to the investing and reporting public. The IFRS segmental
reporting information is reconciled to the amounts reported in our group consolidated financial statements,
prepared in accordance with US GAAP, for all years presented. We divide our operations into the following
segments (turnover percentages and amounts in terms of IFRS):

Continuing operations:

• Sasol Mining. We mine about 46.2 million tons (Mt) a year of saleable coal at Sasolburg and Secunda for

our South African plants and export about 3.6 Mt of coal annually. Sasol Mining accounted for 2% of our
total external segmental turnover from continuing operations in 2006.

• Sasol Synfuels. We operate the world’s only large commercial-scale coal-based synfuels manufacturing

facility at Secunda. We produce synthesis gas through coal gasification and natural gas reforming, and
use proprietary Fischer-Tropsch technology to convert synthesis gas into synthetic fuel components,
pipeline gas and chemical feedstock. Sasol Synfuels accounted for 1% of our total external segmental
turnover from continuing operations in 2006.

• Sasol Oil (previously Sasol Liquid Fuels Business). We manufacture and market liquid fuels at Secunda

and through our interest in the Natref refinery in Sasolburg (South Africa’s only inland crude oil
refinery). Liquid fuels include gasoline, diesel, jet fuel, bitumen and lubricants. Sasol Oil accounted for
5% of our total external segmental turnover from continuing operations in 2006.

• Sasol Gas. We distribute Mozambican-produced natural gas and Secunda-produced methane-rich gas to

customers in the Gauteng, Mpumulanga, Free State, and KwaZulu-Natal provinces of South Africa. We
have a 49% interest in Spring Lights Gas (Pty) Limited, an empowerment gas marketing company in
Durban, and a 75% interest in Republic of Mozambique Pipeline Investment Company (Pty) Limited
(Rompco), the owner of the Mozambican-South African gas pipeline. Sasol Gas accounted for 3% of our
total external segmental turnover from continuing operations in 2006.

• Sasol Synfuels International. We and our joint venture Sasol Chevron develop and implement

international ventures based on the Sasol SPD™ GTL process. We will bring our first international GTL
plant into production with Qatar Petroleum during the second quarter of 2007. These activities are only
expected to contribute to our total external segmental turnover in 2007. We also pursue opportunities
based on other hydrocarbons that could be beneficiated through our Fischer-Tropsch technology.

• Sasol Polymers. We operate plants at Sasolburg and Secunda and market ethylene, propylene,

polyethylene, polyvinyl chloride, chlor-alkali chemicals and mining reagents to a diverse South African
and international customer base. We also have an interest at Kertih, Malaysia in ethylene, propylene and
polyethylene production and marketing. Sasol Polymers accounted for 12% of our total external
segmental turnover from continuing operations in 2006.

• Sasol Solvents. We operate plants in South Africa and Germany and supply a diverse range of solvents

(including alcohols and ketones) and associated products through various business units, including an
acrylic acid and acrylates joint venture in South Africa with Mitsubishi Chemical Corporation and a
maleic anhydride joint venture in Germany with Huntsman Corporation. The comonomers division
previously included as part of Sasol Olefins & Surfactants is now included in Sasol Solvents. Sasol
Solvents accounted for 16% of our total external segmental turnover from continuing operations in 2006.

• Other. We are involved in a number of other activities in the energy and chemicals industries, both in

South Africa and abroad, which, among others, include international petroleum and gas exploration and
production, production of other chemical products, production of wax and explosive products as well as
technology research and development, and our financing activities. These activities accounted for 15% of
our total external segmental turnover from continuing operations in 2006.

Discontinued operations:

• Sasol Olefins & Surfactants. We manufacture and market surfactants and surfactant intermediates, as well

as monomers and inorganic specialty chemicals, mainly at plants in Germany, Italy, the United States of
America and South Africa, for customers across the globe. The Sasol Olefins & Surfactants business has
been disclosed as a discontinued operation and we expect to sell the business before the end of 2007.The
following tables present our total external turnover after the elimination of inter-segment turnover by
business operation and geographic market (in terms of IFRS, except where otherwise indicated):

Sasol

Total

Sasol

Synfuels

Sasol

continuing

2006

Mining Synfuels

Oil

Gas

International

Polymers

Solvents

Other operations

(Rand in millions)

South Africa

204

631

29,598

1,663

–

5,936

1,092

3,721

42,845

Rest of Africa

–

2,643

–

846

158

1,227

4,991

Europe

1,313

107

–

4,317

2,438

8,280

Middle East and India

–

1,121

197

1,372

Far East

–

386

991

113

1,492

North America

–

136

–

1,829

1,067

3,032

South America

–

307

177

504

Southeast Asia and Australasia

–

267

670

389

1,334

Total segment

1,517

915

32,243

1,663

161

7,537

10,485

9,329

63,850

Adjustments to US GAAP

Equity accounting and reversal

of proportionate
consolidation

(1,993)

Turnover under US GAAP

61,857

Sasol

Total

Sasol

Synfuels

Sasol

continuing

2005

Mining Synfuels

Oil

Gas

International

Polymers

Solvents

Other operations

(Rand in millions)

South Africa

642

22,902

1,408

–

5,651

1,303

3,364

35,312

Rest of Africa

–

620

–

752

155

909

2,442

Europe

1,429

107

–

3,732

2,840

8,197

Middle East and India

–

880

173

1,097

Far East

–

358

1,145

116

1,619

North America

–

1,302

843

2,165

South America

–

217

136

371

Southeast Asia and Australasia

–

317

627

332

1,294

Total segment

1,471

820

23,525

1,408

–

7,199

9,361

8,713

52,497

Adjustments to US GAAP

Equity accounting and reversal

of proportionate
consolidation

(1,810)

Turnover under US GAAP

50,687

Sasol

Total

Sasol

Synfuels

Sasol

continuing

2004

Mining Synfuels

Oil

Gas

International

Polymers

Solvents

Other operations

(Rand in millions)

South Africa

1,077

17,237

1,389

–

5,063

869

3,202

28,882

Rest of Africa

1,305

–

815

112

675

2,946

Europe

1,032

153

–

3,502

2,574

7,287

Middle East and India

–

848

216

1,133

Far East

–

178

940

124

1,248

North America

–

1,146

903

2,070

South America

–

187

132

340

Southeast Asia and Australasia

–

432

333

298

1,093

Total segment

1,083

1,329

18,554

1,389

6,576

7,937

8,124

44,999

Adjustments to US GAAP

Equity accounting and reversal

of proportionate
consolidation

(1,659)

Entities previously not

consolidated

266

Turnover under US GAAP

43,606

For more information on the reconciliation of segmental turnover to the corresponding amounts prepared under
US GAAP, see “Item 5.A – Operating results – Reconciliation of segmental results to US GAAP” and Note 3 of
“Item 18 – Financial statements”.

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, proportionate consolidation is applied with respect
to incorporated joint ventures for management reporting purposes. Under US GAAP, the equity method of accounting
is applied.

Relates to Naledi Petroleum Holdings (Pty) Limited (included in the Sasol Oil segment) which was equity accounted
for management reporting purposes until 31 December 2003 and consolidated as a subsidiary with effect from 1
January 2004. However, under US GAAP it is consolidated as a subsidiary for all reporting years.

The segment information has been adjusted for the reclassification of the comonomers division from Sasol Olefins &
Surfactants to Sasol Solvents.

Our strategy

We are active in the oil, gas and chemical sectors, primarily in integrated petroleum and chemical centers

of activity in Southern Africa and other countries where we can obtain competitive feedstock advantages. Our
core business is adding value to low-cost coal and gas feedstock through our unique Fischer-Tropsch synthesis
and other proprietary technologies for the production of fuel, fuel components and chemical feedstock.

Commercializing and expanding our Fischer-Tropsch GTL and CTL technology – We have made further

progress towards the drive to commercialize our GTL technology based on the Sasol SPD™ process in natural
gas-rich regions. The Sasol SPD™ process allows us to monetize underutilized gas resources by converting them
into ultra-low sulfur, high-performing diesel in line with global trends towards cleaner fuel and reduced
emissions to the environment.

• SSI and Qatar Petroleum inaugurated their 49:51 joint venture in respect of the Oryx GTL plant in Ras

Laffan, Qatar in June 2006. The plant with its capacity of 34,000 bpd is the world’s first commercial
scale Slurry Phase Fischer-Tropsch GTL plant outside South Africa, developed and built specifically to
produce GTL diesel and to a lesser extent, GTL naphtha and liquefied petroleum gas (LPG). The GTL
diesel will be used either as a fuel neat or as a blend stock.

• Work on the Escravos GTL plant in Nigeria, a joint venture between NNPC and Chevron Nigeria

Limited is progressing according to plan. It is envisaged that the plant will be operational in 2009. With
its capacity of 34,000 bpd the Escravos GTL plant will produce GTL diesel, GTL naphtha and liquefied
petroleum gas utilizing Sasol licensed technology.

Following our progress in Qatar and Nigeria, other potential GTL options are also under review. These

options include a second GTL plant in Qatar and possible GTL investments in Algeria and Australia. We are not
progressing with a feasibility study on a potential GTL project in Iran, although this may change pending a
review of the political situation in Iran. The political situation in Iran is being monitored. If a stage-one
feasibility study is initiated it will, however, take up to two years before the investment merits of a potential
GTL project are precisely determined for consideration and scrutiny by the relevant risk assessment, governance
and investment decision-making bodies within the group, which will also take full cognizance of the political
situation prevailing in Iran at that time.

In support of this growth driver, our team of researchers continue to advance our second-generation GTL

technology, including our proprietary low-temperature Fischer-Tropsch Slurry Phase reactor and cobalt-based
catalysts.

We signed agreements in June 2006 enabling us to continue with feasibility studies for the potential

development of two CTL plants in China. We anticipate completing the feasibility studies during 2008 for the
two envisaged CTL plants in China. China has been able to sustain high levels of economic growth for more
than a decade, coupled with a growing demand for energy which outstrips the world average. With its vast coal
reserves, China offers a potential opportunity for us to commercialize our CTL technology. Potential CTL
opportunities in the United States and other coal-rich regions may also be considered.

Our researchers will continue to explore new opportunities to commercialize our competitive Fischer-

Tropsch synthesis technology for the beneficiation of coal and other hydrocarbon resources, including
environmentally friendly biomass.

Grow our integrated chemicals portfolio in selected areas – we will focus on organically growing our

chemicals portfolio either by:

• leveraging new chemical growth opportunities from our Fischer-Tropsch processes; or

• securing integrated positions with highly cost-competitive feedstocks.

Sasol Polymers remains an outstanding performer in our chemicals portfolio by focusing on continued

business optimization and benefiting from a buoyant demand for polyethylene, polypropylene and polyvinyl
chloride. As part of Project Turbo, this division is advancing the construction of two new polymer plants in
South Africa to increase our polymer capacity by about 80%. We intend to bring the two plants into operation
during 2007. Outside South Africa, our polymer business continues to gain momentum. In Iran, Sasol, through
Sasol Polymers International Investments is investing up to euro 494 million (our 50% share of the total capital
project) in a new polymer plant which is designed to produce one million tons of ethylene to be converted into
polyethylene, or exported as ethylene. This project is a 50:50 joint venture (called Arya Sasol Polymer
Company) between Sasol and the National Petrochemical Company of Iran, and comprise one ethane cracker for
producing polymer-grade ethylene and two polyethylene plants. The cracker start-up is currently targeted for
between April and June 2007, followed by commissioning of the two polyethylene plants soon thereafter.

Sasol Solvents continues to benefit from its status as a diversified producer and marketer of industrial

solvents. The breadth of our solvents product portfolio and international market presence covering all major
regions are competitive strengths of this business unit.

Substantial work has been undertaken to prepare the Sasol Olefins & Surfactants business for sale. Since

the start of the divestiture process in August 2005, international oil prices have increased significantly, which
represent fundamental changes in energy costs and their related impact on oil derived feedstock prices.
Irrespective of the negative impact of the increased feedstock costs on the Sasol Olefins & Surfactants business,

the strategic rationale for considering the disposal of the business, as expressed in our initial announcement in
August 2005, remains relevant and valid. It is not backward integrated into the primary feed streams to our
required standards and is also not adequately linked to our proprietary Fischer Tropsch technology process.

Exploit upstream hydrocarbon opportunities – SPI has become a steady producer of natural gas in the

Temane field in Mozambique. We will continue to explore for additional natural gas reserves in and around the
Temane and Pande onshore fields as well as two offshore fields. Moreover, SPI remains a 27.75% partner in
Gabon’s offshore Etame oil field, where crude oil production is being sustained at about 18,000 bpd.

Sasol Gas continues to focus on growing the South African gas market following the successful

introduction of natural gas from Mozambique in 2004. At 30 June 2005 Sasol held a 100% interest in Republic
of Mozambique Pipeline Investments Company (Pty) Limited (Rompco), a company which operates and
maintains the cross-border pipeline that conveys natural gas from the Temane central processing facility to the
gas network at Secunda. On 1 July 2005, we sold a 25% interest in Rompco to South African Gas Development
Company (Pty) Limited (iGas), owned by the South African government), and realized a profit of R205 million.
Companhia Mocambicana de Gasoduto S.A.R.L (CMG), a company owned by the Mozambique government,
has taken steps to exercise its option to acquire a 25% interest in Rompco in 2007.

Continuing operations

Sasol Mining

Nature of the operations and principal activities

We have three South African coal mining operations:

• Secunda Mining Complex, consisting of four underground mines (Bosjesspruit, Brandspruit, Middelbult

and Syferfontein) at Secunda supplying 40.3 Mt of coal to Sasol Synfuels, its primary customer. A new
business portfolio supplying utility coal to Eskom Holdings Limited (Eskom), South Africa’s state-owned
power company, has been established and performed well during the year. In line with a supply
agreement, the company supplied 1.7 Mt of coal to Eskom power stations during 2006.

• Export Complex (situated in the Secunda Mining Complex), supplied by the Twistdraai mine at Secunda,

producing coal for the international market (export coal sales of 3.6 Mt) as well as a secondary product
(middlings), supplied to Sasol Synfuels.

• Sigma Mining Complex. The Mooikraal mine near Sasolburg was brought into operation shortly before

30 June 2006. It has been designed to supply utility coal to the group’s utility plants in Sasolburg at a
rate of about 1.9 Mt a year to replace the depleted Mohlolo underground operation and the Wonderwater
high-wall operation, which are undergoing final closure and rehabilitation.

During 2006 total production was 46.2Mt of coal, compared to 47.7Mt in the previous year. The decrease

in production resulted from coal purchases from Anglo Operations (Pty) Limited (Anglo Operations) for supply
to Sasol Synfuels and the introduction of natural gas at Sasolburg. Saleable production volumes vary each year
according to inter-segment demand and export capacity.

Operational statistics

2006

2005

2004

(Mt, unless otherwise stated)

Sigma Mine

1.6

2.6

6.2

Secunda Mines

44.6

45.1

46.2

Total production

46.2

47.7

52.4

Saleable production from all mines

44.5

45.5

50.4

External coal purchases from Anglo Operations

3.1

–

Sales to Sasol Infrachem, Sasolburg

1.7

3.0

6.8

Sales to Sasol Synfuels, Secunda

40.3

39.4

40.2

Additional South African market sales

2.1

0.5

Export sales (primarily Europe)

3.6

Total sales including exports

47.7

46.5

51.1

Production per shift of continuous miner (mining production machine)

(t/cm/shift)

1,674

1,561

1,707

Saleable production equals our total production minus discard and includes both product sold and movements in
stockpiles.

Strategy

An analysis of the challenges facing our mining operations and a review of our strategy culminated in the

determination of the following six key strategic themes:

• Mining Charter compliance;

• Safety, health and environment (SH&E);

• Continuous improvement;

• Business and reserve optimization;

• Product and market optimization and logistics; and

• Winning with people.

Mining Charter compliance

Economic empowerment of historically disadvantaged South Africans. We pursued a rigorous BEE strategy

formulation process, followed by a partner selection process, resulting in the selection of Eyesizwe as our
preferred strategic BEE partner in our coal export operations. We announced in March 2006 the first phase of the
implementation of Sasol Mining’s broad-based BEE strategy through the formation of Igoda Coal, Sasol
Mining’s 65:35 empowerment venture with Eyesizwe.

As a result of this transaction, BEE equity ownership in Sasol Mining’s operations will indirectly comprise

about 8%. We are now expediting plans to advance the second phase of our broad-based BEE ownership
strategy, pursuant to which we intend to achieve a 26% BEE equity ownership by 2014, in compliance with the
Mining Charter.

These future BEE ventures will further assist operational capacity building in the mining sector. We intend

to create a new, sustainable BEE entity, which will be involved in selected mining operations. This entity
preferably, will include a women’s group and other broad-based stakeholders drawn from historically
disadvantaged groups in South Africa. We expect to finalise our next BEE equity ownership deal in the year
ahead.

The submission of applications for the conversion of Sasol Mining’s Secunda “old order” mining rights

were provided to government. This submission provides detail and information on how stated objectives of the
Mining Charter will be addressed as well as plans on how to achieve the targets. See “Item 3.D – Key
information – Risk factors – New mining legislation may have an adverse effect on our mineral rights” and
“Item 4.B – Business overview – Regulation – Empowerment of historically disadvantaged South Africans”.

Safety, health and environmental

The recordable case rate (recordable case rate (RCR) is the standard international measure for reporting

work-related injuries and illnesses and other safety incidents resulting in injury) for 2006 was 0.93 compared to
1.51 for 2005, and the lost work day case rate for 2006 was 0.25 compared to 0.24 for 2005. Safety is of critical
importance and various interventions have and are being implemented in order to improve Sasol Mining’s safety
performance. This includes entrenching safety as a key value at Sasol Mining, in line with the group’s focus on
safety. A process to improve safety-related behaviors was implemented two years ago and will be fully
implemented at all our mining operations by the end of the 2008 calendar year.

With regards to safety and health, the underground dust levels at locations with mechanical miners have

decreased to 3.42 milligrams per meters cubed (mg/m

) from 3.63mg/m

in 2005. This measurement is still well

below the legal limit of 5mg/m

In addition all the mining operations have a legally required Environmental Management Program, as well

as an internationally recognized Environmental Management System (ISO 14001). They are individually audited
at least annually.

Continuous improvement

Through a process of consultation with all role players, a “Sasol Way” of operating was designed,

supported by a tracking tool for monitoring progress and sustainability. This process will be implemented
throughout all the mining operations during the next eighteen months.

In keeping with recent trends, we continue to advance our mechanical productivity, measured by the

average number of tons produced by one continuous miner in one eight-hour shift (t/cm/shift). Since launching a
dedicated productivity-improvement program seven years ago, Sasol Mining has increased its continuous miner
productivity by 108%, while also sustaining a general trend during this period of lowering its recordable injuries.
Machine productivity increased by 7% during the year from 1,561 t/cm/shift to 1,674 t/cm/shift.

Business and reserve optimization

A business planning process has been established which allows for integrated planning from the strategic

level to life-of-complex planning, ten year budgets and short-term planning. During 2006 the business has
operated soundly within the context of this business plan. The business plan is focused to continuously operate
the mines in the most cost effective manner whilst also focusing on reserve optimization.

Product and market optimization and logistics

The changes in both the demand pattern at the Sasolburg petrochemical complex (only utility coal required)

and the supply sources at the Secunda Mining Complex (less Twistdraai coal produced and more coal purchases
from Anglo Operations) have necessitated more focus to ensure stability in the coal blends supplied to our
internal customers (Sasol Synfuels and Sasol Infrachem). Different computerized blending models have been
developed and implemented to manage coal quality and coal blends of products supplied to customers.

Winning with people

Talent management and succession planning processes within the company are entrenched and we continue

to experience year on year improvements in people productivity. The relationship with all our union stakeholders
is good. We achieved 38% representation of historically disadvantaged South Africans (HDSAs) from first line
supervisory to senior management levels. The introduction of an additional 67 women in core business was
successfully completed. Currently we have over 100 women in core business and are well on our way towards
achieving targets set by the Mining Charter and relevant legislation. Overall progress towards the achievement of
employment equity and Mining Charter targets is satisfactory. Current retention challenges in skilled,
professional positions are mainly due to a national growth in the requirements for these skills. Strategies to
mitigate these challenges including, targeted recruitment, fast-tracking of professional growth of employees and
increased artisan and miner learnership are yielding favorable outcomes, resulting in lower voluntary labor
turnover for Sasol Mining as against the mining industry in general and continuous inflow of skilled employees
from internal development. With increased economic growth in the country, Sasol Mining will continue to seek
and implement innovative ways to attract and retain talented people within the company.

Principal markets

We extract and supply coal mainly to our synfuels and chemical plants under terms and conditions which

are determined on an arm’s length basis. We export approximately 8% of the Secunda Mining Complex’s
production. In 2006, external sales, primarily exports, amounted to 3.6 Mt, compared to 3.9 Mt in 2005. In a
volatile market, US dollar export prices decreased by 7%, while the rand weakened by 3%. This resulted in a net
decrease in the rand export coal price of 4%.

Marketing opportunities for coal in both the international and domestic utility market are being explored. It

is our intention to increase our presence in the international market over the ensuing decade. This is currently
constrained by our throughput entitlement at the Richards Bay Coal Terminal, South Africa’s predominant coal
export outlet. The planned expansion of this terminal has been delayed and its timing is uncertain.

Seasonality

The demand for inter-segment coal is consistent throughout the year. The demand for coal in Europe, the

international market in which Sasol Mining is most active, is consistent throughout the year. Variations in
tonnage from season to season in the export market are therefore limited.

Marketing channels

Sasol Mining has appointed a limited number of agents in Europe to represent the company, each with their

own specific geographic markets. These agents operate on a commission basis and are authorized to act as
intermediaries only. All sales require approval of Sasol Mining before they may be concluded with the customer.

Property, plants and equipment

Sasol Mining operates six mines for the supply of coal to Sasol Synfuels, Sasol Infrachem (utility coal

only) and the external market. The annual production of each mine, the primary market to which it supplies coal
and the location of each mine are indicated in the table below:

Mining activities

Mine

Market

Location

2006

2005

2004

Production (Mt)

Bosjesspruit

Sasol Synfuels

Secunda

7.8

7.7

8.2

Brandspruit

Sasol Synfuels

Secunda

8.2

8.3

8.4

Middelbult

Sasol Synfuels

Secunda

9.3

8.0

8.5

Syferfontein

Sasol Synfuels

Secunda

8.8

7.1

6.8

Twistdraai

Export/Synfuels

Secunda

10.5

14.0

14.3

Sigma/Mooikraal

Sasol Infrachem

Sasolburg

1.6

2.6

6.2

46.2

47.7

52.4

The middlings product from the export beneficiation plant is supplied to the Synfuels market.

Beneficiation Plant

A coal beneficiation plant is operated at Secunda to enable coal export to the international market. The

design capacity of the plant is 10.5 Mt throughput per annum. The plant feedstock is supplied by Twistdraai
mine via overland conveyor belts of approximately 22 kilometres.

Sasol Synfuels

Nature of the operations and principal activities

Sasol Synfuels operates a coal and gas-based synfuels manufacturing facility which, on the basis of our

knowledge of the industry and publicly available information, we believe to be the world’s only large
commercial-scale facility of this type. Based at Secunda, we produce syngas primarily from low-grade coal with
a smaller portion of feedstock being natural gas. The process uses advanced high temperature Fischer-Tropsch
technology to convert syngas into a range of synthetic fuel components, as well as industrial pipeline gas and
chemical feedstock. We produce most of South Africa’s chemical and polymer building blocks, including
ethylene, propylene, ammonia, phenols, alcohols and ketones. We operate the world’s largest oxygen production
facilities (according to Air Liquide, the French industrial gas company), currently consisting of 15 units. As a
result, we also have the capacity to recover high volumes of two noble gases, krypton and xenon.

We obtain our coal feedstock requirements from Sasol Mining and purchase natural gas feedstock from

Sasol Gas.

Strategy

The primary strategic objectives of Sasol Synfuels are:

• to maintain all-round operational excellence (including safety performance);

• to maintain a motivated and skilled human resources base;

• to position itself strategically for long-term growth in a complex and evolving environment; and

• to continuously reduce the environmental footprint of our operations in Secunda.

Major growth opportunities exist for us in domestic and international markets. Sasol Synfuels is partnering

with Sasol Technology, Sasol Oil and key chemical businesses in a feasibility study for a phased 20% increase in
production over the next 10 years. The envisaged first-phase growth of 10% would be based on higher
throughput of natural gas and thereafter on higher throughput of coal. The latter coal-based growth phase would
require new-generation coal gasification technology. Sasol Synfuels envisages complementing the current low-
temperature Lurgi coal gasifiers with high-temperature gasifiers, mostly to improve plant efficiency and reduce
emissions to the atmosphere. High-temperature gasifiers produce carbon monoxide, which – along with
hydrogen – can be used to produce synthesis gas instead of being emitted to the atmosphere. The additional
volumes of reaction hydrogen would be sourced from natural gas.

Working in partnership with Sasol Oil and Sasol Technology, we met the new mandatory South African

fuel specifications which were implemented on 1 January 2006. Besides terminating the production and
marketing of leaded fuel and introducing lead replacement fuel for older vehicles, we have introduced diesel
with a substantially lower sulfur content – a reduction from 3,000 parts per million (ppm) to 500ppm. Project
Turbo, the fuel-optimization and polymer-expansion project entered the final stage during the last quarter of the
year. As part of the fuel-optimization portion of the project, we commenced with the commissioning of the
synfuels catalytic cracker (SCC) in August 2006. Project Turbo has necessitated the rerouting of almost one-
million cubic meters a year of fuel precursors produced by Sasol Synfuels to the SCC, where they are now being
converted into higher-octane fuel, as well as ethylene and propylene. As a result of starting up the SCC, we have
a different end-product ratio because our fuel volumes will decrease slightly as some of the fuel streams will be
converted into polymer feedstock. In the longer term, however, our growth plans will offset the Project Turbo-
related reduction in fuel volumes and the negative impact on unit cost. We expect that in addition to delivering
the new fuels solution for 2006, this project will also address most of the envisaged more stringent fuel
specifications which are expected to be mandated in future years.

Various safety initiatives have yielded positive returns, with our RCR decreasing by 50% from 1.31 in 2005

to 0.65 in 2006 for Sasol Synfuels employees.

Principal markets

The company sells fuel components to Sasol Oil, and methane-rich gas is sold to Sasol Gas. Chemical

feedstocks are processed and marketed by Sasol and its joint ventures, including Merisol. Unrefined ethylene
and propylene are purified by Sasol Polymers’ monomers division at Secunda for the downstream production of
polymers. Ammonia is sold to the fertilizer and explosives industries, including Sasol Nitro, our nitrogenous
products division.

The inland South African market for liquid transportation fuels continues to grow, as do many of the major

markets for the group’s main chemical businesses.

Property, plants and equipment

Specific product volumes

2006

2005

2004

(% of total production)

Liquid and gaseous fuels

Petrochemical feedstock

Carbon plus nitrogenous feedstock for fertilizers and explosives

Specialized cokes, creosote and related carbon and tar products

We have procured a preventative maintenance program, which we continue to benchmark against those of

leading international energy and chemical companies. The planned March 2006 shutdown was postponed to
September 2006 to accommodate the complex scope of the work required for Project Turbo. Greater energy
efficiency is also being pursued through new programs aimed at reducing overall unit cost, improving
environmental performance and assuring the reliability of electricity supply. This is particularly important at a

time when Sasol Synfuels are pursuing significant expansion plans. Sasol Synfuels have been given the go-ahead
to commence work in the year ahead for the development of a 100 to 350-megawatt power-generation plant at
Secunda. This facility will use waste-gas streams as an energy source to reduce costs and environmental impact.

Overall production integrity and reliability remained at high levels throughout the year despite four

unplanned shutdowns. Ongoing programs are followed to improve plant reliability, availability and efficiency of
operations. One of the year’s key initiatives was the formation of a dedicated operational improvement team to
support Synfuel’s pursuit of operational excellence.

Sasol Synfuels continued to advance a series of major environmental projects as part of a wider group

initiative in South Africa to reduce our environmental footprint and enhance operational efficiency. We are
partnering with Sasol Nitro to build a R638 million sulfuric acid plant at Sasol Synfuels and an ammonium
sulfate facility at Sasol Nitro. The acid plant will use hydrogen sulfide and offtake gas from the Rectisol plant as
feedstock. Sasol Nitro will convert a large percentage of the sulfuric acid into ammonium sulfate, an important
fertilizer ingredient.

We are also focusing on opportunities to reduce volumes of low-level volatile organic compounds (VOCs),

as well as emissions of sulfur oxides (SOx) and nitrous oxides (NOx). Conceptual studies are progressing with a
view to reduce emissions significantly below the VOC, SOx and NOx limits prescribed by South Africa’s more
stringent new legislation, the National Environmental Management: Air Quality Act.

We completed further environmental cleanup projects with a combined cost of R175 million. In the year

ahead, besides the sulfur-reduction investments associated with building plants for producing sulfuric acid and
ammonium sulfate, Sasol Synfuels expects to invest a further R86 million to improve environmental
performance.

Sasol Oil

Nature of the operations and principal activities

Sasol Oil encompasses the established liquid fuels and lubricants marketing, distribution, commercial and

retailing interests, including the Exel business, our shareholding in the Natref refinery, and the acquisition of fuel
components and the fuel blending and storage facilities at Sasol Synfuels in Secunda. Products include gasoline,
diesel, jet fuel, fuel alcohol, illuminating paraffin, liquefied petroleum gas, fuel oils, motor and industrial
lubricants and bitumen. Sasol Oil also encompasses crude oil procurement, shipping and refining, as well as
final product supply to, and trading with, other oil companies operating in Southern Africa.

Strategy

On 6 February 2004, it was announced that Sasol Limited and Petronas were in discussions concerning the

combination of Sasol’s liquid fuels business and Petronas’ South African liquid fuels businesses, Engen, in a
joint venture to create a leading South African liquid fuels business. On 23 February 2006, despite earlier
approval by the European Commission, the proposed joint venture was prohibited by the Competition Tribunal
in South Africa as it ruled that it would have had anti-competitive effects on the industry. Since the ruling, Sasol
Oil has reviewed and re-aligned its strategy and has also appropriately structured the organization and
management team to drive the revised strategy.

In order to ensure the achievement of our commitment given in terms of South Africa’s Liquid Fuels

Charter and the advancement of BEE we planned to attain the equity commitment through the
above mentioned joint venture transaction. The ruling by the Competition Tribunal delayed such realization,
however, on 1 July 2006 we realized this commitment when Tshwarisano acquired a 25% shareholding in
Sasol Oil. This transaction has facilitated the meeting of the 25% BEE ownership target in compliance with the
Liquid Fuels Charter. See “Item 4.B – Business overview – Regulations – Empowerment of historically
disadvantaged South Africans”.

Principal markets

Liquid fuels marketed

2006

2005

2004

Total liquid fuel sales (million m

)

9.61

9.60

9.32

Fuel and bitumen exports (million m

)

0.8

0.7

Natref refinery operational statistics

2006

2005

2004

Crude oil processed (million m

)

3.09

3.18

3.11

White product yield (% of raw material)

89.3

89.5

90.7

Total product yield (%)

97.1

97.9

99.4

Data based on our 63.64% share in Natref.

Our 63.64% share of Natref’s production represents about 12% of South Africa’s total liquid fuels demand.

In addition, 25% of South Africa’s fuel demand is met from components produced at Sasol Synfuels in Secunda.
Our main wholesale customers in the South African liquid fuels market include Engen, BP, Chevron, Shell and
Total. These companies, amongst others, currently purchase part of their liquid fuels requirements for the South
African market from us through short to long term supply agreements. The process of concluding supply
agreements with smaller emerging oil companies is progressing as well.

Raw materials

Natref obtains approximately 55% of its crude oil requirements from the Middle East (of the purchases

from the Middle East approximately 12,000 bpd of crude oil is purchased from Naftiran Intertrade Company
Limited of Iran and approximately 20,000 bpd of crude oil is purchased from Saudi Arabia) through crude oil
term contracts and the balance at spot prices from West Africa and other sources. Crude oil is landed at Durban
and is transferred to the refinery through a 670 kilometer pipeline owned by Petronet, a subsidiary of Transnet,
which is a state-owned pipeline company.

Marketing channels

The Natref refinery at Sasolburg and our facilities at Secunda are located in the economic heartland of

South Africa, where an estimated 63% of the country’s white products are consumed. We currently supply
approximately 9.1 million m

of white products per year to the South African market. Fuel export volumes

decreased from 636,033m

in 2005 to 269,003m

in 2006 owing to planned and unplanned refinery and plant

shutdowns at Sasolburg and Secunda.

Since the expiry of the Main Supply and Blue Pump agreements at the end of December 2003, we have

concluded individual supply agreements with the main and emerging oil companies operating in South Africa.
These agreements, differing in duration, cover the supply of liquid fuels, including gasoline, diesel, liquefied
petroleum gas, jet fuel and illuminating paraffin. Over the last 12 months we have been able to supply our
committed volumes in terms of the supply agreements, albeit under very challenging circumstances. Our
supplies from Natref and Synfuels have been interrupted because of plant and/or refinery instability. We were
only able to comply with our supply obligations by importing refined petroleum products. Even though Natref
and Synfuels have been stable over the last period, it is envisaged that the importation of refined petroleum
products will continue because of planned plant shutdowns.

We have an empowerment venture with Namibia Liquid Fuels (Pty) Limited, to supply 50% of Namibia’s

white product requirements (about 500,000 m

a year) for at least three years as from 1 January 2005.

We have an existing agreement with the government of Lesotho and have entered into a major new supply

agreement with the government of Swaziland for the supply of white product requirements. We have secured
11 retail service stations in Lesotho increasing our total market share from 19% to 36% to supplement our
commercial market presence in that country.

In the commercial sector, we are targeting four primary business sectors for the marketing and supply of

fuels and lubricants: the mining industry, the transport industry, reseller/distributors and government
organizations. Our marketing of products, such as our low-sulfur Sasol turbodiesel™, has promoted our sales in
both the commercial and retail markets.

In the retail sector we have successfully developed new, or converted existing, service stations, growing

from 345 to 376 Sasol Convenience Centers and Exel-branded service stations as at 30 June 2006, in line with
our dual-branding approach, which supports two distinctive but complementary marketing strategies.

We retain our competitive advantage in direct sales marketing on a commercial basis in the industrial and

related energy markets because of the notably low sulfur content of our fuel oils and special distillate fuels.

We maintain our belief that independent access to the retail and commercial markets has strategic,

competitive and growth advantages and we intend to improve our position in the South African fuels market in
this respect. The previous restrictions on our direct sales to the South African market have been removed
creating opportunities to increase our fuel production and sales through access to the retail and commercial
markets. We do, however, envisage that local and national regulatory requirements will delay the approval
of sites.

Property, plants and equipment

Natref is a technologically advanced refinery, highly efficient in refining heavy crude oil into gasoline,

diesel and other white products. It is South Africa’s only inland crude oil refinery, as the other three crude oil
refineries are located along the country’s shores. Its inland location does not allow the refinery easy access to the
bunkers fuel market, as is the case for coastal refineries. Therefore, Natref focuses on the production of refined
distillate fuels and only produces a small percentage of fuel oil and bitumen. It is designed to upgrade relatively
heavy crude oil with a high sulfur content (sour) to yield about 90% white petroleum products. Crude oil
selection and degree of upgrade are ultimately dictated by refinery configuration and overall economics. Other
products of the refinery include commercial propane, jet fuel, different grades of bitumen and fuel oils.

While we operate the refinery, Total participates in its management with veto rights in respect to a number

of corporate actions, including, among others, increasing or reducing Natref’s share capital, amending Natref’s
Memorandum and Articles of Association and the rights attaching to its shares, appointing directors to serve as
executive officers and determining directors’ remuneration.

Under the terms of an agreement concluded between Total and Sasol, Total has the option to purchase up to

13.64% of the ordinary shares in Natref from Sasol at fair market value upon the occurrence of certain events.
Since December 2003 Total had two opportunities to increase its shareholding in Natref to 50%, the first being
the termination of the Main Supply Agreements and the second the proposed transaction between Sasol and
Petronas which was prohibited by the Competition Tribunal. On both occasions Total decided not to exercise its
option to increase its shareholding in Natref.

During 2006 we have invested in the Natref refinery to meet new fuel specifications. This project was

completed in October 2005. The project objectives to discontinue the addition of lead additive to gasoline
and produce diesel that contains less than 500 ppm of sulfur were both achieved within the approved budget of
R531 million. The impact of this has been that Natref’s refining capacity is reduced to 89% of previous capacity.
In addition, new processing units will have to be built to meet the further evolution of South African required
fuel specifications (required for the control of exhaust emissions from road-going vehicles in South Africa) by
the earliest in 2010 and restore the reduced capacity of the refinery, which will require a substantial investment.

The overall refinery availability amounted to 92% due to a 3.5% unplanned availability. Of the unplanned

shutdowns the most significant were outages of the crude distillation unit and a power failure. A major
turnaround of the crude distillation unit and catalytic reforming units is planned for the 2007 financial year that
will result in net budgeted availability, excluding unplanned downtime to reduce to 94% as opposed to 96% for
the 2006 financial year.

Petronet, which transfers synthetic fuel components from Secunda to Natref, in Sasolburg, purported to

terminate the agreement to transfer these components with effect from 1 January 2005. After evaluating various
technical options, agreement was reached with Petronet to continue with the transfer of synthetic fuel
components to Natref. Modifications to the pipeline have now been effected in order to ensure that the transfer
of synthetic fuel components can take place whilst allowing Petronet to also use the line for other products.

Sasol Gas

Nature of the operations and its principal activities

Established in 1964, originally as the South African Gas Distribution Corporation Limited (Gascor), Sasol

Gas operates a 2,084 km pipeline network. Sasol Gas is a shareholder in ROMPCO and Spring Lights Gas (Pty)
Limited (Spring Lights Gas). Sasol Gas operates and maintains the 865 km transmission pipeline from the gas
fields in Mozambique to Secunda in South Africa on behalf of ROMPCO under a contractual agreement.

The first pipeline was constructed in 1966 to distribute gas produced from coal to approximately

250 industrial customers in the then Witwatersrand area. We expanded our network to more than 800 kilometres
of distribution pipelines by 1977. During 1996 we concluded an agreement with Petronet to utilize the Lilly
pipeline in order to expand our network to the geographical area of KwaZulu-Natal. Our network has reached
1,350 kilometres of distribution lines after the expansion to the Pretoria geographical area in 1997. Based on the
availability of methane-rich gas in Secunda we developed the industrial markets of Secunda, Witbank,
Middelburg and developed the KwaZulu-Natal market down to the Durban South Area.

As part of the Natural Gas Project for the development, production and transportation of natural gas

from Mozambique, ROMPCO was established as the owner of the Mozambique to Secunda gas transmission
pipeline (MSP).

Initially, ROMPCO was wholly owned by Sasol Gas. Pursuant to the ROMPCO Shareholders’ Agreement

the South African and Mozambican governments nominated shareholders, namely the South African Gas
Development Company (Pty) Limited (iGas) and Companhia de Moçambicana de Gasoduto (CMG) were
afforded a deferred option to purchase in aggregate up to 50% of the shareholding in ROMPCO. With effect
from 1 July 2005, iGas exercised its option and purchased 25% of the shares in ROMPCO. A profit of R205
million was realized on this transaction. CMG is finalizing its financing arrangements for the exercise of its
option to acquire a 25% interest in ROMPCO. CMG submitted a conditional offer to purchase on 26 June 2006,
subject to the approvals of the respective financing institutions and the guarantor. These approvals have been
obtained subsequent to 30 June 2006. We anticipate this transaction will be finalized before the end of second
quarter of 2007. The business risk profile of the particular investment will not be adversely affected as a result of
the exercise of the option. On the contrary, the exercise of the option would positively affect the political risk
profile of the investment in ROMPCO and
the MSP.

As part of Sasol Gas’ commitment to BEE, Sasol Gas has formed a joint venture company and contributed

its business rights to market pipeline gas in the Durban South area to Spring Lights Gas which is now entering
its fourth year of successful commercial operations with increased operating profit on the previous year. A BEE
company, Coal Energy and Power Resources, holds 51% of the shares and Sasol Gas the balance. During the last
quarter of 2006 the shareholders signed an amendment to the existing shareholders agreement to negotiate a new
supply agreement to expand the Spring Lights Gas marketing area to the remainder of KwaZulu-Natal.

Since 1996 Sasol Gas has been using Petronet’s Lilly pipeline for the transportation of gas to the KwaZulu-

Natal market. In April 2005 we renewed the gas transportation agreement to continue the use of the pipeline for
a duration of 17 years (until 2022), with an option to extend the agreement for a further three years.

Strategy

Sasol Gas follows a growth strategy which it believes will enable us, as part of the “Sasol Pipeline Gas

Value Chain”, to add value to its stakeholders through the marketing of pipeline gas from various gas sources in
Southern Africa as it becomes available.

The medium term goal, “Zero harm when growing from 96 million gigajoules per annum (MGJ/a) to

141 MGJ/a by June 2008”, has been set and internally communicated to ensure alignment in objectives of the
original Natural Gas Project aimed to supply 120 MGJ/a natural gas for 25 years with a ramp-up period of four
years to June 2008 as well as supply 21 MGJ/a methane-rich gas to the KwaZulu-Natal and Secunda, Witbank
and Middelburg markets.

Although the strategy focuses on volume growth, it takes diligent cognizance of safety, profit margin,

infrastructure capacity, customer focus and stakeholder relationships.

We play an important role in monetizing Sasol’s natural gas reserves in Mozambique and our growth

strategy provides an incentive for further gas exploration by Sasol Petroleum International. Sasol Gas also adds
value to methane-rich gas produced by the Synfuels plant in Secunda through the marketing of the gas.

The majority of the volume growth is expected to come from sales to Sasol Synfuels and the external coal

alternative market. The latter includes the wider definition of all applications of coal (e.g. power generation and
cogeneration) and not only in boilers for steam generation. Growth opportunities in the high value markets,
where the energy alternatives include liquefied petroleum gas, fuel oil and other oil products, especially through
organic growth from existing customers, are regarded as being equally important.

Targeted geographical expansion is essential to provide access to new markets. It is also expected that for

the remainder of the ramp-up to the full 120 MGJ/a natural gas, Sasol Synfuels will utilize additional gas. This
increase in the planned gas consumption during the ramp-up period will have a positive impact not only on Sasol
Gas and Sasol Synfuels, but also on the overall economics of the Natural Gas Project.

Due to the nature of the coal alternative markets, it takes longer to penetrate such markets. Signing new

customer contracts encompasses the negotiation of long term commitments, gas supply contracts and capital
allocations. Large projects, such as co-generation, require significant time to be developed as it is integrated into
the customer’s production facility through the supply of electricity and steam utilities.

The long-term strategy is to increase the natural gas market to 240 MGJ/a over the next 15 years. Should

further exploration activities in Mozambique by SPI be successful the second phase expansion of the supply
infrastructure would enable a total of 240 MGJ/a to supplied to markets in South Africa and Mozambique
commencing 2012.

Principal markets

We market methane-rich gas, produced by Sasol Synfuels and natural gas produced from the gas fields in

Mozambique. In the energy market, our marketed gas competes with crude oil-derived products, electricity and
coal in various industries, such as ceramics, glass, metal, manufacturing, chemical, food, paper and pulp and a
number of other sectors.

The pipeline gas segment in the energy industry in South Africa is still in its infancy. It is expected that the

market will grow further as a result of the introduction of natural gas from Mozambique in 2004. The current
supply of 106 MGJ/a of pipeline gas has increased from 53 MGJ/a in 2004. Compared to developed countries,
South Africa is a small consumer of natural gas as a percentage of its total energy requirements. This presents us
with opportunities to increase sales of environmentally preferred natural gas. Environmental and technological

trends together with new environmental legislation are expected to entice customers to convert to gas as a
substitute for environmentally less desirable energy sources. During 2006 natural gas volumes sold reached
88 MGJ and methane-rich gas volumes 18 MGJ.

Sasol Gas supplies 49 MGJ/a of gas to 541 industrial and commercial customers in the provinces of

Mpumalanga, Gauteng, KwaZulu-Natal, North-West and the Free State. Besides marketing pipeline gas to these
customers, natural gas is also supplied as feedstock to Sasol’s facilities in Sasolburg and Sasol Synfuels in
Secunda.

Raw materials

The natural gas purchased in Mozambique is transported by ROMPCO. Methane-rich gas is purchased

from the Sasol Synfuels facility in Secunda pursuant to a gas supply agreement. Sasol Synfuels has been
supplying methane-rich gas to us since 1994. We have recently renewed the gas supply agreement which is
effective as from 1 July 2006. Methane-rich gas is transported through Petronet’s Lilly pipeline and distributed
via our own pipelines to customers in the Kwazulu-Natal area as well as via our own pipelines to customers in
the Secunda, Witbank and Middelburg area.

Property, plants and equipment

The Mozambique to Secunda Pipeline The 865 km Mozambique to South Africa natural gas pipeline starts

from the natural gas central processing facility at Temane in Mozambique and ends at the pressure protection
station in Secunda in South Africa. The instantaneous peak capacity of the pipeline is 136 MGJ/a with an
average of 120 MGJ/a.

Inland Distribution Network The Gauteng network is fed from Secunda at a pressure of 4,500 kPa.

The network is operated at a pressure of 3,350 kPa and lower and the capacity of the distribution network
is 80 MGJ/a. These pipelines supply the various low pressure distribution areas as well as some customers
directly. Where these lines enter the various distribution areas, a pressure reduction station reduces the pressure
to 625 kPa.

Secunda, Witbank and Middelburg Distribution Network Sasol Synfuels produce and supply methane-rich

gas to Sasol Gas. This is fed into the Secunda-Witbank-Middelburg pipeline to feed the customers and users in
Mpumalanga province. The normal maximum operating pressure for this pipeline is 3,000 kPa. The capacity of
this distribution network is 10 MGJ/a.

KwaZulu-Natal Network The same methane-rich gas as supplied to Witbank and Middelburg is compressed

and fed into the Petronet transmission pipeline to feed our customers and users in the KwaZulu-Natal Province.
The operating pressure of the pipeline is 5,300 kPa. The maximum operating pressure of the pipeline
is 5,900 kPa and the capacity of the network is 20MGJ/a.

Sasol Synfuels International

Nature of operations and principal activities

Based in Johannesburg and formed in 1997, SSI, our technology marketing and support subsidiary, is

responsible for developing and implementing international business ventures based on our Fischer-Tropsch
synthesis technology. SSI initiates and develops new ventures from project conception through to venture
implementation. We expect that, in time, it will participate fully in supporting those ventures and the marketing
of their products after commercial start-up.

Working in partnership with Sasol Technology, SSI continues to explore for new opportunities to

commercialize Sasol’s competitive Fischer-Tropsch synthesis technology for the beneficiation of coal and other
hydrocarbon resources, including biomass.

The Sasol SPD™ process

Exploiting our long and extensive experience in the commercial application of Fischer-Tropsch technology,

we have successfully developed a Fischer-Tropsch-based SPD™ process for converting natural gas into high-
quality, environment-friendly diesel and other liquid hydrocarbons. The GTL process consists of three main
steps, each of which is commercially proven. These include:

• the Haldor Topsøe reforming technology, which converts natural gas and oxygen into syngas;

• our Slurry Phase Fischer-Tropsch reactor, which converts syngas into hydrocarbons; and

• where possible, the Chevron Isocracking™ technology, which converts hydrocarbons into particular

products, mainly diesel, naphtha and LPG.

Currently we believe, based on our knowledge of the industry and publicly available information, that on a

worldwide basis we have extensive experience in the application of Fischer-Tropsch technology on a commercial
scale, with Shell being the only other company with significant experience in this field. Given the increasing
discovery of extensive natural gas reserves, especially in remote regions, our Sasol SPD™ process can be
applied with significant commercial and efficiency advantages in various parts of the world. The transportation
of fuels in liquid form is easier and cheaper than the transportation of gas. As a consequence, our technology has
evoked interest from countries and companies with extensive natural gas reserves as an appealing alternative for
exploiting these reserves. In recent years, we have been actively promoting our Sasol SPD™ technology and are
examining several projects with a view to commencing commercial application at new GTL plants.

The Sasol SPD™ process converts natural gas into diesel and other liquid hydrocarbons which are

generally more environment-friendly and of higher quality and performance compared to the equivalent crude
oil-derived products. In view of product specifications gradually becoming more stringent, especially with
respect to emissions, we believe that the option of environment-friendly GTL fuels will become more appealing
in time. However, the construction of GTL facilities and the production of GTL fuels require significant capital
investments, at least during their initial stages, as is usually the case with the application of new technologies.
GTL fuels can be used with optimized engines for best performance, although they can also be utilized with
current compression ignition engines. We also expect that GTL diesel may be suitable as a cost-competitive
blend stock for conventional diesels, thereby enabling diesel producers to improve the quality of their existing
diesel formulations without investing substantially in sophisticated new plants and infrastructure. We anticipate
the combined factors of GTL diesel’s superior characteristics and the prevailing market conditions in developed
economies will enable GTL products to initially command premium prices for either niche applications or as a
blend stock for upgrading off-specification products.

The Sasol Chevron joint venture

In June 1999, SSI and Chevron Corporation, agreed to create a global alliance Sasol Chevron (SC) in order

to identify and implement ventures based on the Sasol SPD™ process as part of our strategy to exploit our
Fischer-Tropsch technology and to develop and commercialize the GTL process. We believe that there are
considerable synergies between the two companies, which will enable the alliance to accelerate both the
implementation of GTL ventures and the development of markets for the new products, to be produced from the
ventures that will be established. We finalized and implemented our global joint venture in October 2000.
SC and SSI continue to be involved in exploratory discussions and feasibility studies with some of the world’s
gas-rich countries, including Qatar, Nigeria, Algeria and Australia, with the view to develop GTL plants over the
next decade.

Increasing cost challenges

Our GTL ventures have not been spared the general challenges experienced by the industry caused by the

sharp increase in commodity prices and hence project cost. Because of the fortunate timing of the project award
and planning of orders for the major equipment our GTL project in Qatar has experienced only a limited impact
on cost. The GTL project in Nigeria has been more exposed, but we are working closely with all stakeholders to
deal with these challenges. We believe that these actions will be sufficient to address all known challenges. Both
projects are however showing robust economics, partly as a result of the positive impact of higher crude oil
prices.

Working closely with Sasol Technology’s Fischer-Tropsch process innovation teams at Sasolburg and

Johannesburg, SSI and SC are involved in an ongoing program aimed at further improving competitiveness by
lowering the capital and operating costs of future GTL plants.

We are confident that notwithstanding the cost challenges faced by the industry as a whole our technology

package still supports a very competitive GTL value proposition.

The Qatari GTL project

We have formed a joint venture with Qatar Petroleum (QP), Qatar’s state-owned energy company, the Oryx

GTL venture, in respect of the joint development of a 34,000 bpd GTL plant at Ras Laffan Industrial City in
Qatar. We hold 49% in this venture, with QP holding 51%. Since the project commenced in March 2003 a
dedicated Sasol management team has been established in Qatar.

In November 2002 we jointly appointed 15 banks as lead arrangers to provide the US$700 million non-

recourse debt financing for the venture. QP and SSI awarded the lump-sum, turnkey engineering, procurement
and construction (EPC) contract to the multinational, French-based engineering company, Technip, in December
2002. The EPC contract became effective in March 2003 after finalization of the financing agreements. The EPC
contract is being executed from Technip’s operations in Rome. Sasol Technology design engineers and project
managers are managing the technology, engineering and project management portfolios for SSI and QP.

Site work for the construction of the Oryx GTL plant began in September 2003. Civil engineering work,

including pipe laying, was completed by mid-2005. Most major pieces of long-lead-order equipment, including
the two low-temperature Fischer-Tropsch Slurry Phase reactors fabricated in Japan, Haldor Topsøe autothermal
reformers, a Chevron Isocracking™ unit and the compressors arrived at Ras Laffan in phases during 2005. The
inauguration of the plant took place on 6 June 2006. The commissioning of the plant has been delayed to the
second quarter of 2007 following damage during early commissioning to a supporting utility system. Most of the
Oryx GTL diesel will be marketed to customers in Western Europe, where much of this ultra-low-sulfur diesel
will most likely be used as blend stock for higher-sulfur diesel derived from conventional oil refining.

In March 2004, SC and QP announced plans to expand the Oryx GTL plant in order to increase its capacity

to about 100,000 bpd. In support of these plans, SC and QP signed a memorandum of understanding for the
expansion project that would add a further capacity of about 66,000 bpd. This expansion is still under review
and will partly depend on the timely availability of natural gas.

Escravos GTL (EGTL)

SC is participating in the development of a 34,000 bpd GTL plant, at Escravos in the Niger Delta region of

southern Nigeria. EGTL is a joint venture between the Nigerian National Petroleum Corporation and Chevron
Nigeria Limited, two companies with established petroleum production interests at Escravos. In April 2005 the
EPC contract for this project was awarded to Team JKS. Site preparation was completed and plant construction
commenced earlier this year and start-up of the EGTL facility is expected in the 2009 calendar year.

Early-stage investigation of potential GTL projects

QP and SC have agreed to evaluate the opportunity of developing an integrated GTL project, at Ras Laffan,

Qatar, with a capacity of about 130,000 bpd. SC has completed a feasibility study that will be presented to QP
for their support.

SC and Chevron Australia completed a joint pre-feasibility study for a GTL facility in Australia. SC is to

engage with Chevron Australia to agree on progressing with a feasibility study.

SC has continued with discussions regarding the upstream and downstream aspects of a potential Algerian

GTL project.

Coal beneficiation study for China

SSI and its Chinese partners are reviewing two coal-rich sites: one in Shaanxi Province at a site about

650 kilometers west of Beijing; and another in Ningxia Hui Autonomous Region at a site about 1,000 kilometers
west of Beijing. We have already established at Beijing a CTL project office with an initial complement of
10 specialists.

Working in partnership with the National Development Reform Commission of China and two potential

joint-venture partners, Shenhua Corporation and Shenhua Ningxia Coal Limited, SSI recently completed the pre-
feasibility studies for these CTL plants. The outcome of these pre-feasibility studies conducted during 2005 and
2006 was favorable.

Agreements were signed at Cape Town in June 2006 for the potential development of two CTL plants in

China. In terms of these agreements, SSI and the Chinese partners will complete feasibility studies for the
envisaged development of two CTL plants in China during 2008.

Our comprehensive feasibility studies will be based on CTL plants each with an 80,000 bpd capacity.

Should the investment decision be made to proceed with these projects, the plants could be brought into
operation as early as 2012/2013. The estimated capital cost for each plant is currently approximately
US$ 5 billion to US$ 6 billion.

Early-stage investigation of potential CTL projects

SSI has initiated engagement with key stakeholders to evaluate the potential for a CTL project in India.

This has resulted in the decision to open a representative office, likely in Mumbai, with an initial complement of
six specialists.

Sasol in association with two large US based energy companies has completed the pre-feasibility studies

undertaken in response to the passing of the US Energy Policy Act of 2005, which aims to combat growing
energy problems. A decision to progress to a full feasibility study is expected during the first half of 2007
calendar year.

Catalyst facility

To support our plans to globally develop and exploit our GTL technology, Sasol Technology developed a

cobalt catalyst for application in the Sasol SPD™ reactor to be utilized in future GTL plants. We entered in to a
co-investment agreement with BASF Catalyst during 2002 to manufacture proprietary advanced cobalt catalyst.
The first cobalt catalyst production facility with a current production capacity of 675 Mt per annum was
commissioned at De Meern in the Netherlands and has since been producing and stockpiling catalyst for our
Nigerian and Qatari GTL plants. We are currently undertaking engineering studies for the second catalyst plant
in the Netherlands.

Sasol Polymers

Our polymer-related activities are managed in two separate entities, Sasol Polymers a division of Sasol

Chemical Industries Limited and Sasol Polymers International Investments (Pty) Limited (Sasol Polymers
International Investments) a subsidiary of the Sasol Investment Company. Sasol Polymers International
Investments manages our offshore operations.

Nature of the operations and its principal activities

In Sasol Polymers we produce ethylene by separating and purifying an ethylene-rich mixture supplied by

Sasol Synfuels and by cracking of ethane. Propylene is produced by depropanizing a propylene-containing
Fischer-Tropsch stream supplied from the Sasol process. The ethylene is polymerized into low density
polyethylene (LDPE), linear low density polyethylene (LLDPE) and the propylene into polypropylene. We
operate a fully integrated chlor-alkali/polyvinylchloride chain. Ethylene and chlorine, which arises from on-site
chlor-alkali plants, are reacted to produce vinyl chloride monomer and then polymerized to polyvinylchloride
(PVC). Caustic soda, hydrochloric acid, soda hypochlorite and calcium chloride are other chlor-alkali products
which are produced.

We are a major South African plastics and chemicals operation with a vision of being a world-class

producer and supplier of quality monomers, polymers, chlor-alkali chemicals and mining reagents.

Our South African operation was formed from the Polifin group of companies, which was previously a

joint venture between Sasol and AECI. In 2000 Sasol purchased AECI’s shareholding. Polifin was divisionalized
in Sasol Chemical Industries Limited.

In South Africa Sasol Polymers has five operating businesses:

• Monomers;

• Polypropylene;

• Polyethylene;

• Vinyls; and

• Chemicals.

We have a 60% interest in Peroxide Chemicals (Pty) Limited, a joint venture with Degussa Africa (Pty)

Limited, a manufacturer and supplier of organic peroxide chemicals and a 50% interest in DPI Holdings (Pty)
Limited, a joint venture with Group Five Limited, a manufacturer of PVC pipes and components for the building
industry. Our board approved the disposal of interest in DPI Holdings (Pty) Limited to Dawn Limited for a
consideration of R51 million. The transaction was approved by the South African Competition Tribunal and
became effective during October 2006.

In Sasol Polymers International Investments we manage the following international investments:

• Our 12% shareholding in Optimal Olefins (Malaysia) Sdn. Bhd. (with Petronas of Malaysia and The

Dow Chemical Company of the USA), a manufacturer of ethylene and propylene. Optimal Olefins
operates a 600 kilotons per annum (ktpa) ethane/propane cracker.

• Our 40% shareholding in Petlin (Malaysia) Sdn. Bhd. (with Petronas of Malaysia), a manufacturer and

supplier of LDPE. A 255 ktpa tubular plant is operated by Petlin (Malaysia).

• Our 50% shareholding in Arya Sasol Polymer Company in Iran with Pars Petrochemical Company, a

subsidiary of the National Petrochemical Company, a manufacturer and supplier of ethylene (1,000 ktpa),
LDPE (300 ktpa), and medium and high density polyethylene (300 ktpa). The facilities are under
construction and are expected to be ready for operation between April and June 2007.

• A 40% share in Wesco China Limited (with Rhine Park Holdings), a polymer distributor in China and

Taiwan.

Strategy

To direct resources and activity within Sasol Polymers and Sasol Polymers International Investments, we

have two strategic ambitions:

• to lead the sub-Saharan African market with the existing product portfolio; and

• to expand through alliances and thereby to become a bi-regional business operating across the Indian

Ocean Rim.

In addition to the investment in the Petlin and Optimal Olefins plants in Malaysia and the recent

enlargement of the PVC/vinyl chloride monomer plants to 200 ktpa, two major expansions in pursuit of these
strategic ambitions have been undertaken and are nearing completion:

• in South Africa, Project Turbo is being implemented to upgrade gasoline blend components by Sasol

Synfuels at Secunda. This project will also result in increased ethylene and propylene feedstock and
hence expansions of production and purification plants have taken place in Secunda and Sasolburg.
Consumption of the additional ethylene and propylene will be in-house by means of a new tubular
reactor LDPE plant of 220 ktpa using ExxonMobil technology at Sasolburg; enlargement of the existing
Univation linear low density polyethylene (LLDPE) plant to 150 ktpa; and a new 300 ktpa Innovene
polypropylene plant at Secunda. Except for the polypropylene plant which is still under construction, all
other plants have achieved successful start-up and will consume monomers from Sasol Synfuels’ new
selective catalytic cracker at Secunda; and

• in Iran a complex comprising 1,000 ktpa of ethylene in an ethane-fed cracker, 300 ktpa of LDPE using

Sabtec technology, and 300 ktpa medium density polyethylene using Basell’s Lupotech G technology are
under construction.

Our South African plants will be able to continue to supply the growing needs of the South African

polymer markets for the immediate future in terms of PVC and LLDPE and for the medium to long term in
terms of LDPE and polypropylene.

Substantial investments in plant and equipment, technologies and skills have been made to achieve a

leading domestic market position in all core businesses.

Principal markets

Over the past three years between 83% and 86% of Sasol Polymers’ revenue has been earned from sales

into the South African market.

We are the sole polymer producer of PVC, LDPE and LLDPE in South Africa and hold the leading share of

these markets. Our main competition is in the form of polymer imports from Asian and Middle Eastern
producers. We supply 160 ktpa of ethylene and 100 ktpa of propylene under contract to The Dow Chemical
Company’s plastics operation in Sasolburg, South Africa, by pipeline for the production of HDPE and
polypropylene, respectively. We compete directly with The Dow Chemical Company in the polypropylene
market, where we hold 50% of the South African market. Caustic soda is sold into the pulp and paper, minerals
beneficiation and soap and detergent industries in South Africa. We hold a 40% share of the caustic soda market.
Another merchant supplier, NCP Chlorchem, has a 24% market share, the Mondi Paper Company produces
caustic soda for its own use (6% of demand) and a 30% shortfall exists in the South African market which is
serviced through imports.

We are the sole local producer of liquid cyanide which is sold to local gold producers. The major user of

calcium cyanide for the reworking of goldmine sand deposits ceased operation in March 2005, and the cyanide
assets were reconfigured to produce only sodium cyanide. Declining gold production in South Africa is the main
cause for reduction in sales of sodium cyanide in the past year.

Currently, we export polymers from our South African operations, 29% is sold into West Africa (Nigeria,

Angola, Ivory Coast, Senegal and the Democratic Republic of Congo); 23% is sold into China; 21% into East
Africa (Tanzania, Uganda and Kenya); 19% into Southern Africa (Zimbabwe, Zambia, Malawi, Mozambique
and Swaziland) and 8% into Western Europe with Spain being the largest market. Product from the Petlin plant
in Malaysia is sold into Malaysia, India, China, Australia, and New Zealand.

Seasonality

Global polymer demand does not show any marked annual seasonality although higher demand tends to

arise in the third quarter as converters stock up for the December holiday period.

The global polymer industry is, however, cyclical in terms of margins given the large capital investment

and the size of plants. The duration of a typical cycle is seven years and margins can vary from low trough
conditions to extreme peak conditions. During tight supply/demand periods, which usually coincide with
increases in economic activity as measured by gross domestic product, margins may increase disproportionately
with high peaks. In time margins reduce as investment is stimulated or as demand dissipates. It may happen that
too much capacity is installed which results in collapsed margins.

Raw materials

Feedstock for ethylene and propylene in South Africa is purchased from Sasol Synfuels at market-priced

fuel-alternative values. The mechanism for determining the fuel-alternative value is based on the Basic Fuel
Price. With the recent volatility in the oil price and refinery margins, our feedstock costs have put severe strain
on margins particularly as Far East polymer prices, though high in dollar terms according to historical norms,
have not fully responded to the increase in the oil-based costs of production. Salt used in our production process
is imported from Namibia and Botswana at US-dollar denominated prices.

Feedstock for Sasol Polymers International Investments’ joint venture cracker in Malaysia (Optimal

Olefins) is purchased from Petronas at a set price, unrelated to oil, that escalates annually in line with US
inflation rates. Petlin (Malaysia) buys its ethylene feedstock from Optimal Olefins at market related prices. Arya
Sasol (Sasol Polymers International Investments joint venture in Iran) will buy its feedstock, ethane, from the
Pars Petrochemical Company at a set price, unrelated to the oil price. In times of high oil prices this provides a
competitive advantage to the operations in Malaysia and Iran, compared to crude oil based producers.

Marketing channels

Our sales in South Africa are made directly to customers using our own marketing and sales staff. Sales

offices are located in Johannesburg, Durban and Cape Town. Account Managers are responsible for management
of our relationship with customers. Sales administration staff manage order processing, logistics and payment
collections.

For exports, an international trading business was established to sell directly into Southern Africa and

through distributors and agents into East and West Africa, the Far East, Europe and South America. No
infrastructure currently exists in the export markets with all administration and logistics arranged from the
Johannesburg office.

Property, plants and equipment

The following table summarizes the installed production capacities of each of our main product areas.

Production capacity

Product

South Africa

Malaysia

(ktpa)

Ethylene

456

Propylene

520

LDPE (Poly 1)

100

LDPE

220

102

LLDPE

150

Polypropylene

220

Ethylene dichloride

160

Vinyl chloride

205

PVC

200

Chlorine

145

Caustic soda

160

Cyanide

Hydrochloric acid

Calcium chloride

Includes our attributable share of the production capacity of equity accounted investees.

The 100 ktpa autoclave LDPE plant at Sasolburg (Poly 1) will be closed down as part of Project Turbo in

which a new 220 ktpa tubular LDPE plant has been built.

Sasol Solvents

Nature of the operations and its principal activities

We manufacture and globally market a range of primarily oxygenated solvents to various industries. These

are used in the manufacture of paints, inks, coatings, adhesives, pharmaceuticals, cosmetics, fragrances and other
applications. In addition to their solvent applications, a number of these products serve as intermediates for the
production of downstream chemicals. We believe that the breadth of our product portfolio is a competitive
advantage, compared to more limited portfolios of some of our competitors in the global solvents market.

Strategy

The Solvents strategy (Optimize – Perform – Grow) supports the overall group strategy.

The comonomers business unit which formed part of the Sasol Olefins & Surfactants business was

incorporated into Sasol Solvents for reporting purposes as a result of the proposed divestiture of Sasol Olefins &
Surfactants. The alpha-olefin comonomers, 1-pentene, 1-hexene and 1-octene, are manufactured at facilities in
Secunda as an integral part of Sasol’s synfuels process. The proposed divestiture of the Sasol Olefins &
Surfactants business has also led to certain organizational changes. These changes have not had a significant
effect on the strategy of our solvents business.

Sasol Dia Acrylates is a joint venture with Mitsubishi Chemical Corporation of Japan. The integrated, four-

plant facility produces acrylic acid used captively for the production of glacial acrylic acid, butyl acrylate and
ethyl acrylate from feedstock produced by the group. This facility underscores our commitment to expand our
chemical portfolio by adding value to chemical feedstock we produce.

Sasol Huntsman is a joint venture with Huntsman Corporation of the United States. This joint venture

operates a 55 ktpa maleic anhydride production facility in Moers, Germany.

Principal markets

In 2006, we sold approximately 1.58 Mt of products worldwide. We manage our global business from

offices in Johannesburg, South Africa and Hamburg, Germany. We operate thirteen regional sales offices and
seven storage hubs in South Africa, the Asia-Pacific region, the Middle East, the United States and Europe.

Our competition varies depending on the products and includes a number of major international oil and

chemical companies. In the market for ketones, our main competitors are ExxonMobil, Shell Chemicals and
Ineos. In the alcohols market, our main competitors are BP Chemicals, Shell Chemicals, The Dow Chemical
Company, Celanese and Equistar. In the market for acetates and acids, our main competitors include Celanese,
Eastman and BP Chemicals.

The comonomers produced by our operations in South Africa are used by third parties in the manufacture

of polyethylene plastics, which end up in applications such as shrink-wrap film, woven plastic bags and refuse
bags. The main competitors include Ineos, Shell and Chevron.

Marketing channels

We utilize a number of distributors worldwide as an extension of our sales and marketing force to enable

increased market penetration for end-use customers.

Property, plants and equipment

Production capacity

Product

Facilities location

Total

(ktpa)

Ketones

333

• Acetone

South Africa

175

• MEK

South Africa and Germany

130

• MiBK

South Africa

Glycol ethers

• Butyl glycol ether

Germany

Acetates

• n-Propyl acetate

South Africa

• Ethyl acetate

South Africa

Mixed alcohols

South Africa

181

Pure alcohols

860

• Methanol (C

)

South Africa

140

• Ethanol (C

)

South Africa and Germany

285

• n-Propanol (C

)

South Africa

• Isopropanol (C

)

Germany

225

• n-Butanol (C

)

South Africa

150

• iso-Butanol

South Africa

Acrylates

• Ethyl acrylate

South Africa

• Butyl acrylate

South Africa

• Glacial acrylic acid

South Africa

Comonomers

275

C5-C8 alpha olefins

South Africa

275

Other

South Africa and Germany

Consolidated nameplate capacities excluding internal consumption, including our attributable share of the production
capacity of equity accounted investees.

Approximately 75% of our production capacity is at sites in South Africa and 25% in Germany. The South

African production facilities are located at Secunda, Germiston and in Sasolburg. The German production
facilities are located at Herne, Marl and Moers in the Ruhr area.

Completion of an additional Methyl Iso-butyl Ketone (MiBK) train using improved Sasol technology which

will increase capacity by 30 ktpa is planned for the middle of 2008. The estimated expenditure amounts to
R250 million. A number of small de-bottlenecking projects will also be implemented.

A significant portion of our South African product is derived as a co-product of the synfuels process at

Secunda and certain products are synthesized from chemical feedstock. Ethanol, isopropanol and methyl ethyl
ketone (MEK) are synthesized from ethylene, propylene and butene, respectively, at the German plants. In South
Africa, butanol and acrylic acid are synthesized from propylene.

Certain of our products result from the downstream conversion of primary chemicals to higher value-added

derivatives, including:

• MiBK from acetone;

• ethyl acetate from ethanol;

• propyl acetate from propanol and acetic acid;

• ethyl and butyl acrylates from acrylic acid and the corresponding alcohols; and

• ethylene glycol butyl ethers from butanol and ethylene oxide.

We manufacture comonomers, 1-pentene, 1-hexene and 1-octene, at Secunda, South Africa. Market demand

for these products has been strong and, combined with the recent shutdown by a major competitor of a
US production plant, the supply/demand balance is healthy and is expected to remain so for the foreseeable
future.

Other activities

Sasol Wax

Nature of the operations and its principal activities

We produce and market wax and wax-related products to commodity and specialty wax markets globally.

We manufacture crude oil-derived paraffin waxes, as well as synthetic waxes produced on the basis of our
Fischer-Tropsch technology. Sasol Wax has its head office in Hamburg and employs 970 people globally.

The overall volume of products marketed by the business amounts to 822 ktpa, of which 27% are products
derived from the Fischer-Tropsch process. The main product portfolio includes paraffin waxes, both fully refined
and semi-refined, produced and marketed in various grades, as well as Fischer-Tropsch-based synthetic waxes
which include the Fischer-Tropsch-derived hard wax, the Fischer-Tropsch-derived medium wax and liquid
paraffins in the carbon range C

through C

. Various specialty blends of waxes are also produced and marketed.

We continue to develop niche markets for higher-value specialty waxes, such as those used by the food,
cosmetics, pharmaceutical, construction-board and adhesive industries. Demand for our liquid paraffins for
environmentally preferred drilling fluids has been growing in the Gulf of Mexico following the introduction of
more stringent US Environmental Protection Agency specifications for drilling fluids and other oilfield
chemicals. We produce, as a result, about 106 ktpa of wax emulsion at facilities in Germany, Austria and the
United Kingdom.

Strategy

Our strategy is to beneficiate synthesis gas (South Africa) and slack wax (Hamburg) to create value added
products marketed globally. We are a unique and important player in the wax market, having a product portfolio
sought after by customers in more than 100 countries.

Principal markets

The division markets its products globally, but its main markets are in Europe and the United States. In

both Europe and the United States, approximately 50% of paraffin waxes are sold to candle manufacturing
companies and the balance is sold to numerous industries, including rubber and tire, cosmetics, adhesives and
surface coatings industries and for use as a drilling fluid. Fischer-Tropsch-derived hard wax production is sold
predominantly in the United States and Europe, and also in Asia. Fischer-Tropsch-derived medium waxes and
paraffin waxes produced in South Africa are predominantly sold to the candle industry in South Africa.

The overall world market for waxes is estimated at about 3,300 ktpa and our main competitors in the

market are the Chinese producers China Oil and Sinopec. In specialty wax markets our main competitor
is H and R Wax Company.

Marketing Channels

Marketing is mostly done by own resources in all geographical areas where we operate. Primary marketing

areas are the United States and Europe, but we also market our products in Latin and South America, Southern
Africa, the Middle East, North Africa, Asia, and Australia. Distributors and agents are used but operate under
direct guidance from our marketing team.

Property, plants and equipment

The main production assets are located in Hamburg, Germany; Sasolburg and Durban, South Africa and

Richmond, California, United States.

Our plant in Hamburg has a production and blending capacity for paraffin wax of 300 ktpa. It purchases

slack wax feedstock from numerous lube-oil-producing refineries predominantly in Western Europe and from
Eastern Europe and Africa. We initially de-oil slack waxes to fully or semi-refined quality and fully hydrogenate
all final products. Subsequently, various product blends are produced. Products are sold either in liquid bulk or
in solidified form. This operation has a trading activity of about 100 ktpa.

Our plant in Sasolburg operates Fischer-Tropsch-based technology for the production of synthetic waxes. It

used coal-derived syngas as feedstock, which was converted to Mozambican natural gas as from July 2004. We
own and operate a wax plant integrated into the Engen refinery in Durban, South Africa. This plant produces
wax blends predominantly for the South African and other African candle industries. The production capacity of
the South African wax plants amounts to 240 ktpa of Fischer-Tropsch-derived products, of which 70 ktpa are
hard waxes, 80 ktpa medium waxes, 30 ktpa waxy oils and 60 ktpa liquid paraffins.

We also operate a major candle factory located in Johannesburg with a capacity of up to 30 ktpa, which

represents approximately 40% of the South African candle industry market.

In the United States, our wholly owned subsidiary Sasol Wax Americas, Inc. (formerly Moore and Munger

Inc.), based in Shelton, Connecticut, is engaged predominantly in trading activities, both in Fischer-Tropsch-
derived and paraffin waxes. Sasol Wax Americas, Inc. holds a 50% share in the Lux International Corporation
wax business based in Richmond, California. The total product manufactured and traded by Sasol Wax
Americas, Inc. in the United States amounts to approximately 100 ktpa.

Production capacity

Product

Facilities location

Total

(ktpa)

Paraffin wax

Germany

300

FT Hard wax

South Africa

FT Medium wax

South Africa

Waxy oils

South Africa

Liquid Paraffins

South Africa

Semi-refined paraffin wax

South Africa

Specialty wax blends

Germany, United States

Wax emulsion

Europe

100

Sasol Nitro

Nature of the operations and its principal activities

We manufacture and market ammonia, fertilizers, commercial explosives and related products. The division

also markets ammonia, sulfur and specialty gases produced by other entities in the group. All our production
activities are located in South Africa. We focus on supplying the Southern African market with selective exports
of fertilizers, ammonium nitrate-based explosives and explosives accessories.

Our product portfolio includes:

• ammonia;

• nitric acid;

• ammonium nitrate solution;

• sulfuric acid;

• hydrogen;

• phosphoric acid and phosphate derivatives;

• various grades of fertilizer;

• explosives-grade ammonium nitrate;

• various packaged explosives; and

• explosive accessories – non-electronic initiation systems.

Strategy

Having completed a period of consolidation and exiting from non-core businesses in the past 3 years, the

business is now well positioned to achieve growth. In the short-term (1-3 years) growth will be achieved mainly
through expansion of our current business. Over the longer-term (3-5 years) growth will be achieved through
development of new business. Long-term plans include inter alia, a biodiesel plant and an ammonium sulfate
plant.

Principal markets

Approximately half of our total ammonia production is used to produce ammonium nitrate-based fertilizers

and explosives. The remaining production is sold mainly to other South African explosives and fertilizer
manufacturers with small quantities made available for industrial usage in chemical manufacture and mineral
beneficiation.

The Sasol group is the only producer of ammonia in South Africa. Sasol Nitro produces half of this

ammonia and is the sole supplier to the market. Approximately 4% of South Africa’s ammonia requirement in
2006 was imported. Omnia and AECI are our two major customers for ammonia and compete in the downstream
fertilizer and explosives markets. We have entered into market-related contractual arrangements with these
customers.

Marketing channels

The combined impact of a drastic increase in the South African maize surplus at the end of the previous

planting season and sustained low prices for maize had a significant negative impact on maize plantings for the
2005/2006 season and thereby also the demand for fertilizers in Southern Africa.

The South African explosives market remains very competitive and prices are amongst the lowest

worldwide. Explosive products are supplied mainly to the Southern African market, with exports of explosives
grade ammonium nitrate mainly to Australia. Some quantities of cartridged explosives are also exported to other
African countries.

The market for explosive accessories in South Africa is significant with large quantities of detonators

required for extensive mining activities. Demand for products from Sasol Dyno Nobel (Pty) Limited, a joint
venture, reached record levels, mainly as a result of growth in niche markets. This business is poised for
further growth. The acquisition of the remaining 40% of Sasol Dyno Nobel (Pty) Limited for a consideration
of US$ 31 million (approximately R213 million) was approved on 30 August 2006.

Property, plants and equipment

Our 330 ktpa ammonia plant in Sasolburg uses natural gas as feedstock. The plant also produces hydrogen

that is sold to the oil and metal refining industries in South Africa. We also derive 330 ktpa of ammonia as a by-
product from coal gasification in Secunda.

Sasol Nitro operates two nitric acid plants. The smaller 315 ktpa unit in Sasolburg is linked to a

downstream ammonium nitrate plant. The ammonium nitrate produced in Sasolburg is used mainly for the
production of explosive grade low-density ammonium nitrate. The 470 ktpa nitric acid plant in Secunda supplies
a downstream ammonium nitrate plant linked to a 500 ktpa granulation facility that produces limestone
ammonium nitrate and various other grades containing nitrogen, phosphorus and potassium. Ammonium nitrate
for industrial use is sourced from both sites.

In Phalaborwa, adjacent to the phosphate rock mine of Foskor Limited (Foskor), Sasol Nitro operates a

325 ktpa phosphoric acid plant, of which 100 ktpa capacity has been mothballed since 2004 due to adverse
market conditions. Sasol has been toll manufacturing phosphoric acid for Foskor since September 2005 and a
longer term tolling deal is awaiting approval from the South African Competition Commission.

Sasol Nitro also manufactures bulk explosives at various mining sites and cartridged explosives in Secunda

and Ekandustria.

Sasol has exited the manufacture of electronic initiation systems. A sale of the electronic initiation systems

plant in Cape Town to Orica Limited was signed in June 2006.

Production capacity

Product

Facilities location

Total

(ktpa)

Ammonia

South Africa

660

Sulfur

South Africa

205

Granular and liquid fertilizers

South Africa

700

Fertilizers bulk blending

South Africa

300

Phosphates

South Africa

375

Explosives

South Africa

300

Includes volumes produced by Sasol Synfuels.

Includes 100 ktpa mothballed capacity at Phalaborwa.

Sasol Infrachem

Nature of the operations and its principal activities

Sasol Infrachem is the sole supplier of utilities and services to various Sasol businesses units (Sasol

Polymers, Sasol Solvents, Sasol Wax and Sasol Nitro) as well as external businesses in Sasolburg. We operate
and maintain the autothermal reformer (ATR) which reforms natural gas into synthesis gas on behalf of Sasol
Gas. Sasol Infrachem is also responsible for managing the group’s corporate affairs related to the Sasolburg and
Free State regions.

From July 2005 we converted from coal gasification to natural gas reforming at Sasolburg. The

environmental benefits of converting from coal to natural gas are being realized through a substantial reduction
in emissions to air (including hydrogen sulfide, carbon dioxide, NOx and volatile organic compounds).

Strategy

Our vision is to see all businesses prosper in Sasolburg. Our competent and committed people provide a

pace-setter platform for gas, utilities and site support services.

Our strategic ambition is to ensure a competitive advantage through reliable supply, cost competitiveness,

specialized knowledge and expertise in services, infrastructure and utilities.

Property, plants and equipment

Production capacity

Product

Facilities location

Total

Steam

South Africa

2 000 tph

Electricity

South Africa

176 MWh

Water

South Africa

100 Ml/day

Merisol

Nature of the operations and its principal activities

Merisol is a joint venture company formed in 1997 by the merger of Sasol Phenolics with the phenolics

activities of Merichem Company, based in Houston, Texas. The joint venture partners each own 50% of Merisol.
Merisol has a strong presence in the global market for natural phenolics and cresylics with manufacturing
facilities in Houston, Sasolburg and Oil City, Pennsylvania. Merisol has an interest in the production of synthetic
meta, para-cresol through a 50:50 manufacturing joint venture with Sumitomo Chemicals. Merisol also has a
20:80 venture (Merisol holding 20%) with Chang Chun of Taiwan for the production in Sasolburg of ortho-
cresol novolac, a precursor to high-performance epoxy resins used for encapsulating memory and processor
chips. Merisol is the supplier of ortho-cresol feedstock to this plant.

Natural phenolics are products related to phenol, which are derived as by-products of coal gasification, coal

carbonization and certain petroleum refining processes and are recovered for purification and separation. Merisol
manufactures the pure products, phenol, ortho-cresol, meta-cresol and para-cresol, and a diverse range of
blended products, consisting of mixtures of phenol, cresols, xylenols and other phenol derivatives. These blends
are known collectively as cresylic acids. Both the Sasolburg and Houston plants produce phenol- and ortho-
cresol and cresylic acids. The Houston plant uses proprietary separation technologies to produce high-purity
meta, para-cresol and pure meta-cresol and para-cresol, making Merisol one of the few producers of these
products in the world.

Principal markets

Merisol markets its products worldwide through sales offices in the United Kingdom, Hong Kong, the

United States and South Africa. Markets are served from product inventories held in Rotterdam, for the
European market, in Houston, for the US market and in Taiwan and Sasolburg for most other markets.

The pure products, phenol, ortho-cresol, meta-cresol and para-cresol, are sold in competition with

synthetically produced equivalents. Merisol is relatively small in the global phenol market, but strong in the
South African market and in selected niche markets elsewhere.

Merisol supplies major shares of the cresol and cresylic acids global markets for:

• ortho-cresol, where the main competitors include General Electric, Lanxess, Nippon Steel Chemicals,

Rütgers Chemicals and Deza;

• meta-cresol, where the main competitors include Lanxess, Honshu Chemical and Sumitomo Chemicals;

• para-cresol, where the main competitors include Degussa, Konan Chemical, Atul Chemicals and various

Chinese producers;

• high purity meta, para-cresol, where the main competitors include Mitsui Chemicals, Lanxess and

Sumitomo Chemicals; and

• wire enamel solvents where the main competitors are Rütgers-Chemicals, Deza, C-Chem and Mitsui

Chemicals.

Merisol derives about 80% of its turnover from the North and South America, Europe and Far East markets

and the balance from other regions.

Property, plants and equipment

Merisol’s Sasolburg plant uses feedstock from our coal gasification activities at Secunda. Merisol

completed the first and major part of its R400 million project to expand and improve feedstock recovery and
processing operations. This part of the investment includes a new Sasolburg plant to extract and refine additional
volumes of Secunda tar acids, to enable Merisol to grow with future market demand and compensate for the
decrease of other feedstock globally. These additional volumes are further processed at the Houston plant.
Following the successful completion of the new Sasolburg plant, the Houston operations are now in the final
stage of being rationalized and streamlined to reduce costs.

Merisol owns a butylation plant at Oil City, Pennsylvania, producing di-butyl para-cresol and meta-cresol

from meta, para-cresol and pure para-cresol feedstock made by Merisol at its Houston plant.

Production capacity

Product

Facilities location

Total

(ktpa)

Phenol

South Africa, United States

Ortho-cresol

South Africa, United States

Meta-cresol and para-cresol

United States

Pure meta,para-cresol

United States

Cresylic acids and xylenols

South Africa, United States

High-boiling tar acids

United States

Butylated products

United States

Sasol Petroleum International

Nature of the operations and its principal activities

Mozambique

Our natural gas extraction and processing activities on the Temane reservoir have been fully operational

since the first quarter of calendar year 2004. Current gas production levels (at 75% of the design capacity) are
very much in line with original expectations at the time of project approval.

The development of the Pande reservoir, with associated trunk and gathering lines to the gas processing

plant has been initiated, and is scheduled for completion by the end of the 2007 calendar year. This is the second
stage of development of the business and will bring gas production to 100% of design capacity.

Whilst the Mozambican government has been a 30% partner in the gas field development since inception,

they have now also acquired an interest in the gas processing plant. With effect from 1 April 2006, the effective
ownership structure of the current business in Mozambique is 70% Sasol Petroleum Temane Limitada (SPT),
25% Companhia Moçambicana de Hidrocarbonetos, SARL (CMH) and 5% International Finance Corporation.

Sufficient additional gas reserves exist in the Temane and Pande reservoir areas to support a 50% expansion

of the capacity of the current Mozambican business.

Onshore exploration activities continue, with some 1,000 km

of seismic surveys having been completed

during 2005, and good progress having been made with the environmental impact assessment that is required to
allow seismic surveys to be conducted in the Offshore Block 16/19 area during 2007. These exploration
activities are aimed at further expansion of gas reserves in support of market opportunities that have been
identified, both in South Africa and in Mozambique.

Gabon

In Gabon, we hold a 27.75% interest in the Etame marine block with the operator, Vaalco Gabon (Etame)

Inc. (28.07%) and other members of the consortium. Exploration efforts resulted in the discovery of the Etame
oil field in 1998. The field went on stream in 2002 at an average rate of 15,000 bpd. During 2006, the field
produced oil, at an average rate of 18,500 bpd. The last development well, Etame-6-Horizontal, came on stream
in July 2005. The field is currently producing from one vertical and three horizontal wells.

During the year, the Gabonese Government approved development plans for the Avouma field and agreed

that the Ebouri field was commercially viable. Both discoveries were made in the previous year. The Avouma
field is currently under development with the first oil expected to be produced by the end of the 2006 calendar
year. It will be tied back to the Floating Production Storage and Off-take (FPSO) vessel on the Etame field. This
will contribute significantly to the flow of oil from the block. The development plans of the Ebouri field are
nearly completed and will be submitted to the Gabonese government for approval during 2007. The field is
expected to be on stream by the end of the 2007 calendar year. The Gabonese government also approved a three
year extension of the exploration rights covering the acreage that is not yet producing. A large three dimensional
seismic survey will obtain a better understanding of a large structural closure.

In the Dussafu marine block offshore Gabon, we hold a 50% interest and are the operator. Our partners,

Premier Oil BV and Perenco s.a., hold 25% each.

In 2004 a dry hole was drilled but prospectivity remains on the block. Three dimensional seismic data on

the block was acquired during the year and will be incorporated into existing information with the aim to define
a location to drill a second exploration well. We are still deciding whether to enter the next exploration phase.

Equatorial Guinea

In Equatorial Guinea, we currently hold a 10% interest in Block L with Chevron (45%), Amerada Hess

(25%), and Tullow Oil (20%). We secured a farm-out agreement with Petrobras which when fully ratified by all
partners will reduce our interest to 5%. The Banyan L-2 well was drilled in 2006 and was a dry hole. The
partners are currently considering the remaining prospectivity of the block prior to the end of the current
exploration period in October 2006. This block carries no outstanding obligations in the current exploration
phase.

Nigeria

Through our relationship with Chevron we have gained entry into some highly prospective exploration

acreage in Nigeria. We have been offered a 5% interest in the OPL 214 permit. The farm-in has received all of
the necessary approvals and is currently being finalized. A successful exploration well was drilled in 2005 and
follow up drilling is being planned. We currently hold a 3.75% interest, after all approvals were received in June
2005, in the OPL 249 permit. The license includes part of the Bonga-SW/Aparo field on which a development
plan has been presented to the government for consideration. Appraisal drilling was completed on the N’siko
discovery and the development plan is in preparation. We have accepted a 6% interest in the OPL 247 permit.
The farm-in has received all of the necessary approvals but still awaits Nigerian governmental ratification.
A further opportunity to take up a 5.1% interest in Block 1 of the Nigeria/Sao Tome Principe joint development
zone has been accepted and government approval has been received. The partners are concluding internal
agreements to make this entry effective.

South Africa

We are a 10% partner in a prospecting sub-lease agreement, in Block 3A/4A, offshore of South Africa’s

West Coast. During the year, and as provided for in the 2005 farm-out agreement between Sasol and
BHP Billiton, operatorship of the block was transferred to BHP Billiton upon commencement of the second
exploration period. BHP Billiton also concluded a farm-out agreement for a 30% participating interest with the
South African State Oil Company, PetroSA. Reprocessing of three dimensional seismic data has been completed
by BHP Billiton.

Our strategy

Our strategic focus is on finding, developing and operating gas and oil opportunities. We continue to be a

gas feedstock supplier to the group’s South African businesses and the gas markets. We are aligning ourselves to
be a gas feedstock supplier to the group’s international GTL opportunities. In addition, we are striving to
become the centre of excellence within the group for enhanced oil and gas recovery uses for carbon dioxide.

Principal markets

Mozambique

Other than royalty gas provided to the Mozambican government, all gas produced is exported to South

Africa. The Mozambican government is dedicating royalty gas for use in the vicinity of the processing plant in
Temane as well as developing the gas market in the capital city, Maputo. The natural gas condensate produced in
the gas processing plant is currently exported via the port of Maputo to the Western European market, where it is
used as a fuel blend stock.

Gabon

Oil production from operations is sold on the open market.

Equatorial Guinea and Nigeria

There is currently no production as the projects are in the exploration, appraisal or early development

stages. Oil production from their future operations will be sold on the open market.

Marketing channels

Mozambique

In the ongoing business, all natural gas is sold on a long-term sales contract to Sasol Gas, for marketing in

the South African market. In the future it is foreseen that we will enter into a long-term sales agreement with a
single Mozambican entity that will purchase some of the additional gas volume that will become available from
the proposed expansion of the current operations for use in Mozambique.

Natural gas condensate has, up to now, been marketed in the international spot market by Sasol Oil. In the

future, it is foreseen that Sasol Petroleum Temane will enter into a long-term condensate sales agreement with an
international commodity trading organization.

Gabon

An annual sales contract is typically entered into based on a competitive bidding process and prices are

linked to international prices at time of sale.

Property, plants and equipment

Mozambique

Our gas processing facilities in Mozambique are located some 700 km north of the capital, Maputo.

Ownership is shared with the Mozambican government through CMH (25%) and the International Finance
Corporation (5%).

Gabon

The production occurs through a dedicated FPSO vessel. This is moored offshore at the site of the field.

Sasol Technology

Nature of the operations and its principal activities

Sasol Technology acts as the technology partner to all the business units through launching and helping to

sustain the Sasol growth initiatives. Sasol Technology aims to provide functionally driven support across
geographic boundaries through its research and development, new business development, engineering and
project management and plant technical support.

Strategy

The strategy for Sasol Technology is based on four pillars:

• to direct Sasol’s technology future;

• to position and structure Sasol Technology for short, medium and long-term performance and delivery;

• to ensure a sustainable execution capacity to deliver on business ventures; and

• to ensure meaningful work for the people allowing them and the company to excel and grow.

Sasol Technology, as the technology partner in the group, is fully committed to the growth objectives by

working together with the business units and taking responsibility for the long-term research and development of
technology improvements as well as developing new technologies. Through engineering and project execution
activities Sasol Technology demonstrates its commitment to the delivery of functional plants to our business
partners for their operation. Technical support works on an integrated basis with the business units’ operations
personnel to improve the profitability throughout the group.

The constraints that Sasol Technology experiences are related to available resources and capacity. These

constraints are manageable at this stage but are foreseen to become more problematic over the following years.
Strategic plans are being developed to address these issues.

Research and development

The central research and development division in Sasolburg, South Africa employs over 500 people who

focus on fundamental research, while the decentralized divisions focus on product applications. A phased
expansion and modernization program of the Sasolburg research facility was implemented with the aim to:

• enhance infrastructure through enabling the installation of new pilot-plants to expand operational

efficiency and flexibility;

• allow the relocation, upgrading and full integration of existing pilot plants;

• install modern process control systems; and

• improve the information generated.

This program was initiated after the completion of a comprehensive exercise to benchmark the structure,

equipment and performance of the research and development facilities against those of other international
organizations. The enhanced facilities will allow the opportunity to commercialize new and improved
petrochemical processes more effectively.

The central research function has a full suite of state-of-the-art pilot plants to support both current and the

development of future technologies.

Research activities are also conducted through external alliances and research collaborations with over

100 research institutions, consortia and universities worldwide. In addition, strong emphasis is placed on
training; as a result of this at least 20 of the employees from South Africa are at any given time studying abroad
in a continuing effort to ensure top level in-house research competency.

Fundamental research activities

Noteworthy Sasol technology research and development successes over the past decade include the

development of the Slurry Phase and Advanced Synthol reactors, the development of the proprietary cobalt
catalyst, the low temperature Fischer-Tropsch process, recarburized carbon, ethylene tetramerization and the
1-heptene to 1-octene conversion process.

A significant part of the research focuses on supporting the CTL and GTL technologies and associated

products. This includes research on coal gasification and gasification products, syngas conversion through the
application of Fischer-Tropsch synthesis and research relating to adding value to Fischer-Tropsch-derived
products. Catalysis research includes the development of both iron- and cobalt-based proprietary Fischer-
Tropsch catalysts. Sasol Technology has progressed in developing the second generation of the integrated Sasol
SPD™ process to convert natural gas into a clean-burning synthetic fraction of diesel and other premium-grade
products. In time, we plan to integrate some of the experience gained from operating the Nigerian and Qatari
GTL plants into the new-generation Sasol SPD™ process. Sasol Technology is also investigating chemical
expansion opportunities based on GTL plants. In particular, the fuel products of the GTL plants can be diverted
towards the production of chemicals. As was the case with chemical production at Secunda, unique beneficiation
technologies are being developed.

The wide range of products in our product portfolio requires extensive research on product work-up and

beneficiation, including separation and purification processes and new product development. Among other
carbon-based products and cresylic acids require adaptation of technology to meet product needs. Research has
been carried out on cresylic acids, another gasification by-product, on behalf of the Sasol joint venture with
Merisol, relating to purification of various associated products and adding value to certain feed streams.

Over the years, a strong competency has been developed in purification in order to extract high value alpha

olefins from Fischer-Tropsch products. This has helped to successfully develop purification processes for
1-pentene, 1-hexene, 1-heptene and 1-octene products, which allow the application of these products as
comonomers in polymers. Ongoing studies include those dedicated to the commercial viability of exploiting
metathesis and other processes to convert odd-number alpha olefins (such as 1-pentene and 1-heptene) into even-
numbered counterparts (such as 1-hexene and 1-octene), which are in far greater demand. Sasol Technology is
also focused on improving hydroformylation as an alternative process for producing specialty alcohols from
olefins. Sasol Technology has also been successful at increasing the purities of hexene and octene comonomers
to enable their optimal application with new-generation polyolefin catalyst systems. In order to benefit from the
projected demand growth in global markets for 1-hexene and 1-octene, we are investigating various potential
production routes, including ethylene trimerization and ethylene tetramerization.

Research is also focused on the reduction of the Sasol operations’ environmental footprint which includes

water treatment and purification. In this regard, special attention is given to water utilization, given the location
of some of the current and future plants in semi-arid areas. An integrated approach is being followed toward
optimization of current processes focusing, among others, on energy efficiency, emissions and water utilization.
End of pipe solutions include technology such as microbial treatment processes and desalination technology,
which has already been tested and implemented.

Continued focus is on identification and implementation of new technologies, to help reduce production

cost. This includes research focusing on the application of catalytic distillation in various new and existing
processes.

Renewable and alternative fuels are fast becoming important for future competitive strategies. Sasol

Technology is investigating biodiesel and fuel cells. We are experimenting with the formulation and performance
of biodiesels derived from soya beans as well as from Fischer-Tropsch applied on biomass derived syngas. We
expect that Sasol will be able to produce high-quality biodiesels based on renewable resources for potential use
as a future fuel blend stock.

We have implemented techniques such as computational chemistry and will embark on using combinatorial

chemistry during 2006, on a smaller scale, in order to improve productivity and speed up technology
development efforts.

Front end engineering and technology management

All front end engineering and technology integration and management is performed by specialist Sasol

Technology teams taking the ideas from our research and development teams and engineering them into a
commercial proposition for exploitation by the group.

The conceptual and basic design, engineering management and plant commissioning of projects is

undertaken on a integrated basis with the business unit leveraging with external technology suppliers and
contractors.

Project execution and engineering

Sasol Technology is responsible for the project engineering and project management of the major capital

projects in the group. The involvement is currently focussed in South Africa as well as Qatar for the execution
and handover of the plants. Delivery of smaller projects and shutdowns are also undertaken.

African Amines

African Amines is a 50:50 joint venture of Sasol and Air Products. It manufactures, purchases and sells

alkylamines, principally for use in explosives, water-treatment chemicals and agricultural chemicals. Its products
range includes:

• mono-methylamine;

• di-methylamine;

• mono-ethylamine; and

• iso-propylamine.

African Amines has production facilities in Newcastle, Kwa-Zulu Natal, in South Africa. This location

makes African Amines an efficient and cost-effective supplier to markets in Australasia, South America, the
Asia-Pacific region and the Indian subcontinent. African Amines tends to be less competitive in the main ports of
Europe and the United States due to the density of local producers serving those markets.

Discontinued operations

Sasol Olefins & Surfactants

We announced our intention to consider the divestiture of the Sasol Olefins & Surfactants business subject

to fair value being received. Substantial work was undertaken since the announcement to prepare the business
for sale including:

• issuance of the Information Memorandum on 22 May 2006 to interested parties inviting them to

participate in the auction process to acquire the business;

• completion of vendor due diligence regarding finance and tax, safety, health and environmental, human

resources and market/industry considerations; and

• evaluation of indicative bids received on 16 June 2006 and inviting certain interested parties to

participate in the next round of bidding.

All of this work was substantially completed by 30 June 2006.

The income statement has been restated for all periods to exclude Sasol Olefins & Surfactants from

continuing operations and report these results as a single line item. In the 2006 balance sheet the assets and
liabilities of Sasol Olefins & Surfactants have been classified as held for sale.

Nature of the operations and its principal activities

Sasol Olefins & Surfactants comprises four business units:

• Alkylates and surfactants;

• Alcohols and surfactants;

• Inorganic specialties; and

• Monomers.

Alkylates and surfactants

The main products of the business unit are paraffins, olefins (including poly-internal olefins), linear

alkylbenzene (LAB) and their surfactant derivatives such as paraffin sulfonate and linear alkylbenzene sulfonate
(LAS). LAB is the feedstock for the manufacture of LAS, an essential surfactant ingredient for the detergents
industry. Paraffins (n-paraffins) and n-olefins are produced mainly as feedstock for the production of LAB and
oxo-alcohols. A portion of this business unit’s products are used internally for the production of downstream
surfactants.

Alcohols and surfactants

The business unit produces a diversified portfolio of linear and semi-linear alcohols of carbon range

between C

and C

22+

. Nonionic and anionic surfactants enhance the product portfolio, as well as some surfactant

intermediates such as ethylene oxide, alkyl phenols and alkanolamines. The diversity of this product portfolio is
supported by the wide range of raw materials (petrochemical, oleochemical and coal-based), technologies and
manufacturing facilities used. A portion of the alcohols production is consumed internally to produce surfactants
and specialty plasticizers.

Inorganic specialties

This business unit produces mainly alumina products both as co-products from the Ziegler units (together

with alcohol) as well as in dedicated production units. The alumina is upgraded by means of a variety of
technical processes to adapt the product characteristics, in some cases to highly specialized products. This
business unit also produces zeolites in a production facility in Italy.

Monomers

The business unit produces ethylene in the United States at our ethane-based cracker in Lake Charles,

Louisiana.

Strategy

Our strategy has been to extract the maximum value from vertical value chain integration, and horizontal

integration by being present in both the major value chains in surfactant manufacture and technical and site
integration benefits from the three major producing countries, Germany, Italy and the United States. Furthermore
the business has fostered strong relationships with customers and has leveraged this to provide additional value
chain benefits by developing and supplying differentiated and specialty products. A challenge for the business
has remained the increasing and fluctuating raw material/feedstock pricing associated with crude oil and energy
prices.

Principal markets

The bulk of the production from the alkylates and surfactants business unit would end up as surfactants,

either produced internally or by other parties having acquired the intermediates from us. The bulk of these
surfactants in turn end in detergents or industrial or institutional cleaning products. The main competitors
include: ExxonMobil, Shell and Petresa in n-paraffins; Huntsman, Petresa and ISU in the LAB market; and
Stepan, Huntsman and Cognis in the LAS market.

Although a substantial portion of the alcohols and surfactants business unit products also end up in

detergents and industrial and institutional products, these products also find wide application in industries such
as metalworking, flavors and fragrances, personal care, cosmetics, plastic additives, textiles and agriculture. The
main competitors include Shell and Cognis.

Aluminas from the inorganic specialties business unit are used in a broad range of applications, including

catalyst support, raw material for ceramics, coatings and polymer additives. Competitors on aluminas include
Akzo Filtrol and BASF Catalyst. Zeolites are used as softening components in detergents. There are numerous
competitors in zeolites.

Ethylene is sold to plastic manufacturers in the US Gulf Coast region and is used internally to manufacture

alcohols. There are numerous competitors in the United States ethylene market.

Seasonality

There is very little seasonality associated with our products or the markets in which they participate.

Cyclicality of this business is more related to the general chemical investment cycle, which impacts the supply
side of the market equation. Many of the markets that we serve typically follow global and regional gross
domestic product and are therefore impacted more by macro-economic factors.

Raw materials

The main raw materials and feedstocks used in this business are kerosene, benzene, ethane, ethylene and

aluminum (all purchased externally). The price of most of these materials are related to crude oil and energy
pricing and the prices would follow the crude oil and energy pricing reasonably closely. Over the past 4 years
these crude oil and energy prices have been increasing steeply and have been quite volatile.

Marketing channels

Over 90% of the products produced by Sasol Olefins & Surfactants are sold directly to end-use customers

by our sales and marketing personnel. A limited number of distributors are used and are primarily centered in
Europe. Approximately 60% of the total sales by Sasol Olefins & Surfactants are conducted under annual and in
some cases multi-year contracts.

Property, plants and equipment

The following table summarizes the production capacity for each of our main product areas.

Production capacity

Product

Facilities location

Total

(ktpa)

Ethylene

United States

455

alcohol

United States, Europe, South Africa

625

Inorganics

United States, Europe

170

Paraffins and olefins

United States, Europe

990

LAB

United States, Europe

550

Surfactants

United States, Europe, Far East, Middle East

1,000

Legal proceedings and other contingencies

Litigation in respect of continuing operations

Fly Ash Plant Sasol Synfuels is in legal proceedings with regard to the operation of a plant in Secunda.

Ashcor has claimed damages of R313 million relating to its inability to develop its business and a projected loss
of future cash flows. We believe the prospect of future loss is reasonably possible with the loss unlikely to
exceed R10 million.

Nationwide Poles The South African Competition Commission received a complaint against Sasol Oil

(Carbo-Tar division) in April 2003. The complaint was referred by the plaintiff to the South African Competition
Tribunal. The Competition Tribunal found against Sasol that during the period of the complaint Sasol was a
dominant firm whose conduct met the test required in establishing prohibited price discrimination. The company
filed a notice of appeal and the appeal was heard by the Competition Appeal Court during September 2005.
Likelihood of loss is remote as the Competition Appeal Court found in favor of Sasol.

Nutri-Flo Nutri-Flo filed a complaint in 2002 alleging that Sasol Nitro was engaged in price

discrimination, excessive pricing and exclusionary pricing. In November 2003, Nutri-Flo made an urgent
application to the Competition Tribunal to obtain an interdict preventing Sasol from implementing a new price
list. In this application Nutri-Flo again filed a complaint on grounds similar to those specified above. In addition
it was alleged that Sasol, Kynoch and Omnia are acting as a cartel in fixing prices in the fertilizer industry.
Nutri-Flo subsequently withdrew its application. However, the South African Competition Commission has
investigated the complaint and in May 2005, referred the matter to the Competition Tribunal, alleging findings of
price fixing, prevention/lessening of competition, abuse of dominance and exclusionary conduct. The
Competition Commission requested the Competition Tribunal to impose the maximum administrative penalty in
terms of the South African Competition Act. Sasol took the matter on review to the South African Competition
Appeal Court. The court ruled against Sasol in April 2006 and the matter must consequently be heard by the
Competition Tribunal. Sasol has filed an exception to the referral of the complaint to the Competition Tribunal
on the basis that it is vague and does not disclose a clear contravention of the Competition Act. On the basis of
the pleadings in their current form, we believe the likelihood of a finding of unlawful conduct is remote. In the
event that the Competition Commission amends the referral, our current assessment may require review. For this
reason, it is currently not possible to make an estimate of the contingent liability (whether arising out of
penalties that may be imposed by the Competition Tribunal or civil lawsuits that may arise in the event of a
finding of unlawful conduct).

Sasol Wax On 28 and 29 April 2005 the European Commission conducted an investigation at the offices of

Sasol Wax International AG and its subsidiary Sasol Wax GmbH, both located in Hamburg, Germany. A parallel
investigation is being conducted by the US Department of Justice. On 28 April 2005 Sasol Wax Americas Inc.
received a subpoena for information from the United States District Court regarding its wax sales activities. The
investigations in the US and the European Union arise from alleged anticompetitive behavior among industry
members in the paraffin wax industry. Sasol Wax is co-operating with the competition authorities in the US and
in the European Union in order to clarify this issue. At this point of the investigation it is not possible to assess
the financial implications or inherent risk. A reliable estimate of the amount of the possible penalty cannot be
made, since the determination thereof is at the sole discretion of the antitrust authorities.

Profert Profert filed a complaint against Sasol in August 2004 alleging that Sasol Nitro refused to supply

Profert, that discriminatory pricing towards Profert in sales of LAN was committed and that Sasol is engaged in
exclusionary conduct to exclude Profert from the fertilizer market. In May 2006, the South African Competition
Commission referred the complaint to the South African Competition Tribunal alleging that Sasol, AECI and
Kynoch have entered into agreements dividing the LAN market in order to make Sasol the exclusive supplier,
that Sasol is engaged in conduct that favors Kynoch in supply arrangements to the exclusion of other suppliers,
and that Sasol is committing discriminatory pricing against Profert. The Competition Commission requested the
Competition Tribunal to impose the maximum administrative penalty in terms of the South African Competition
Act. Sasol filed a reply to the referral of the complaint on 4 August 2006. The Competition Commission has not

yet replied to Sasol’s submission. Preparations for the hearing are proceeding. On the basis of the pleadings in
their current form, we believe the likelihood of the Competition Tribunal imposing a penalty is remote. In the
event that the Competition Commission amends its referral, our current assessment may require review. For this
reason, it is currently not possible to make an estimate of the contingent liability (whether arising out of
penalties that may be imposed by the Competition Tribunal or civil lawsuits that may arise in the event of a
finding of unlawful conduct).

Sale of Phosphoric Acid production assets In June 2004, Foskor increased its phosphate rock price to such

an extent that Sasol indicated that it would shut down the operations in Phalaborwa. Sasol and Foskor then
entered into an agreement in terms of which Foskor would purchase the Phalaborwa plant. For the period that
this intended sale was under assessment by the regulatory authorities, the parties entered into an agreement that
Foskor would supply phosphate rock at its cost and Sasol would toll manufacture phosphoric acid for Foskor.
The toll manufacturing agreement commenced on 1 September 2005. In October 2005, the South African
Competition Commission issued a recommendation that the proposed merger be prohibited and referred the
matter to the South African Competition Tribunal. The parties abandoned the merger in June 2006 and notified
the Competition Commission that they intend to enter into a new toll manufacturing agreement for a period of
4 years. The Competition Commission has not expressed any view on whether the intended transaction would
amount to a merger or not. The parties intend to finalize the terms of a new toll manufacturing agreement and to
notify the Competition Commission of the provisions of such agreement. Views that may be expressed by the
Competition Commission will be taken into consideration prior to implementation of the new agreement.

The Competition Commission is also investigating whether the current toll manufacturing agreement (that

commenced in September 2005) amounts to pre-implementation of a merger without the required approval by
the Competition Tribunal and/or if there were any other unlawful agreements between Foskor and Sasol relating
to the proposed sale of the phosphoric acid assets. If the matter is ultimately referred to the Competition
Tribunal and the parties are found to have implemented a merger without the necessary Tribunal approval, the
parties could be faced with penalties of up to 10% of the turnover of their relevant businesses. We believe the
likelihood of the finding of unlawful conduct to be remote. In the event that the Competition Commission refers
the matter to the Tribunal, our current assessment may require review. For this reason, it is currently not possible
to make an estimate of the contingent liability.

Other From time to time Sasol companies are involved in other litigation and administrative proceedings in

the normal course of business. 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.

Litigation in respect of discontinued operations

The EDC pipeline litigation Sasol North America (Sasol NA) has numerous separate pending cases which

originated as a result of a 1994 rupture of the ConocoPhillips ethylene dichloride (EDC) pipeline connecting
Conoco’s dock to Sasol NA’s vinyl chloride monomer plant in the United States. Plaintiffs are seeking
compensatory and punitive damages as a result of alleged exposure to EDC. As of 30 June 2006 there is a class
action and 13 lawsuits pending, brought by approximately 500 plaintiffs. Plaintiffs allege various personal
injuries resulting from exposure to EDC while employed as contractors of ConocoPhillips to clean up the EDC
or to perform other projects on the ConocoPhillips refinery where the rupture occurred. The plaintiffs seek
recovery of unspecified compensatory and punitive damages. Sasol NA has successfully obtained substantial
insurance cover for costs to be incurred in connection with this litigation. Previous settlements for approximately
US$10 million of which Sasol NA’s share was US$3 million were made in 2003. While the cases are being
vigorously defended the likelihood of financial loss in the future is probable. The loss is unlikely to exceed the
amount of US$3 million for previously settled cases.

Under the Asset and Share Purchase agreement with RWE-DEA AG for the acquisition of Condea, the

costs in respect of the EDC pipeline cases are reimbursable by RWE-DEA AG less insurance and tax benefits.

Sulfur dioxide litigation During January 2003 Sasol NA and ConocoPhillips refinery released a quantity of

sulfur dioxide into the environment as a result of a power outage in the ConocoPhillips Lake Charles refinery.
Lawsuits were filed against ConocoPhillips and Sasol NA has since been added as a defendant. At 30 June 2006
more than 600 lawsuits had been filed on behalf of more than 20,000 plaintiffs. ConocoPhillips and Sasol NA
jointly defended the lawsuits and Sasol NA’s liability for defense and settlement costs has been limited by
agreement. Sasol NA has paid the “cap” as per the agreement and therefore we believe the prospect of future
loss in this matter is remote, with no future loss expected.

Yellow Rock litigation In July 2005 Sasol NA received notice of a suit filed by Yellow Rock LLC alleging

over US$1 million in damages and seeking an injunction that would require Sasol NA to remove its ethylene
from Salt Storage Dome 1-A in Sulfur, Louisiana near the Lake Charles Chemical Complex. The suit alleges
that in 2004 the Dome 1-A was leaking ethylene and caused the “blow out” of an oil and gas exploration well
being drilled by Yellow Rock. An integrity assessment of the well performed by an independent consultant in
early 2005 concluded that the Dome 1-A was not leaking. While these results were conveyed to Yellow Rock
and were approved by the Louisiana Department of Natural Resources, it did not deter the filing of suit. We
believe the prospects of future events confirming a loss are therefore remote.

US hearing loss cases There are presently approximately 160 hearing loss cases pending in the Sasol NA

business. These claims for occupational hearing loss in Louisiana are not covered by workers compensation. The
likelihood of loss is considered reasonably possible as these claims will be settled. The range of expected future
loss through settlement is estimated to be between US$ 800,000 and US$ 1,150,000.

Environmental Orders

The group is subject to loss contingencies pursuant to numerous national and local environmental laws and

regulations that regulate the discharge of materials into the environment or that otherwise relate to the protection
of human health and the environment in all locations in which it operates. These laws and regulations may, in
future, require the group to remediate or rehabilitate the effects of its operations on the environment. The
contingencies may exist at a number of sites, including, but not limited to, sites where action has been taken to
remediate soil and groundwater contamination. These future costs are not fully determinable due to factors such
as the unknown extent of possible contamination, uncertainty regarding the timing and extent of remediation
actions that may be required, the allocation of the environmental obligation among multiple parties, the
discretion of regulators and changing legal requirements.

The group’s environmental obligation for continuing operations accrued at 30 June 2006 was

R2,268 million compared to R2,161 million in 2005 (R238 million and R158 million was accrued for 2006 and
2005 respectively for our discontinued operations). Included in this balance is an amount accrued of
approximately R395 million (R134 million for our discontinued operations) 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 ongoing monitoring.
Due to uncertainties regarding future costs the potential loss in excess of the amount accrued cannot be
reasonably determined.

Under the agreement for the acquisition of Sasol Chemie, we received an indemnification from

RWE-DEA AG for most of the costs of remediation and rehabilitation of environmental contamination existing
at Condea Vista Company located in the United States on or before 1 March 2001.

Although the group 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 recognized. It is not expected that these environmental
obligations will have a material effect on the financial position of the group.

As with the oil and gas and chemical industries generally, compliance with existing and anticipated

environmental, health, safety and process safety laws and regulations increases the overall cost of business,
including capital costs to construct, maintain, and upgrade equipment and facilities. These laws and regulations
have required, and are expected to continue to require, the group to make significant expenditures of both a
capital and expense nature.

September 2004 Accident Trust

On 1 September 2004 the lives of ten employees and contractors were lost and a number of employees and

contractors were injured during an explosion that occurred at our Secunda West ethylene production facility.

Since January 2006, the Company, Solidarity, the Chemical, Energy, Paper, Printing, Wood and Allied

Workers’ Union and an attorney representing the unions have been in negotiations to find a mechanism to pay
compensation to the dependants of people that died or were physically injured in the accident to the extent that
they had not been previously compensated in terms of existing policies and practices. It was agreed to establish
an independent trust, the September 2004 Accident Trust, to expeditiously make ex gratia grants to persons who
were physically injured in the 1 September 2004 explosion at our Secunda West ethylene production facilities
and to the dependants of persons who died in that accident. The September 2004 Accident Trust was registered
on 29 June 2006. Qualifying victims of the accident have been invited to submit applications for compensation.
These grants will be calculated in accordance with the applicable South African legal principles for the harm and
loss suffered by them as a result of the accident to the extent that they have not already been compensated.

The Company will fund the September 2004 Accident Trust to pay the ex gratia grants. Whilst accepting

social responsibility, the Company has not acknowledged legal liability in creating the trust. As at 30 June 2006
it is believed that a loss contingency exists and that it is probable that the future claims will be received from the
dependents of the deceased or from those physically injured and to whom ex gratia grants will be made.
No accrual has been made as at 30 June 2006 as the amount of the loss cannot be reliably estimated. The future
payments are dependent on the number of applications submitted to the Trust, the independent findings of each
application and the calculation of the grants based on the applicable South African legal principles. It is believed
that the possible loss is unlikely to exceed R20 million.

Regulation

The majority of our operations are based in South Africa, but we also operate in numerous other countries

throughout the world. In South Africa, we operate coal mines and a number of plants and facilities for the
storage, processing and transportation of raw materials, products and wastes related to coal, oil, chemicals and
gas. These facilities and the respective operations are subject to various laws and regulations that may become
more stringent and may, in some cases, affect our business, operating results, cash flows and financial condition.

Empowerment of historically disadvantaged South Africans

The Liquid Fuels Charter

In November 2000, following a process of consultation, the Minister of Minerals and Energy and

representatives of the companies in the liquid fuels industry, including Sasol Oil, signed the Liquid Fuels Charter
setting out the principles for the empowerment of historically disadvantaged South Africans in the South African
petroleum and liquid fuels industry.

The Liquid Fuels Charter requires liquid fuels companies, including Sasol Oil, to ensure that historically

disadvantaged South Africans hold at least 25% equity ownership in the South African company holding their
liquid fuels assets by the calendar year 2010. It also envisages methods of measuring progress by requiring
participants in the industry to meet targets set in connection with transformation of ownership. In addition, the
Liquid Fuels Charter requires that historically disadvantaged persons be given preferred supplier status, where
possible, in the procurement of supplies, products, goods and services, as well as access to use and ownership of
facilities.

Sasol and Exel’s BEE transaction

One of our major BEE transactions was the establishment of Exel in November 1997 as a 22.5% minority

shareholder. At the time of the merger with Sasol Oil, Exel was a model empowerment enterprise 77.5% owned
and controlled by HDSAs. With the help of Sasol, through the secondment of specialized personnel, the

provision of technical support and training, and other support services, Exel evolved rapidly from a zero base to
establishing 195 retail fuel stations by December 2003. By that time, Exel had won 4% and 7% of the
competitive South African liquid fuels retail and commercial markets, respectively. Exel recorded an operating
profit (before interest and tax) of almost R8 million in 1998. Five years later, the company posted an annual
operating profit of more than R100 million. Subsequently Sasol Oil acquired the entire shareholding of Exel
with the empowerment partners obtaining a 2% interest directly in Sasol Oil.

Sasol and Tshwarisano BEE transaction

It is our fundamental objective to comply with the terms of the Liquid Fuels Charter. We have therefore

facilitated a transaction with our BEE partner in the form of Tshwarisano.

It was initially envisaged and announced that Tshwarisano would have acquired a 12.5% shareholding in

the former proposed joint venture if the Competition Tribunal had approved the proposed merger of our liquid
fuels business with Petronas’ South African liquid fuels business. Pursuant to the Competition Act of 2000, the
Competition Tribunal prohibited the merger on 20 February 2006.

By agreement as a result of the proposed merger not occurring, Tshwarisano has acquired a 25%

shareholding in Sasol Oil effective 1 July 2006.

BEE policies

As from 1 July 2006, Sasol Oil will meet the 25% BEE ownership target with Tshwarisano holding 25% of

the shares in Sasol Oil with BEE policies as follows:

• procuring goods and services, on a preferential basis, from HDSAs;

• progressing employment equity in our businesses, with focus on employment equity, capacity building,

training and development;

• facilitating the development of small, micro and medium-sized enterprises and focusing on training,

entrepreneurship and broadening the dealer mix; and

• advancing social upliftment objectives and nation-building.

Employees

In keeping with the spirit of the Liquid Fuels Charter, as well as the Employment Equity Act, we have set

employment equity targets. This requires that advantageous treatment be given to HDSAs in aspects of
employment such as hiring and promotion. Employment Equity targets are set out and reviewed periodically to
ensure that they are met. Special training and mentorship programs are in place to create a work environment
that is suited to the successful nurturing of HDSA staff.

Procurement

Procurement is a crucial element of BEE as set out in the Liquid Fuels Charter, as well as in other industry

charters and government policy. BEE procurement affords smaller industry players the opportunity to participate
meaningfully in the sector. As prescribed in the Liquid Fuels Charter, HDSA companies are accorded preferred
supplier status as far as possible.

Sasol Oil has established a BEE procurement policy, an enhanced procurement governance model and

unique strategies to stimulate growth in its BEE spend.

Corporate social investment

We focus on facilitating the socioeconomic development of the communities in which we operate, through

partnerships with key stakeholders in these communities.

Social investments are presently channeled into five main areas:

• education (particularly in math and science);

• job creation and capacity building;

• health and welfare;

• arts, culture and sport development; and

• environment.

The Mining Charter

In October 2002, the government and representatives of South African mining companies and

mineworkers’ unions reached broad agreement on the Mining Charter, which is designed to facilitate the
participation of HDSAs in the country’s mining industry. The Mining Charter’s stated objectives include the:

• expansion of opportunities for persons disadvantaged by unfair discrimination under the previous

political dispensation;

• expansion of the skills base of such persons;

• promotion of employment and advancement of the social and economic welfare of mining communities;

and

• promotion of beneficiation, or the crushing and separation of ore into valuable substances or waste within

South Africa.

The Mining Charter, together with a scorecard which was published on 18 February 2003 to facilitate the

interpretation of and compliance with the Mining Charter (the scorecard), requires mining companies to ensure
that HDSAs hold at least 15% ownership of mining assets or equity in South Africa within five calendar years
and 26% ownership within ten calendar years from the enactment of the new Mineral and Petroleum Resources
Development Act (MPRD Act) which came into force on 1 May 2004. The Mining Charter further specifies that
the mining industry is required to assist HDSAs in securing finance to fund their equity participation up to an
amount of R100 billion within the first 5 calendar years after the coming into force of the aforementioned Act.
Beyond this R100 billion commitment, the Mining Charter requires that participation of HDSAs should be
increased towards the 26% target on a willing-seller willing-buyer basis at fair market value

Various principles of the Mining Charter have been incorporated in regulations promulgated by the

Minister of Minerals and Energy under the MPRD Act with respect to the South African mining industry. These
regulations came into force on 1 May 2004.

The scorecard provides a method of indicating the extent to which applicants for the conversion of their

mineral rights under the MPRD Act have complied with the provisions of the Mining Charter. It is intended that
the entire scorecard would be taken into account in decision making. Notes attached to the scorecard provide
guidance in interpreting the objectives of the Mining Charter.

On 16 March 2006 we announced the implementation of the first phase of Sasol Mining’s broad-based

BEE strategy through the formation of Igoda Coal, an empowerment venture with Eyesizwe Coal, a black-
owned mining company. Igoda Coal will be one of South Africa’s largest empowered coal export companies.
Eyesizwe Coal will own 35% of Igoda Coal, while Sasol Mining holds the remaining 65%. Igoda Coal will
become fully operational as a statutory business entity and take transfer of the relevant mining area from Sasol
Mining once the transfer of the mining rights have been effected. It is expected that the transaction will become
effective in 2007.

As a result of this transaction we will obtain credit towards equity ownership targets. It has been announced

that we will further expedite plans to advance the second phase of Sasol Mining’s broad-based BEE ownership
strategy. This strategy will see Sasol Mining achieve full compliance with the Mining Charter’s 2009 and 2014
targets for BEE ownership, respectively, through conversion of its mining rights.

The Restitution of Land Rights Act

Our privately held land and mineral rights could be subject to land restitution claims under the Restitution

of Land Rights Act 1994. Under this Act, any person who was dispossessed of rights in land in South Africa as a
result of past racially discriminatory laws or practices is granted certain remedies, including, but not limited to:

• restoration of the land claimed with or without compensation to the holder;

• granting of an appropriate right in alternative state-owned land to the claimant; or

• payment of compensation by the state or the holder of the land to the claimant.

If land is restored without fair compensation, it is possible that a constitutional challenge to the restoration

could be successful. Once a land claim has been lodged with the Commission on Restitution of Land Rights, the
rights of any person in respect of such land are restricted in that he may not perform certain actions relating to
the land, including, but not limited to, selling, leasing or developing such land, without the consent of the
Commission. The Commission is obligated to notify the land owner of such a claim lodged or any other party
which might have an interest in a claim. All claims had to have been lodged with the Commission by
31 December 1998. Although this was the final date for filing claims, many claims lodged before the deadline
are still being reviewed and not all parties who are subject to claims have yet been notified. We have not been
notified of any land claim that could have a material adverse effect on our rights to any of our significant
properties.

The Restitution of Land Rights Amendment Act became law on February 2004. Under the original Act, in

the absence of a court order, the power of the Minister for Agriculture and Land Affairs to acquire or expropriate
land for restitution purposes is limited to circumstances where an agreement has been reached between the
interested parties. The Act would entitle the Minister to expropriate land in the absence of agreement. Such an
expropriation could be for restitution or other land reform purposes. Compensation payable to the owner of the
land would be subject to the provisions of the Expropriation Act 63 of 1975 and section 25(3) of the
Constitution which provides, in general, that compensation must be just and equitable.

Broad-based Black Economic Empowerment Act

The South African Department of Trade and Industry introduced the Broad-based Black Economic

Empowerment Act (the Act). The Act’s stated objectives are to:

• promote economic transformation in order to facilitate meaningful participation of black people in the

economy;

• achieve a substantial change in the racial composition of ownership and management structures in new

and existing enterprises;

• increase the instance of ownership and management of communities, workers and collective enterprise

cooperatives in new and existing enterprises;

• promote investment programs that lead to broad-based and meaningful participation by black people in

the economy in order to achieve sustainable development and general prosperity; and

• develop rural communities and empower local communities by enabling access to economic activities,

land, infrastructure, ownership and skills.

The Act establishes a Black Economic Empowerment Advisory Council (the Council) to advise the

President on BEE. In terms of the Act, the Minister of Trade and Industry may issue codes of practice on BEE,
which may include:

• the interpretation and definition of BEE;

• qualification criteria for preferential purposes for procurement and other economic activities;

• indicators and weighting to measure BEE;

• guidelines for stakeholders in the relevant sectors of the economy to draw up transformation charters for

their sectors;

• the development of a system of reporting on the implementation of BEE; and

• any other matter necessary to achieve the objectives of the Act.

The Act provides that every organ of the State must take into account any relevant code of practice issued

pursuant to the Act in determining qualification criteria for the issuing of licenses and other authorizations
pursuant to any law and in developing and implementing a preferential procurement policy.

The Minister of Trade and Industry may propose regulations under this Act.

Codes of good practice for broad-based black economic empowerment (the Codes)

Draft codes of good practice were issued for comment by the Minister of Trade and Industry in December

2004 pursuant to the Act mentioned above. These draft codes are in the process of being amended so as to
provide further clarity as to the organization of the Codes.

Progress to date includes the publishing of Phase 1 of the Codes in November 2005, which includes the

following:

• Code 000: Framework for the Measurement of Broad-based BEE;

• Code 100: Measurement of the Ownership Element of Broad-based BEE; and

• Code 200: Measurement of the Management and Control Element of Broad-based BEE.

Additional draft codes were also issued for public comment in December 2005 as Phase 2 of the Codes.

This phase of the Codes provides further clarity on Codes 000, 100 and 200 referred to above and set out in
Codes 300 to 1000 outlining measurement of employment equity, skills development, preferential procurement,
enterprise development, the residual element, any sector codes and qualifying small enterprises.

Pursuant to the published codes and draft codes, private sector enterprises are urged to apply the principles

contained in the Codes when implementing broad-based BEE initiatives. In interactions with public entities and
organs of state, it is considered essential that the private sector applies these principles to ensure full recognition
for their efforts. Furthermore, it is considered desirable that the private sector also apply these principles in their
interactions with one another.

Stakeholders are encouraged to align any legislation properly enacted prior to the Act, which imposes BEE

objectives, with the Act and the Codes. This will apply specifically to the Liquid Fuels Charter as contained in
the Petroleum Products Amendment Act and the Mining Charter as contained in the Mineral and Petroleum
Resources Development Act which shall remain in force unless amended, substituted or repealed. Alignment of
all such legislation, over time, will reduce any residual uncertainty.

Regulation of mining activities in South Africa

The Minerals Act

For the period up to 30 April 2004, all mineral rights, encompassing the right to prospect and mine, were

held, either privately or by the government of South Africa. Ownership of private mineral rights was held
through title deeds and constitutes real rights in land, which are enforceable against any third party. Prospecting
and mining were regulated by the Minerals Act and South African common law. The Minerals Act regulated the
prospecting for and the optimal exploitation, processing and utilization of minerals, in addition to imposing
reclamation requirements on prospecting and mining operations. The Act required that anyone undertaking
prospecting or mining operations had to compile an environmental management program and to provide for the
environmental impact of the proposed prospecting or mining activities. This program had to be approved by the

relevant Director of Mineral Development. The Minerals Act has subsequently been repealed by the
implementation of the Mineral and Petroleum Resources Development Act (Act 28 of 2002), which came into
effect on 1 May 2004.

Under the Minerals Act, we owned all the coal rights for the properties over which we have mining

authorizations, except for small tracts of land at Secunda, which were owned by the government of South Africa
and for which we have obtained the government’s consent to mine in consideration for the payment of a royalty
per ton of coal mined from those properties.

The Mineral and Petroleum Resources Development Act (MPRD Act)

The fundamental principle of the MPRD Act is the recognition that the mineral resources of the country are

the common heritage of all South Africans and therefore belong to all the people of South Africa. The Act vests
the right to prospect and mine, including the right to grant prospecting and mining rights on behalf of the nation,
in the state, to be administered by the government of South Africa. Thus, the state is the guardian of all mineral
rights and has the right to exercise full and permanent custodianship over mineral resources.

The MPRD Act imposes significantly more stringent environmental obligations on mining activities than

the repealed Minerals Act. However, it contains transitional arrangements for existing operations. Under these
transitional provisions, the environmental management programs will continue in force, as the Department of
Minerals and Energy (DME) introduces the more stringent requirements of the MPRD Act.

The MPRD Act adopts the environmental management principles and environmental impact assessment

provisions of the National Environmental Management Act. The MPRD Act addresses the allocation of
responsibilities for environmental damage, pollution and degradation and imposes rehabilitation obligations. It
significantly extends the scope of liability of directors who may be jointly and severally liable for any
unacceptable negative impact on the environment, advertently or inadvertently caused by the company. It also
allows the state to take remedial action and claim costs. It maintains the requirement for an environmental
management program for all mining operations, but with more detailed specifications than under the Minerals
Act, and prohibits the carrying out of mining activities before the approval of the program. When rehabilitation
is required, it is not limited to the land surface. We were in material compliance with the repealed Minerals Act,
and we expect to continue to be in compliance with the new legislation.

Mining rights

Transitional provisions are included in the MPRD Act, which phases out privately held mineral rights held

under the repealed legislation. The transitional provisions contemplate three types of rights:

(a) mineral rights in respect of which no prospecting permit or mining authorization has been issued

and/or no prospecting or mining activities are taking place;

(b) mineral rights in respect of which prospecting permits have been issued and prospecting is taking

place; and

The rights described in these three categories are defined as Old Order rights. Under category (a), the

holders of privately-held mineral rights had to apply for a prospecting or mining right in their own names to
replace their existing mineral rights by 30 April 2005. Under categories (b) and (c), any prospecting permit or
mining authorization granted under the previous legislation would continue to be valid for a maximum period of
two and five calendar years from enactment, respectively. After the lapse of the one-year period referred to in
category (a) and the respective periods in categories (b) and (c), the mineral rights will cease to exist. Within
these periods, the holders of mineral rights and prospecting permits or mining authorizations, in order to
continue with their mining or prospecting operations, must apply for a new prospecting right or mining right in
respect of category (a) and for conversion to new prospecting or mining rights in respect of categories (b)
and (c).

Under the Act, prospecting rights will be granted for an initial maximum period of five calendar years, and

could be renewed once, upon application, for a period not exceeding three calendar years. Mining rights will be
valid for a maximum period of thirty calendar years, and could be renewed, upon application, for further
periods, each not exceeding thirty calendar years. Provision is made for the grant of retention permits, which
would have a maximum term of three calendar years and could be renewed once, upon application for a further
two calendar years.

A wide range of factors and principles will be taken into account by the Minister of Minerals and Energy

when considering these applications. These factors include the applicant’s access to financial resources and
appropriate technical ability to conduct the proposed prospecting or mining operation, the environmental impact
of the operation and, in the case of prospecting rights, considerations relating to fair competition. Other factors
include considerations relevant to promoting employment and the social and economic welfare of all South
Africans and showing compliance with the provisions of the Mining Charter for the empowerment of HDSAs in
the mining industry.

Part II of the Regulations promulgated under the MPRD Act relate to the social and labor plan that must

accompany any application for a mining right. The Mining Titles Registration Amendment Act (Act 24 of 2003)
and regulations have been implemented simultaneously with the implementation of the MPRD Act. It provides
the mechanism to give effect to the provisions of the MPRD Act, in particular with regard to the registration of
rights under that Act. Draft regulations under this Bill have also been published for comment.

Sasol Mining held various prospecting permits or mining authorizations with respect to our existing mining

operations, which are now being classified as old order rights. We have commenced with the process to apply for
conversion of our existing mining and prospecting rights into new order rights and for any new licenses Sasol
Mining may require under the MPRD Act. It is the declared intent of the South African government not to
disrupt operations as a result of the introduction of the new legislation. When considering applications for the
conversion of existing mineral rights under the MPRD Act, the Minister of Minerals and Energy must take into
account, among other factors, the applicant company’s compliance with the Mining Charter. We intend to
undertake any appropriate action required to ensure conversion of our existing mineral, prospecting and mining
rights under the MPRD Act.

The act provides that a mining right granted under the Act may be cancelled if the mineral to which such a

mining right relates is not mined at an optimal rate.

Furthermore, royalties from mining activities will become payable to the state under provisions contained

in the Mineral and Petroleum Resources Royalty Bill. This Bill was first published in March 2003 and has since
been revised, with the final Bill being published on 11 October 2006. The Bill provides for a royalty rate of 1%
on coal with an ash content of higher than 15% for South African energy consumption and 3% on coal with an
ash content lower than 15%. The royalty is revenue based, payable bi-annually in arrears to the state, and will
take effect on 1 May 2009. The royalty will be deductible for normal income tax purposes.

Regulation of pipeline gas activities in South Africa

The Gas Act

The Gas Act came into effect on 1 November 2005 as proclaimed by the President. The Gas Act regulates

matters relating to gas transmission, storage, distribution, liquefaction and re-gasification activities. Among its
stated objectives are:

• promoting the efficient development and operation of the respective facilities and the provision of

respective services in a safe, efficient, economically and environmentally responsible way;

• promoting companies in the gas industry that are owned or controlled by HDSAs;

• promoting competition and investment in the gas markets; and

• securing affordable and safe access to gas services.

The Gas Act provides for the powers of the National Energy Regulator of South Africa (NERSA) regarding

pipeline gas, whose powers include the issuance of licenses for a range of activities including:

• the construction, conversion or operation of gas transmission, storage, distribution, liquefaction and re-

gasification facilities; and

• trading in gas.

NERSA has the authority to determine maximum prices for distributors, reticulators and all classes of

consumers where there is inadequate competition as contemplated in the South African Competition Act.
NERSA may impose fines not exceeding R2 million a day, if a licensee fails to comply with its license
conditions or with any provisions of the Gas Act.

The National Energy Regulator Act

The National Energy Regulator Act came into operation on 15 September 2005 as proclaimed by the

President. The National Energy Regulator Act provides for the establishment of a single regulator to regulate the
piped gas, petroleum pipeline and electricity industries and for the functions and composition of the energy
regulator.

On 1 November 2005 NERSA, pursuant to the National Energy Regulator Act, came into existence by the

appointment of the four full-time regulators, of which one is the designated chief executive officer of NERSA.
The Regulator consists of nine members, including four full-time members and five part-time members.
Although the full-time members of NERSA are appointed for specific portfolios (gas, electricity and petroleum
pipelines), NERSA will operate as a collective and decisions will be made on a collective basis.

According to Section 35 of the Gas Act license applications for existing business activities had to be

submitted to NERSA within six months from the effective date of the Gas Act (2 May 2006) by any person
owning or operating gas facilities or trading in gas. Accordingly, ROMPCO submitted an application for the
operation of a gas transmission facility whilst Sasol Gas submitted license applications for the operation of
distribution facilities as well as for trading in gas.

All the license applications have been compiled in accordance with the Gas Act and the rules published by

NERSA. In accordance with the rules, the applications were advertised, inviting objections within a 30-day
period. Thereafter NERSA has 60 days to consider the objections and responses thereon in order to decide on
the granting of the licenses. As the regulations under the Gas Act have not been promulgated yet, Sasol Gas
envisages that the decision on granting of the licenses should be concluded during the first quarter of the 2007
calendar year.

The Mozambique Gas Pipeline Agreement (Regulatory Agreement)

This agreement entered into between the Minister of Minerals and Energy of South Africa, the Minister of

Trade and Industry and our company in connection with the introduction of natural gas by pipeline from
Mozambique into South Africa is incorporated into the Gas Act through the reference thereto in Section 36 of
the Act. The Gas Act provides that the terms of the agreement bind the Gas Regulator for a period until 10 years
after natural gas is first received from Mozambique (26 March 2004). From the date of the conclusion of the
agreement, the terms of the agreement relating to the following matters constitute conditions of the licenses to
be issued to Sasol Gas and ROMPCO under the Gas Act:

• our rights and periods granted in respect of transmission and distribution of gas;

• third party access to the transmission pipeline from Mozambique and to certain of our pipelines;

• tariffs we charge for gas;

• our obligation to supply customers, distributors and reticulators with gas; and

• the administration of the agreement.

As part of the Gas Act, the Mozambique Gas Pipeline Agreement forms part of the legislation and as such

it may be susceptible to the same legislative processes generally applicable to changes in legislation.

The Gas Regulator Levies Act was signed into law on 15 January 2003 and came into effect on

1 November 2005. It provides for the imposition of levies by the Gas Regulator on the amount of gas delivered
by importers and producers to inlet flanges of transmission or distribution pipelines. These levies will be used to
meet the general administrative and other costs of the gas regulation activities of NERSA and the functions
performed by NERSA in this regard. In terms of the Act, NERSA has submitted a budget to the Minister of
Minerals and Energy, which after approval by the Minister in conjunction with the Minister of Finance, will be
relayed into a levy charged as a per gigajoule levy on the volumes of gas transported. The regulations published
under the Gas Act for comment specifically precludes the recovery by licensees of such levies from their
customers.

Regulation of petroleum-related activities in South Africa

The Petroleum Products Amendment Act

This Amendment Act, which became effective on 17 March 2006, amends the existing Petroleum Products

Act by enacting provisions regulating a range of matters including the licensing of persons involved in the
manufacturing, wholesale, holding or development of sites, and retail sale of petroleum products. The
Amendment Act prohibits licensed wholesalers from holding retail licenses, except for training purposes. As the
Amendment Act and regulations to be promulgated thereunder regulate business activities conducted by Sasol
Oil, Natref and Sasol Synfuels, they are currently in the process of applying for manufacturing licenses in
respect of our plants, wholesale licenses in respect of our wholesale activities and site licenses for our retail
sites. We cannot assure you that these licenses will be granted. It should be noted that, as a person conducting
the aforesaid activities at the commencement of the Amendment Act, Sasol Oil and Sasol Synfuels are entitled to
the issue of such licenses if they are found to be in compliance with all legal requirements in force for the
operation of their respective activities. However, new site developments could be delayed given the requirements
under the new regulations.

The Petroleum Pipelines Act

This Act, which was signed by the President of South Africa on 31 May 2004 and became effective on

1 November 2005, among other things, establishes a petroleum pipelines authority as custodian and enforcer of
the regulatory framework applicable to petroleum pipelines.

Among the stated objectives of the Petroleum Pipelines Act are:

• promoting competition and limiting anticompetitive practices within the scope of the regulated activities;

• promoting the efficient, sustainable and orderly development, operation and use of pipelines, marine

offloading facilities and storage facilities from a national and industry-specific perspective;

• ensuring the safe, efficient, economic and environmentally responsible transport and storage of crude oil

and petroleum products;

• promoting fair and equitable access to pipelines, offloading and storage facilities and related commercial

services; and

• promoting companies in the petroleum pipeline industry that are owned or controlled by HDSAs.

The Act provides that no person may construct, or operate, a petroleum pipeline, loading facility or storage

facility without a license issued by the authority. It enables the authority to impose conditions to such licenses
relating, inter alia, to:

• pipelines being licensed for crude oil or petroleum products, or both;

• interested parties being allowed to negotiate changes with licensees in the proposed routing, size and

capacity of proposed pipelines;

• shippers to be provided access to pipelines and capacity to be shared among users in proportion to their

needs and within commercially reasonable and operational constraints; and

• tariffs to be set by the authority for pipelines, and approved by the authority for loading and storage

facilities.

The Act enables the authority to expropriate land in accordance with section 25 of the Constitution if a

licensee is unable to acquire such land by agreement with the owner and the land is reasonably required for
facilities which will enhance South Africa’s petroleum pipelines infrastructure. The Act authorizes the South
African Minister of Minerals and Energy to promulgate regulations and we cannot assure you that the
application of the provisions of the Act, or the promulgation of regulations in terms thereof, will not have a
material adverse effect on our business, operating results, cash flows and financial condition.

We have submitted applications for the issue of licenses for our depots and related infrastructure and

currently await their issue.

The Petroleum Pipelines Levies Act

The Petroleum Pipelines Levies Act, No. 28 of 2004, empowers the National Energy Regulator to impose

levies on petroleum transported by petroleum pipelines. The proposed levy will be based on the amount of
petroleum, measured in liters, delivered by importers, refiners and producers to inlet flanges of petroleum
pipelines and must be paid by the person holding the title to the petroleum immediately after it has entered the
inlet flange.

The levy is intended for the purpose of meeting the general administrative and other cost of the Authority

and the functions performed by the National Energy Regulator.

Any levies intended to be imposed by the Authority must be published for representation by stakeholders

and must be approved by the Minister of Minerals and Energy, with the concurrence of the Minister of Finance.
Levies lapse five years after their imposition and the Minister must approve a re-imposition of levies.

To date no levies have been imposed, although their imposition is imminent.

Safety, health and environment

We are committed to zero harm to people, facilities and the environment. Our safety, health and

environment (SH&E) performance is driven by the quest for continuous improvement that will help us achieve
our vision of being a world class company.

Our combined mining, fuels and chemical operations are subject to numerous local, national and regional

safety, health and environmental laws and regulations in Southern Africa, Europe, the United States, the Asia-
Pacific region, the Middle East and the Indian subcontinent. Our global operations, including marketing and
logistics, are also affected by international environmental conventions.

We focus on our safety, health and environmental responsibilities through our SH&E policy, strategy and

minimum requirements and are committed to ensure that we operate under safe working practices, safeguard
against accidents and avoid harm to people and the environment in all our businesses.

Safety, health and environmental laws and regulations affect a wide spectrum of our group activities. These

statutory requirements often require permits or licenses to be obtained for the use of natural resources such as
water, and for the operation of our facilities and the disposal of our waste products. They also prescribe
minimum standards for the safety and health of our employees. They impose restrictions on the types and
quantities of emissions that can be released into the environment, and also regulate issues of product safety,
waste generation, management and ultimate disposal. It is our expectation that these laws and regulations will
become more stringent in the future.

Safety, health and environment policy and management systems

We have developed a systems-oriented approach towards the management of these issues. We have moved

from a division-based safety, health and environment management policy to a structure directed on a group basis.
We are committed to sustainable development and legal compliance being the minimum requirement for all our
operations. Matters of safety, health and environment are treated as critical business issues. Planning of safety,
health and environmental issues includes the setting of targets, performance measurement, reporting and review.

In order to ensure that our safety, health and environmental performance is aligned with our group targets

and objectives, corporate governance and other audits are carried out regularly. All of our businesses are required
to track their performance and furnish quarterly reports to their respective operating boards to the Group
Executive Safety, Health and Environment Committee and to the group Risk and Safety, Health and
Environment Committee. At the highest level, the Risk and Safety, Health and Environment Committee of the
Sasol Limited Board considers the major risks and liabilities, progress on our internal indicators of performance
and any major incidents and events of non-compliance. For information regarding our Group Executive Safety,
Health and Environment Committee and the Risk and Safety, Health and Environment Committee of the Sasol
Limited Board, see also “Item 6.C—Board practices”. Similar reports are also required to address significant
division-specific issues. We use the findings emanating from corporate governance and other audits to
implement improvement measures.

Our businesses are required to manage their safety, health and environmental risks in line with

internationally accredited management systems. On environmental management systems, we are well on the way
towards our group target of achieving ISO (International Standards Organization) 14001 certification for all our
businesses. The ISO 14001 standard is an internationally accepted standard for the development and
implementation of environmental management systems. Certification to the standard entails regular audits by an
independent, accredited third party auditor. We have also set OSHAS 18001 and Process Safety Management
(based on the US Occupational Safety and Health Administration and other Sasol requirements) as additional
minimum corporate requirements, including a behavioral safety program for all Sasol businesses. These systems
and programs are being implemented and good progress has been made.

Health and safety

Safety. In the 2006 year we regrettably lost 4 workers, including contractors. Sasol Mining experienced

three fatalities – two underground and one on surface which resulted in the unfortunate deaths of two contractors
and one employee. In the other unfortunate incident a contractor fell from scaffolding during construction at
Secunda and died as a result of his injuries.

Sasol appointed DuPont Safety Resources (DuPont), an internationally reputable safety consultancy, in

November 2004 to undertake a comparative safety review of its selected South African operations against
international best practices in the areas of leadership, organization, and operational and process safety. The
results from this intense focus of safety resulted in an overall improved safety performance with Sasol achieving
an all time low recordable case rate of 0.7. DuPont performed a second review during March 2006 to determine
progress with the implementation of actions as a result of the first review recommendations. The review report
highlighted the fact that while there are still many improvement opportunities, Sasol has made good progress.
The results, if measured by injury statistics, are clearly visible. Details of the second DuPont Safety Review are
available on our website (www.sasol.com).

The performance of our United States and European operations have been excellent. All facilities are in the

best quartile of performance in the chemical industry.

Emissions. Because of the nature of some of our processes, including coal gasification for the production of

petrochemical products, our operations generate relatively high carbon dioxide emissions. Our coal gasification
operations are situated in South Africa, which is classified as a developing country in terms of the Kyoto
Protocol and though we are largely exempt from the emissions reduction targets required under the Protocol we

have implemented a successful project to replace coal as a feedstock with natural gas at our Sasolburg chemical
operations. Sasol is also committed to reducing greenhouse gas emissions. We support the voluntary Energy
Efficiency Accord championed by the South African Department of Minerals and Energy.

We monitor and measure ambient air quality around our SA plants. In Lake Charles in the United States, we

also are part of an authority-led initiative to monitor ambient air concentrations, in order to identify and address
proactively major risks for community health in a timely manner. In addition, our operations in the United States
have reduced reported emissions under the Toxic Release Inventory by over 80% since reporting began in 1987.

As expected, our hydrogen sulfide odors from coal gasification, which were within statutory limits, were

eliminated when natural gas replaced coal as a feedstock at our Sasolburg operations. Significant efforts are also
being made to reduce hydrogen sulfide emissions emanating from the Secunda operation. The sulfur recovery
plants are being upgraded to reduce levels of hydrogen sulfide emissions and improved monitoring and control
equipment will also be addressed as part of this long-term project. Sasol also conducted an international audit
focusing on air pollution management at our South African operations. Findings and recommendations made
during the audit are being incorporated into current improvement and business plans.

Water. Water use is increasingly becoming a source of concern, not only in mining, but in all our

operations, in particular in South Africa, Qatar and other arid countries. A series of water treatment and saving
programs and projects were introduced or are currently under way to address relevant challenges in all of our
operations. We have progressed significantly in the research and development of managing the water-related
impacts of our mining activities.

Our project team of internal and external experts in mining, geohydrology, geochemistry, water and waste

treatment is currently committed to researching innovative and cost-effective solutions to further reduce our
impact on the environment.

The long-term supply of water to the Secunda complex (up to 2030) has been assured by the Vaal River

Eastern Sub-System Augmentation Project (VRESAP). The Trans-Caledon Tunnel Authority was mandated by
the Minister of Water Affairs and Forestry of South Africa to fund and implement the VRESAP project to meet
the growing demands of Eskom and Sasol in the Mpumalanga region. Construction of the VRESAP pipeline is
currently in progress and completion is expected in the last quarter of 2007 calendar year.

Fires, explosions and releases. The manufacture of petrochemicals involves using high volumes of

flammable substances, often under high pressure and at high temperatures. Hence, managing the risk of fires,
explosions and releases of hazardous substances is essential for us. In the course of our operations, we
experienced a number of fires, explosions and releases of hazardous chemical substances, the most significant
being an explosion that occurred at Sasol Polymers on 1 September 2004. We have taken steps to reduce the
frequency and severity of these events, and do not expect any other past fires, explosions or releases to have a
material effect on our results or operations.

Our operations in the United States are conducted in accordance with the requirements of the Occupational

Safety and Health Administration Process Safety Management and US Environmental Protection Agency
(US EPA) Risk Management Program regulations. Through the application of these regulations, we implement a
thorough safety management process designed to minimize the risks of accidents and releases of hazardous
substances.

In addition, since 11 September 2001, assessing and improving the security of chemical operations in the

United States has become an important focus. Our Baltimore and Lake Charles plants have since evaluated plant
security programs and made changes in procedures and physical security measures. As a member of the
American Chemistry Council, Sasol NA has also adopted a Security Code of Management Practice, which
requires that we conduct a security vulnerability analysis to identify areas in which additional security measures
are necessary, and have a management system in place for other aspects of plant, distribution and cyber security.

All Sasol sites have identified and quantified their major risks with regards to major fires, explosions or

releases. Risk mitigation plans are in place.

We maintain a comprehensive insurance program, to address identified risks.

Land remediation and rehabilitation. Because of our chemicals and fuels processes, we have particular

legacy and current risks that we have addressed or are currently addressing. We are consolidating our regional
strategies to form a group-wide strategy to address potential liabilities associated with land remediation and
rehabilitation.

Our gas pipelines are buried underground in order to reduce long-term impacts. We implemented this

approach for the Mozambique natural gas project, for which we used World Bank guidelines for environmental
impact assessment studies.

The decommissioned Klipspruit cyanide factory has been satisfactorily rehabilitated and negotiations are

underway for the Johannesburg Metro Council to take over the land for future development.

Waste. Potential risks associated with waste are a priority for us. Historical legacies are addressed in

accordance with relevant legal requirements, and cleaner production techniques are implemented to address
future risks. Where we acquire new plants, the attendant risks are identified and the necessary indemnities
sought from the sellers. Where we have not secured such indemnities, we are confident that such risks and
attendant liabilities will not have a material adverse effect.

The Natural Gas Conversion Project has had significant impact on the reduction of waste produced,

specifically with regards to tar and oil waste, and ash at our operations in Sasolburg. The ash dump presently has
a negative growth rate due to ash sales for brick making.

The South African Waste Discharge Charge System for the controlled discharge of effluent to a water body

will be implemented by the Department of Water Affairs and Forestry over the next two to three years. The
financial impact to Sasol has yet to be quantified, but could be substantial. Waste and waste water effluent
minimization projects are receiving specific attention.

Asbestos. We have a strategy for the risk-based phase-out of asbestos, which is being implemented by our

operations. We have implemented a policy to ensure that new sources of asbestos are not procured in the
construction of new facilities worldwide. Asbestos is removed and disposed of under strict regulatory
requirements as plant modifications are made or as necessary for maintenance.

South Africa

Environmental regulation

The Constitution of the Republic of South Africa provides the framework for the environmental legislation

in South Africa. Section 24 of the Constitution enshrines the right of all citizens to an environment that is not
harmful to their health and well-being and provides individuals with a right to the protection of the environment.
It further provides that these rights can be enforced through reasonable legislative and other measures to prevent
pollution and degradation, to promote conservation and to secure an ecologically sustainable development.
Further constitutional provisions provide relevant rights of enforcement, including class actions. A number of
laws and regulations address specific issues relating to the protection of the environment. The following includes
an analysis of some of these laws, which may be relevant to our operations.

National Environmental Management Act. The National Environmental Management Act provides for

cooperative environmental governance and coordination of the environmental functions of the government. The
Act regulates environmental authorization requirements compliance and provides for enforcement measures
including provision for fines up to R5 million. The Act principally imposes a duty of care on persons who have
or may pollute or degrade the environment and other responsible parties to take reasonable measures to prevent
and remediate environmental damage, protects workers refusing to undertake environmentally hazardous work

and provides for control over emergency incidents. It promotes access to environmental information, protects
whistleblowers and allows for private prosecution and class actions. The Act was recently amended to include
provisions and requirements for environmental authorizations and impact assessments. Provisions in this regard
under the Environment Conservation Act were repealed. Section 24G was also added to the Act, providing for
retrospective applications in respect of activities undertaken in contravention of the law. Consideration of
applications is subject to payment of a fine, up to R1 million.

National Environmental Management: Biodiversity Act. This Act, deals with various issues relating to

biological diversity including its management and conservation.

National Environmental Management: Protected Areas Act. This Act provides for the declaration of

conservation areas. Of particular significance is that it provides for the expropriation of private land, including
servitudes, in the interests of conservation. We have not been notified of any action that could have a material
adverse effect on our rights to any of our significant properties.

Mineral and Petroleum Resources Development Act. This Act makes provision for the effective

management of impacts associated with mining activities. An environmental management program (EMP) must
be compiled, approved by the Department of Minerals and Energy, and regularly reviewed. The EMP is required
to cover potential environmental as well as socio-economic impacts. The Act further requires the making of
financial provision for the rehabilitation or management of negative environmental impacts.

Water protection

The National Water Act provides for the equitable allocation of water for beneficial use, sustainable water

resource management and the protection of the quality of water resources. The Act establishes water
management procedures and protects water resources through the licensing of various uses of water. It also
includes provisions for pollution prevention, remediation requirements and emergency incidents. The
Department of Water Affairs and Forestry is currently implementing a Waste Discharge Charge System, which
may have a significant impact on operational costs.

A significant part of our operations, including mining, chemical processing and others, require use of large

volumes of water. South Africa is generally an arid country and prolonged periods of drought or significant
changes to current water laws could increase the cost of our water supplies or otherwise impact our operations.
In this regard, the Department of Water Affairs and Forestry is implementing a Pricing Strategy aimed at
allocating the appropriate price for the use of water, which may have a significant impact on operational costs.
Further initiatives in this regard include the National Water Resource Strategy and the National Water Resource
Allocation Strategy, aiming to ensure the equitable distribution of water.

Air protection

The National Environmental Management: Air Quality Act has recently been promulgated, enabling the

Department of Environmental Affairs and Tourism to set ambient air quality and emission standards, declare
Priority Areas for the purposes of implementation of Air Quality Management Plans, and prepare for the review
of atmospheric emission licenses. It is expected that this Act will impose stricter standards on air quality
management in South Africa, through the adoption of internationally accepted ambient and emission standards
and that this will result in significant capital and operational costs. The Department of Environmental Affairs and
Tourism recently declared the Vaal Triangle as a Priority Area.

Some of our processes in South Africa, especially coal gasification, result in relatively high carbon dioxide

emissions. South Africa is considered a developing country in terms of the Kyoto Protocol and, accordingly, it is
largely exempt from the emissions reductions required. We are taking measures to reduce our emissions,
amongst which has been the use of natural gas from Mozambique as of 2004 in lieu of coal, which is reducing
sulfur dioxide emissions and hydrogen sulfide odors from gasification operations in the Sasolburg region. We
also monitor air emissions at our plants to measure ambient air quality. The Department is also finalizing
ambient air quality standards. Compliance with these standards will require significant capital expenditure.

Waste and hazardous substances

Environment Conservation Act. The Environment Conservation Act establishes a licensing framework for

the establishment, operation and closure of any waste disposal site. The Department of Environmental Affairs
and Tourism is currently finalizing a National Waste Management Implementation Programme, to be supported
by the Waste Management Bill, still to be drafted. The Bill is expected to cover solid waste management and
incorporate the principles of the Basel Convention on the trans-boundary movement of waste.

Hazardous Substances Act. The Hazardous Substances Act provides for the control and licensing of

substances that may cause injury, ill-health or death to human beings by reason of their toxic, corrosive, irritant,
strongly sensitizing or flammable nature.

Other environmental legislation

The National Road Traffic Act and its regulations regulate the transportation of dangerous goods and

substances. The Act provides specifications for road tankers, labeling, duties of responsible persons,
compatibility of multi-loads, driver training and hazardous substance documentation. The National Railway
Safety Regulator Act provides for similar regulation in respect of rail transport.

The Explosives Act consolidates the laws relating to the manufacture, storage, sale, transport, importation,

exportation and the use of explosives and imposes an authorization requirement for the manufacture and storage,
as well as for the import, export and sale of explosives.

The Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act regulates the registration,

importation, sale, acquisition, disposal or use of fertilizers, among other products.

Health and safety regulation

Occupational Health and Safety Act. The Occupational Health and Safety Act covers a number of areas of

employment activity and use of machinery in South Africa, excluding mining activities. The Act imposes various
obligations on employers and others to maintain a safe workplace and minimize the exposure of employees and
the public to workplace hazards and establish penalties and a system of administrative fines for non-compliance.

Mine Health and Safety Act. The principal objective of the Mine Health and Safety Act is to protect the

health and safety of persons at mines by requiring that employers and others ensure that their operating and non-
operating mines provide a safe and healthy working environment, determining penalties and a system of
administrative fines for non-compliance and giving the Minister of Minerals and Energy the right to restrict or
stop work at any mine and require an employer to take steps to minimize health and safety risks at any mine.

Compensation for Occupational Injuries and Diseases Act. The purpose of this Act is to provide for

compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees
in the course of their employment, or for death resulting from such injuries or diseases. The Act is administered
by the Minister of Labor, through a Director-General who manages a compensation fund to which employers
contribute, directly or indirectly. Where indirect contributions are made, these contributions are made to a mutual
association, which acts as the insurer in respect of claims against the employers. All employers, with the
exception of those in national, provincial and local government, are required either to register under the Act or to
be fully insured against related liabilities.

Occupational Diseases in Mines and Works Act. This Act relates to the payment of compensation in respect

of certain diseases contracted by persons employed in mines or at locations where activities ancillary to mining
are conducted. Any mine (including the Sasol Mining operations) at which risk work takes place is deemed to be
a controlled mine in respect of the employees for whom the employer is required to make payments to the fund
for occupational diseases, in order to meet relevant claims. Persons who are employed in controlled mines are
required to have a certificate of fitness, which must be renewed from time to time.

For further information, see “Item 6.C—Board practices—The risk and safety, health and environment

committee”.

Germany

In Germany, we operate a number of plants and facilities for the storage, processing and transportation of

chemical feedstock, products and wastes. These operations are subject to numerous laws and ordinances relating
to safety, health and the protection of the environment.

General environmental care

The lack of a general environmental code in Germany means that no guideline legislation is available for

general environmental care. In terms of the Act on the Assessment of Environmental Impacts, the environment
impact assessment (EIA) is an instrument of preventative environmental care that is legally binding. This has
been introduced in existing public procedures for the licensing of, or considerable amendment to, certain
projects of relevance to the environment, including chemical facilities. The EIA is based on the cooperation
between the environmental authorities and the parties intending to carry out the project.

The Environmental Information Act guarantees everyone’s access to official environmental information.

Issues relating to general environmental care are addressed by the environmental provisions of the Regional

Planning Act and other specific and planning law designed to ensure environmental soundness, as well as by the
Environmental Liability Act, which provides for liability in the case of environmental risks. Where human life or
health is disturbed and where emissions have entered the soil, water or the air, the owner of a facility is liable,
even if he or she is not at fault and irrespective of whether the damage was caused as a result of a hazardous
incident or during normal operations. Damage resulting from force majeure is excluded from liability. The right
to the restoration of the previous state also extends to nature and the landscape. Installations that pose a
particular risk to the environment must have provisions for sufficient cover, an obligation which may be met by
arranging liability insurance.

Criminal law provisions are included in the Act to Combat Environmental Crime, which targets a range of

polluting activities, including water, soil and air pollution, environmentally damaging waste disposal and noise.
It also addresses licensing of the operation of installations and the handling of hazardous substances and goods
and particularly serious environmental offences.

Specific environmental protection legislation

Emission control. The guideline legislation to protect humans and the environment from air pollution and

noise pollution is the Federal Emission Control Act. This Act and the ordinances promulgated under it provide
the framework for environmental protection and the technical safety of installations. It provides for licensing for
installations that are particularly susceptible to causing harmful environmental impacts, including chemical
facilities or mineral oil refineries.

Regulation of hazardous substances. Provisions for the protection of humans and the environment against

the harmful effects of hazardous substances and preparations are provided in the Chemicals Act, the related
ordinances on the Prohibition of Certain Chemicals and the Hazardous Incidents Ordinance. New substances are
subject, as laid down in European law, to a registration and notification obligation before they can be brought
onto the market. Old substances that have been on the market since 1981 are assessed on the basis of relevant
European regulation. Hazardous substances and preparations must be classified, labeled and packed in line with
their hazardous properties, their manufacture, marketing and use may be prohibited or limited.

The Chemicals Act is complemented by the Plant Protection Act of 14 May 1998 and the Fertilizers Act, as

well as by legislation on animal feedstuffs and human foodstuffs and by substance-related provisions in other
areas of care of the environment. This also includes the provisions concerning the environmental impacts of
genetic technology under the Genetic Technology Act.

Avoidance, recovery and disposal of waste. The Closed Substance Cycle and Waste Management Act

regulates the avoidance, recovery and disposal of waste. The aim of the Act is to promote an economy based on
closed substance cycles, thus conserving resources, and to guarantee the environmentally sound disposal of
waste. Wherever waste cannot be avoided, recovered or used to produce energy, it must be removed from the
cycle and, as a matter of principle, be disposed of within Germany in a way that is not detrimental to the
common good. Under law, waste is defined as a tangible item, which falls under one of the legally determined
categories of waste, and which the owner is getting rid of, desires to get rid of or must get rid of.

The Waste Transportation Act regulates the transport of waste into, out of or through the area of application

of the Act and creates the basis for the establishment of a solidarity fund to finance the return of waste exported
illegally.

Water protection. The guideline legislation in the field of water protection is the Federal Water Act. This

requires everyone to exercise adequate care when carrying out measures which may have an impact on a water
body so that water pollution or any other negative effect on water is prevented. Surface waters and groundwater
are, as public utilities, subject to a public management and utilization code, which leaves the allocation of users’
rights at official discretion.

The Waste Water Charges Act complements the Water Management Act and authorizes an annually rising

waste water charge linked to the toxicity of the discharged waste water. Water legislation promulgated by the
Federal States goes beyond merely the enforcement of the framework of federal law to determine administrative
procedures and regulate issues of private water law.

Water protection is also addressed directly or indirectly by substance-related provisions in other laws,

including the Chemicals Act, the Fertilizers Act and the Waste Avoidance and Waste Management Act. They also
comprise provisions through which water is indirectly protected via the soil and the air.

Soil protection. The protection and care of soil as an environmental medium and part of the ecosystem is

promoted by a range of environmental provisions, primarily the Federal Soil Protection Act. Soil protection
measures, preventative or remedial, aim at avoiding or reducing substance inputs into the soil, or removing
already existing soil damage, and at addressing the extensive land consumption caused by soil sealing.

Health and safety

The Health and Safety at Work Act provides for protection of the health and safety of employees. It places

the employer under a duty to assess hazards at the workplace, to take appropriate preventive measures, and to
instruct employees about measures used. The employer must take precautions for especially hazardous areas and
situations and provide preventive occupational healthcare. This Act is complemented by the Safety at Work Act,
which places employers under a duty to appoint appropriately qualified officers to support them in occupational
health and safety matters, including ergonomic workplace design. Also, the Mining Act contains stipulations
regarding the health protection of mine workers and is complemented by a special ordinance treating this topic.

Italy

In Italy, we operate a number of plants and facilities for the storage and processing of chemical feedstock,

products and wastes. These operations are subject to numerous laws and ordinances relating to safety, health and
the protection of the environment.

General environmental care

On 28 April 2006 a new Environmental Decree (Legislative Decree 152/2006) came into force, regulating

the most important environmental matters, including authorizations, emissions, water management, wastes and
remediation and environmental damages. The effectiveness of the authorization chapter has been postponed to
the beginning of the 2007 calendar year, and the environmental damage section will come in force in the 2008
calendar year. Nonetheless, the company is liable for damages caused to the environment under general and
special rules.

European Directive 96/61/CE (Integrated Pollution Prevention and Control) provides that companies must

obtain an integrated authorization for all environmental impact. This directive has already been implemented in
Italy but has not yet taken effect. Sasol Italy is preparing the documentation required to be compliant with the
directive.

Specific environmental protection legislation

Emission control. Environmental protection and the technical requirements licensing of all installations

from which emissions emanate is now regulated by Legislative Decree 152/06, section 5.

Regulation of hazardous substances. Legislative Decree 52/1997 implemented in Italy the EU Directive

relevant to classification, packaging and labeling of dangerous substances. Legislative Decree 65/2003
implemented the EU Directives relevant to classification, packaging and labeling or dangerous preparations.
New substances are subject, as laid down in European law, to a registration and notification process before they
can be brought onto the market. Old substances that have been on the market since 1981 are assessed on the
basis of relevant European regulation. Hazardous substances and preparations must be classified, labeled and
packed in line with their hazardous properties; their manufacture, marketing and use may be prohibited or
limited.

Avoidance, recovery and disposal of waste. Legislative Decree 152/06, part 4 incorporates the principle of

‘polluters pay’ and further provides for cradle to the grave liability for wastes.

Water protection. Legislative Decree 152/2006, part 3, defines the authorization procedure and discharge

limits, in order to protect surface and underground water. Surface water and groundwater are, as public utilities,
subject to a public management and utilization regulation which leaves the allocation of users’ rights at official
discretion.

Soil protection. The protection and care of soil as an environmental medium and part of the ecosystem is

promoted by Legislative Decree 152/06, which essentially follows the Ministerial decree 471/1999 with some
simplification as far as documentation is concerned. Soil protection measures, preventative or remedial, aim at
avoiding or reducing substance inputs into the soil, or removing already existing soil damage. The Legislative
decree sets forth both the acceptable limits and the rules for monitoring communication and reclamation.

Health and safety

The Health and Safety at Work Legislative decree 626/1994 provides for protection of the health and safety

of employees. It places the employer under a duty to assess hazards at the workplace, to take appropriate
preventive and protective measures, and to instruct employees about risks and relevant measures. The employer
must take precautions for especially hazardous areas and situations and provide preventive occupational
healthcare.

United States

Environmental compliance

Sasol NA and Merisol are subject to numerous federal, state, and local laws and regulations that regulate

the discharge of materials into the environment or that otherwise relate to the protection of human health and the
environment. As with the chemical industry, generally, compliance with existing and anticipated environmental,
health, safety, and process safety laws and regulations increases the overall cost of business, including capital
costs to construct, maintain, and upgrade equipment and facilities. These laws and regulations have required, and
are expected to continue to require, Sasol NA and Merisol to make significant expenditures of both a capital and
expense nature. Environmental compliance expenditures for our interest in Merisol and Sasol NA’s
manufacturing sites for the next 5 years are estimated to range from US$9 million to US$13 million per year.

Under the agreement for the acquisition of Condea, the whole of RWE-DEA AG’s chemical business which

we renamed Sasol Chemie, we received indemnities from the seller, RWE-DEA AG, for most of the costs of
operational compliance with respect to conditions existing on or before 1 March 2001. These indemnities
expired on 1 March 2006.

The Louisiana Department of Environmental Quality (LDEQ) in 2000 issued to Sasol NA four violations of

state and federal air emission laws and regulations. These allegations assert violations of air-based reporting and
record-keeping requirements, as well as minor exceedance of permitted air emissions. Sasol NA settled the
LDEQ air enforcement action in 2006 for a penalty of US$ 50,000 and performance of a Beneficial
Environmental Project valued in the settlement at US$ 165,000.

The Baltimore Plant received Clean Air Act Section 114 and RCRA Section 3007 information requests

from the US EPA in 2006. The Baltimore Plant also received notices of violations in 2006 from US EPA with
respect to compliance with spill control and countermeasures and hazardous waste regulations, but no penalties
were assessed.

Remedial action

Active and former manufacturing sites. Sasol NA has been investigating and the remediation soil and

groundwater contamination at the Lake Charles chemical complex (LCCC) and Baltimore plant sites resulting
from historical operations under orders issued by LDEQ and the Maryland Department of the Environment
(MDE). The Vinyl Chloride Monomer (VCM) Plant which was sold to Georgia Gulf in 1999 is also subject to
US Resource Conservation and Recovery Act (RCRA) corrective action requirements. The Baltimore Plant is
monitoring the natural attenuation of hydrocarbon contaminants in the groundwater and regularly reporting to
MDE and is not being actively remediated. The current costs of monitoring the Baltimore Plant site and the
VCM Plant site and any foreseeable remediation costs are not expected to be material.

In addition to Sasol NA’s operating sites, Sasol NA also has retained liability to Georgia Gulf Corporation

for the remediation of four manufacturing operations sold in November 1999 and located in Mansfield,
Massachusetts, Aberdeen, Mississippi, Jeffersontown, Kentucky, and Oklahoma City, Oklahoma. The Mansfield
site, which is still owned by Sasol NA, has been extensively investigated and remediated since 1991, and the
remediation of groundwater and an area of soil contamination is ongoing. The Aberdeen plant site has also been
investigated under several orders issued by state authorities, and several areas of contamination have been
remediated. Property to the west of the Aberdeen plant was purchased in 2002 and part of the plume migrating
off-site was delineated and contained on-site during 2003. Further investigations of part of the Aberdeen site are
still being performed and the need for further remediation is currently being investigated.

Under the agreement for the acquisition of Sasol Chemie, most of Sasol NA’s costs of the remediation

contamination from historical operations at its active and sold sites are being indemnified by RWE-DEA AG,
and will continue to be indemnified until at least 1 March 2023 in respect of Lake Charles and Baltimore, and in
perpetuity in respect of the Mansfield, Aberdeen, Jeffersontown, and Oklahoma City sites. In addition to
indemnities from RWE-DEA AG, Sasol NA also has indemnities from some of its predecessors— British
Petroleum for Mansfield and Reichhold Chemical for Jeffersontown—for contamination resulting from those
companies’ operations at the sites. Sasol NA does not expect costs to address contamination at these sites to have
a material effect on operations or results.

Calcasieu Estuary CERCLA Site. In June 1999, Sasol NA and other Calcasieu Parish industry members

received letters from USEPA making demand under Section 107 of the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) for past costs and future remedial investigation, remediation, and
restoration costs associated with the Calcasieu Estuary. The Calcasieu Estuary, which includes the Calcasieu
River and several major tributaries in the vicinity of Lake Charles, Louisiana, has received releases and
discharges from Parish industry since the 1930s. Bayou Verdine has historically received releases and discharges
from the Conoco Lake Charles Refinery beginning in the 1940s and from the LCCC beginning in the 1960s. The
“Bayou Verdine Area of Concern” is one of the areas of concern of the Calcasieu Estuary CERCLA Site.

In 1999 and 2000, ConocoPhillips and Sasol NA completed a voluntary joint remedial investigation of

Bayou Verdine under the oversight of state and federal authorities. In 2001, ConocoPhillips and Sasol NA
completed ecological and human health risk assessments of Bayou Verdine and in 2002 performed an
Engineering Evaluation and Cost Analysis (EE/CA) of removal actions for Bayou Verdine under an
Administrative Order on Consent (AOC) with USEPA.

Beginning in October 2002, ConocoPhillips and Sasol NA performed a sediment removal action for a

relatively small area of elevated EDC concentrations located near the confluence of Sasol NA’s West Ditch and
Bayou Verdine. The West Ditch Project was completed in July 2003 at a cost to Sasol NA of about
US$ 2 million. To date, no third party claims have been filed in connection with the West Ditch Project.

The EE/CA also recommends removal actions for the “Main Channel Area” of Bayou Verdine.

ConocoPhillips and Sasol NA intend to perform the Main Channel Removal Action under a Consent Decree
which will be negotiated in 2005 and 2006. Under a Consent Decree, ConocoPhillips and Sasol NA hope to
resolve all of the government’s CERCLA claims against the companies in connection with the Calcasieu Estuary
and will receive protection against CERCLA contribution claims by other “Potentially Responsible Parties”
against the companies. An agreement in principle has been reached with US EPA and the resource trustees
concerning the scope of Main Channel and natural resource restoration projects and the amount of past agency
response costs to be reimbursed by Sasol NA and ConocoPhillips. Sasol NA will pay 10% of these costs.

Sasol NA’s total estimated liability for its share of Bayou Verdine and the Calcasieu Estuary CERCLA Site

is about US$ 1.7 million. Under the agreement for the acquisition of the Condea group (now renamed Sasol
Chemie), 80% of Sasol NA’s Estuary-related remediation costs are expected to be indemnified by
RWE-DEA AG, and will continue to be indemnified until 1 March 2023.

Mozambique

In Mozambique, Sasol operates a processing plant and associated facilities for the extraction, processing

and transportation of natural gas. The Central Processing Facility has been in operation since 18 February 2004.
These operations are subject to numerous Mozambican laws and regulations as well as World Bank requirements
and best practice standards.

Environmental, health and safety regulations. The Ministry for the Coordination of Environmental Affairs

(MICOA) was created in 1994 to coordinate environmental affairs in Mozambique. In 1995, the Ministry drew
up a National Environmental Management Program, which is a policy document outlining the priorities for
environmental management and sustainable development in Mozambique. This program contains a National
Environmental Policy, a proposal for Framework Environmental Legislation and Environmental Legislation and
an Environmental Strategy.

The Framework Environmental Law was enacted in July 1997. The aims of the Environmental Law are to

provide a legal framework for the use and correct management of the environment and its components and to
assure sustainable development in Mozambique. The Law is applicable to all public or private activities that may
directly or indirectly influence the environment. It requires licensing of activities that are liable to cause
significant environmental impacts. The granting of an environmental license is subject to the preparation and
approval of an appropriate level of environmental impact study and management plan. Over the last year, new
environmental legislation has been enacted, namely the Regulation on Environmental Quality and Effluent
Emissions Standards (June 2004) and the Regulation on Environmental Impact Assessment Process (December
2004), the latter revoking the 1998 regulation. In terms of environmental protection and safety, the Petroleum
Act No. 3/2001 requires that holders of exploration and production rights conduct petroleum operations in
compliance with environmental and other applicable legislation.

In 2004 the Mozambican operations were certified in terms of ISO 14001 and ISO 9001. Sasol Petroleum

Temane Limitada, our Mozambican subsidiary, received OHSAS 18001 certification during January 2006.

We are currently involved in de-mining and seismic activities inside the exploration area. These activities

are governed by best practice environmental management approaches and periodic reports on environmental
performance are submitted to MICOA. The seismic lines are aligned so that they avoid dwellings and no
resettlement, temporary or permanent, is foreseen. Compensation due to affected community members as a
result of these activities is being undertaken under the Resettlement and Compensation Procedures for the
Natural Gas Project, approved by the Mozambican Ministerial Project Liaison Committee in early 2003.

During the year, we signed agreements with the Mozambican government for two off-shore blocks in the

Indian Ocean. Seismic activities are due to start on these blocks following a detailed Environmental Impact
Assessment (EIA) process. To ensure an open and transparent process, Sasol will promote wide and active
public consultation and engagement with all identified stakeholders. This will be governed by the new EIA
Regulations, as will the planned expansion aimed at the de-bottle necking of the gas processing and transporting
facilities of the Natural Gas Project.

Mineral Rights. Petroleum activities are regulated by the provisions of the Law Regulating Petroleum

Activities. The National Directorate of Coal and Hydrocarbons administers and regulates petroleum operations
on behalf of the government. The Mozambique government encourages the exploration and development of the
country’s hydrocarbon potential within a certain defined project framework.

In accordance with the constitution of Mozambique, the land and the natural resources of the soil and the

subsoil of the territorial waters and continental shelf are the property of the state, which determines the
conditions for their development and use.

The Petroleum Law creates a state enterprise, Empresa Nacional de Hidrocarbonetos de Mozambique,

which is appointed as the custodian of rights for the use, benefit, administration and disposal of hydrocarbons
and may grant licenses to international investors to conduct exploration and production.

Other countries

In a number of other countries we are engaged in various activities that are regulated by local and

international laws, regulations and treaties. In Malaysia, China and other countries, we operate plants and
facilities for the storage, processing and transportation of chemical substances, including feedstock, products and
wastes. In Qatar, the United Arab Emirates, Nigeria, Gabon, Equatorial Guinea and other countries, we are
involved, or are in the process of being involved, in exploration, extraction, processing/or storage and
transportation activities in connection with feedstock, products and waste relating to natural gas, petroleum and
chemical substances. Our operations in the respective jurisdictions are subject to numerous laws and regulations
relating to exploration and mining rights and the protection of safety, health and the environment.

4.C

Organizational Structure

Sasol Limited is the ultimate parent of the Sasol group of companies. Our wholly owned subsidiary, Sasol

Investment Company (Pty) Limited, a company incorporated in the Republic of South Africa, holds our interests
in companies incorporated outside South Africa. The following table presents each of Sasol’s significant
subsidiaries (including direct and indirect holdings), the nature of business, percentage of shares of each
subsidiary owned and the country of incorporation at 30 June 2006.

Percentage

Country of

Name

Nature of business

ownership

incorporation

Sasol Mining (Pty) Limited

Coal mining activities

100

South Africa

Sasol Synfuels (Pty) Limited

Production of liquid fuels, gases and chemical

100

South Africa

products and refining of tar acids

Sasol Technology (Pty)

Engineering services, research and

100

South Africa

Limited

development and technology transfer

Sasol Financing (Pty) Limited

Management of cash resources, investment

100

South Africa

and procurement of loans

Sasol Investment Company

Holding company of the group’s foreign

100

South Africa

(Pty) Limited

investments

Sasol Chemical Industries

Production and marketing of mining

100

South Africa

Limited

explosives, gases, petrochemicals and,
fertilizers

Sasol Gas Holdings

Holding company for the group’s gas

100

South Africa

(Pty) Limited

interests

Sasol Oil (Pty) Limited

Marketing of fuels and lubricants

100

South Africa

Republic of Mozambique

Owning and operating the natural gas

South Africa

Pipeline Investments

transmission pipeline between Temane

Company (Pty) Limited

in Mozambique and Secunda in South
Africa for the transportation of natural
gas produced in Mozambique to markets
in Mozambique and South Africa

Sasol Chemical Holdings

Investment in the Sasol Chemie group

100

South Africa

International (Pty) Limited

Sasol Chemicals Europe

Marketing and distribution of chemical

100

United Kingdom

Limited

products

Sasol Chemicals Pacific

Marketing and distribution of chemical

100

Hong Kong

Limited

products

Sasol-Chem Inc.

Marketing and distribution of chemical

100

United States

products

Sasol Financing

Management of cash resources, investment

100

Isle of Man

International plc

and procurement of loans

Sasol Gas Limited

Marketing, distribution and transportation

100

South Africa

of pipeline gas and the maintenance of
pipelines used to transport gas

Sasol Oil International Limited

Buying and selling of crude oil

100

Isle of Man

Sasol Petroleum International

Exploration, production, marketing and

100

South Africa

(Pty) Limited

distribution of petroleum and natural gas

Percentage

Country of

Name

Nature of business

ownership

incorporation

Sasol Polymers International

Holding company for Sasol Polymers’

100

South Africa

Investments (Pty) Limited

foreign investments

Sasol Synfuels International

Develop and implement international

100

South Africa

(Pty) Limited

GTL and CTL ventures

Sasol Wax International

Holding company for Sasol Wax operations

100

Germany

Aktiengesellschaft

Sasol Wax GmbH

Production, marketing and distribution of

100

Germany

waxes and wax related products

Sasol Wax (SA) (Pty) Limited

Production, marketing and distribution of

100

South Africa

waxes and wax related products

Tosas Beherend (Pty) Limited

Investment holding company

100

South Africa

National Petroleum Refiners of

Refining crude oil

South Africa

South Africa (Pty) Limited

Sasol Chemie GmbH

Investment in Sasol Germany GmbH

100

Germany

and Co. KG

and Sasol Olefins and Surfactants GmbH

Sasol Germany GmbH

Production, marketing and distribution of

100

Germany

olefin and surfactant products

Sasol Italy SpA

Manufacturing, trading and transportation

100

Italy

of oil products, petrochemicals and
chemical products and derivatives

Sasol North America Inc.

Manufacturing of commodity and

100

United States

speciality chemicals

25% interest in Sasol Oil (Pty) Limited was sold to Tshwarisano LFB Investment (Pty) Limited effective 1 July 2006.

CMG is finalizing its financing arrangements for the exercise of its option to acquire a 25% interest in ROMPCO.

Subsidiaries which form part of our discontinued operations.

4.D

Property, plants and equipment

Plants and facilities

We operate coal mines and a number of plants and facilities for the storage, processing and transportation

of oil, chemicals and gas related raw materials, products and wastes. For a detailed discussion regarding the use,
capacity and products of these facilities provided for each business see “Item 4.B – Business overview”.

Coal mining facilities

Our main coal mining facilities are located at the Secunda Mining Complex, consisting of underground

mines (Bosjesspruit, Brandspruit, Middelbult, Syferfontein and Twistdraai export mine) and the Sigma Mining
Complex, consisting of underground mines (Mohlolo and Mooikraal) near Sasolburg.

Pages M–2 to M–4 include maps showing the location of our coal properties and major manufacturing

plants in South Africa.

Our Secunda facilities

Our main manufacturing facilities are located at Secunda and they are the base for numerous of our

Synfuels operations and a range of our chemical industries operations, including explosives, fertilizers,
monomers and polymers, solvents, alpha olefins and tar. The approximate size of this property is 82.5 square
kilometers (km ).

Our Sasolburg facilities

Our facilities at Sasolburg are the base for numerous of our chemical industries operations, including

ammonia, explosives, mining chemicals, phenols, solvents, polymers, fertilizers, tars and waxes operations. The
approximate total size of these properties is 51.4 km

The size of the Natref refinery, also based in Sasolburg, is approximately 1.1 km.

Our Mozambican facilities

Our natural gas processing operations in Mozambique are operated by Sasol Petroleum Temane Limitada

(a subsidiary of Sasol Petroleum International). These facilities, located some 700 km north of the Mozambican
capital, Maputo, on a site of approximately 400,000 m

, extract and process gas from the Temane gas field. The

processed gas is supplied to the South African gas market, utilizing a newly installed high pressure pipeline,
some 865 km in length owned by ROMPCO.

Our facilities in Germany

Various operations of Sasol Solvents are based at a number of locations in Germany, most significant of

these facilities are at Marl (site size approximately 160,000 m

; plant size 75,000 m

) and Moers site (site size

approximately 808,000 m

; plant size 400,000 m

). Sasol Wax facilities are based in Hamburg.

Various operations of Sasol Olefins & Surfactants are based at a number of locations in Germany. The most

significant of these facilities are at Brunsbüttel (site size approximately 1.5 million m

; plant size 500,000 m ).

Our facilities in Italy

Various operations of Sasol Olefins & Surfactants are based at a number of locations in Italy. The primary

facilities are at Augusta (site size approximately 1.35 million m

; plant size 220,000 m

) and Terranova (site size

approximately 185,000 m

; plant size 75,000 m ).

Our facilities in the United States

Various operations of Sasol Olefins & Surfactants are based at a number of locations in the United States.

The most significant of these facilities are located at Lake Charles, Louisiana (site size approximately 3 million
m

; plant size 540,000 m

) and in Baltimore, Maryland (site size approximately 293,000 m ;

plant size 255,000 m ).

Merisol also has operations based at Oil City, Pennsylvania and Houston and Winnie, Texas.

For more information regarding capital expenditure in respect of these properties and the related facilities

and operations, see “Item 4.A – History and development of the company – Capital expenditure” for a
description of our material plans to construct, expand and enhance our facilities.

100

Mining properties and operations

Mine systems and their production capacity

Sasol Mining operates six mines, the annual nominated capacities and actual production values are

indicated in the following table:

Nominated capacity and production

Nominated

2006

capacity

Actual

Mine

per year

production

(Mt)

Bosjesspruit Mine (Secunda)

8.1

7.8

Brandspruit Mine (Secunda)

8.4

8.2

Middelbult Mine (Secunda)

8.2

9.3

Syferfontein Mine (Secunda)

8.7

8.8

Twistdraai Export Mine (Secunda)

10.6

10.5

Sigma Mine (Mohlolo and Mooikraal) (Sasolburg)

1.7

1.6

The 2006 nominated capacity of the mines is the expected maximum production of that mine during normal
operational hours.

All mines employ the underground room and pillar mining method, using continuous miners. At Sasolburg,

the Sigma Mine was first established in 1950. In the Secunda area, production at the first two mines, Brandspruit
and Bosjesspruit commenced in 1977. Twistdraai and Middelbult followed during the early 1980s, while
Syferfontein started production in 1992. In 1996, the Twistdraai Export Mine was commissioned. The mine
boundaries are adjusted into new reserve areas with brownfield extensions, facilitated by satellite shaft systems,
based on ongoing studies and new planning. All the production equipment is either replaced or overhauled on a
regular basis according to a managed maintenance system.

Processing operations

Export business – Secunda operations. The export business was initiated in August 1996 as part of a

growth strategy. To date, a total of 32.5 Mt of coal has been exported, beneficiated from 86.1 Mt at the
Twistdraai Export Plant from 1996 through 2006. Coal is fed to the beneficiation plant from the existing
Twistdraai Export Mine. The beneficiation plant produces primary export product with an ash content of
approximately 10.3% as well as a secondary product for the Sasol Synfuels market.

The export beneficiation plant has a design throughput capacity of 10.5 Mt per year. In 2006, 10 Mt was

processed. The plant consists of a primary and secondary stage. The primary stage comprises three modules with
two feed streams each. The coal is fed at a rate of 550 tons per hour into two 800 millimeter (mm) diameter
dense medium cyclones per feed stream. There are a total of 18 cyclones in the primary stage. The secondary
stage consists of two modules with two 1,000 mm diameter dense medium cyclones.

The run of mine (ROM) coal is transported via overland conveyor belts to the export beneficiation plant

from the Twistdraai export mine. The export product is loaded onto trains by means of a rapid load-out system,
and then transported to the Richards Bay Coal Terminal in KwaZulu-Natal.

The existing capacity at the Richards Bay Coal Terminal is 72 Mt per year. Sasol Mining has a 5% share in

this terminal, which relates to an existing entitlement of 3.6 Mt per year. It is expected that the planned Richards
Bay Coal Terminal expansion project will increase the total throughput capacity to 82 Mt.

Sasol Coal Supply – Secunda operations. Sasol Coal Supply operates the coal handling facility between

Sasol Mining and Sasol Synfuels by stacking and blending coal on six stockpiles of 110,000 tons each.

101

The Sasol Coal Supply operation has a stockpile capacity of 660,000 tons, which is turned over

approximately 1.5 times per week. In addition, there is a reserve stockpile capacity of more than 2.2 Mt. The
objectives of this facility are:

• to homogenize the coal quality supplied to Sasol Synfuels;

• to keep the Sasol Synfuels bunkers full with a product that conforms to customer requirements;

• to maintain a buffer stockpile to ensure even supply; and

• to prevent fine coal generation.

The daily coal supply to Sasol Synfuels is approximately 110,000 tons to 118,000 tons.

Coal exploration techniques

Sasol Mining’s geology department employs several exploration techniques in assessing the geological

risks associated with the exploitation of the coal deposits. These techniques are applied in a mutually supportive
way to achieve an optimal geological model of the relevant coal seams, targeted for production purposes. The
Highveld Basin is considered to be structurally complex when compared to the other coalfields in South Africa
where mining activities are taking place. As a result, Sasol Mining bases its geological modeling on sufficient
and varied geological information. This approach is utilized in order to achieve a high level of support to the
production environment.

Core recovery exploration drilling. This is the primary exploration technique that is applied in all

exploration areas, especially during reconnaissance phases. In and around operational mines, the average vertical
borehole density varies from 1:10 to 1:15 (boreholes per hectare), while in medium term mining areas, the
average borehole density is in the order of 1:25. Usually, the drilling depth ranges from 200m to 250m. Depths
of the boreholes drilled vary, depending on the depth to the Pre-Karoo basement, which vary from 160m to
380m. The major application of this technique is to locate the coal horizons, to determine coal quality and to
gather structural information about dolerite dykes and sills, and the associated de-volatilization. This information
is used to compile geological models and forms the basis of geological interpretation.

Directional drilling (surface to in-seam). Directional drilling from surface to in-seam has been successfully

applied for several years. A circular area with a radius of approximately 2km of coal deposit can be covered by
this method, from one drill site. The main objective of this approach is to locate dolerite dykes and steep dipping
dolerite sills, as well as faults with displacements larger than the coal seam thickness.

Horizontal drilling. This technique is applied to all operational underground mines and supplies short-term

(minimum three months) exploration coverage per mining section. No core is usually recovered, although core
recovery is possible, if required. The main objective is to locate dolerite dykes and steep dipping sills
intersecting the coal mining horizon, by drilling horizontal holes in the coal seam from a mined out area.
A drilling reach of up to 1km is possible, although the average length is usually 800m.

Aeromagnetic surveys. All exploration areas are usually aero-magnetically surveyed before the focused

exploration is initiated. The main objective is to locate dolerite sills and dykes, as well as large-scale fault zones.

Airborne electro-magnetic surveys. Due to the occurrences of non-magnetic dolerite dykes and sills, it has

been necessary to survey certain exploration areas electro-magnetically to pinpoint these structures to optimize
mine deployment.

Geophysical wireline surveys of directional boreholes. Geophysical surveys are routinely conducted in the

completed directional drilled boreholes. This resulted in the availability of detailed information leading to
increased confidence of the surface directional drilling results. This technique has also been applied in
underground directional drilling with excellent results.

102

Secunda operations

The coal supplied to Sasol Synfuels is the raw coal mined on the tied mines and the secondary product

from the export mine’s beneficiation plant.

Extensive geological exploration has been done in the coal resource areas. Annually, additional exploration

is undertaken to update and refine the geological models, which allows accurate forecasting of geological
conditions and coal qualities, for the effective planning and utilization of the coal reserves.

Computation and storage of geological information

Geological information is stored in a Sequel Server database. Data validation and quality checking through

several in-house methods is conducted regularly. Data modeling is conducted by manual interpretation and
computer-derived geological models, using the Minex 5 edition of the SURPAC/MINEX software. Reserves and
composite qualities are computed using established and recognized geo-statistical techniques.

General stratigraphy

The principal coal horizon, the Number 4 Lower Coal Seam, provides some 90.8% of the total proven and

probable reserves. The Number 4 Lower Coal Seam is one of six coal horizons occurring in the Vryheid
Formation of the Karoo Supergroup, a permo-carboniferous aged, primarily sedimentary sequence. The coal
seams are numbered from the oldest to the youngest.

Characteristics of the Number 4 Lower Coal Seam. The Number 4 Lower Coal Seam is a bituminous hard

coal, characterized by the following borehole statistics:

• The depth to the base of the seam ranges from 40m to 241m with an average depth of 135m below the

surface topography. All the current mining done on this seam is underground.

• The floor of the seam dips gently from north to south at approximately 0.5 degrees.

• The thickness of the seam varies in a range up to 10.0m with a weighted average thickness of 3.30m. In

general, thinner coal is found to the south and thicker coal to the west adjacent to the Pre-Karoo
basement highs.

• The inherent ash content (air dried basis) is an average 24.5%, which is in-line with the coal qualities

supplied during the past 29 years to Sasol Synfuels.

• The volatile matter content is tightly clustered around a mean of 22.8% (air dried).

• The total sulfur content (air dried), which primarily consists of mineral sulfur in the form of pyrite and

minor amounts of organic sulfur, averages 1.08% of the total mass of the coal.

The other potential coal seam is:

• The Number 2 Coal Seam, which provides an additional tonnage to the reserve in one area and is being

evaluated in a number of other areas to provide supplemental reserve tonnage.

Mining parameters and assumptions used during reserve estimation

• Minimum Mining Height (meters); the minimum mining height used is 2.2m. The exception is

Bosjesspruit mine, where the height is 2.0m.

• Maximum mining height (meters): the maximum mining height used is 4.8m (Syferfontein).

• Primary Safety factor.

the safety factor used in the mine planning, for primary development, in normal

ground conditions is 1.8.

• Secondary Safety factor.

the safety factor used in the mine planning, for secondary development, in

normal ground conditions is 1.6.

103

• Minimum dry ash free volatile matter content: the dry ash free volatile matter content gives an

indication of devolatilized coal. During estimations, areas with a dry, ash free volatile matter content of
less than 28%, are excluded, and considered to be devolatilized coal areas.

• Geological loss factor: the geological loss factors vary in the respective blocks from 5.2% (Brandspruit)

to 35% (Block 5 East). The geological loss factor is a discount factor applied to the gross in situ tonnage
to take into account as yet unobserved geological features, which may occur. The geological loss factor is
therefore a function of the borehole density and known geological complexity of the area, as well as the
judgment of the competent person involved.

• Mine layout losses: the mine layout loss factors, expressed as a percentage of the in situ coal reserves

vary between 11% (Rooipoort) and 28% (Block 5 East). The mine layout loss factor is a discount factor
required to account for the expected loss of coal reserves, due to actual mining activities, not reaching
the defined boundary of the minable in situ coal reserve block. The mine layout loss factors applied are
therefore a function of the complexity of the depicted actual and anticipated geological structures and the
actual historical loss factors experienced.

• Mine method losses: the mine method loss factor, expressed as a percentage of the minable in situ coal

reserves vary between 40.4% (Twistdraai) and 50.6% (Syferfontein). The mine method loss factor is the
discount factor required to account for the expected loss of coal reserves, due to actual mining activities,
which requires support pillars to be left in situ. The mine method loss factors applied are therefore a
function of the mine method used and planned to be used, as well as the actual historical loss factors
experienced.

• Contamination factor: the contamination factor expressed as a percentage of the extractable coal

reserve, vary between 0% (Syferfontein) and 2.7% (Middelbult). The contamination factor refers to the
extraneous coal and non-coal material which is unintentionally added to the practical mining horizon, as
a result of the mining operations. The contamination factors applied are therefore a function of expected
geological conditions in the immediate roof and floor of the mining horizon, as well as the actual and
historical contamination factors experienced.

• Superficial moisture factor: the superficial moisture factor, expressed as a percentage of the extractable

coal reserve, vary between 4.5% (Middelbult) and 3.1% (Brandspruit). The superficial moisture refers to
the extraneous moisture added to the extracted coal as a result of the mining operations. The factors
applied are therefore based mostly on the historical factors experienced.

The safety factor is calculated by dividing the strength of the pillar by the stress acting on the pillar. The strength of the
pillar is determined by the inherent strength of the coal material, the width of the pillar and the height of the pillar. The
stress on the pillar is the result of the pillar load, which is determined by the depth of mining, the pillar width and the
bord width.

Reserve estimation (remaining reserves at 31 March 2006)

We have approximately 4.0 billion tons (Bt) of gross in situ proven and probable coal reserves in the

Secunda Deposit and approximately 1.5 Bt of recoverable reserves. The coal reserve estimations are set out in
the table 1 below. The different reserve areas are depicted on a map on page M–4, as well as whether the reserve
areas are allocated or not.

104

Table 1.

Coal reserve estimations

in the Secunda area where Sasol Mining has interim statutory rights (old order

mining rights), for which applications were submitted to convert to mining rights in terms of the Mineral
and Petroleum Resources Development Act, Act 28 of 2002

Gross in

Mine

situ coal

Geological

layout

Extraction

Recoverable

Beneficiated

resource

discount

losses

rate

reserves

yield

Proven/

Reserve area

(Mt)

(%)

(Mt)

(%)

probable

Middelbult Mine

851

180

168

306

100

Proven

Bosjesspruit Mine

502

115

189

100

Proven

Twistdraai Mine

166

P40, S36

Proven

Syferfontein Mine

508

212

100

Proven

Brandspruit Mine

169

100

Proven

Rooipoort Area

300

129

100

Probable

Evander Town

100

Probable

Secunda Town

100

Probable

Block 2, Number 4 seam

810

219

148

273

100

Probable

Block 2, Number 2 seam

370

100

125

100

Probable

Block 5 East

184

100

Probable

Total Secunda Area

3,978

1,462

The coal reserve estimations in this table were compiled under supervision of Mr. Phill Grobler Pr. Nat. Sci
(Professional Natural Scientist). The “South African Code for Reporting of Minerals Resources and Minerals reserves,
(The SAMREC Code)”dealing with competence and responsibility, paragraph 4.1, state: Documentation detailing
exploration results, mineral resources and mineral reserves estimates from which a public report on exploration results,
mineral resources and mineral reserves is prepared, must be prepared by or under the direction of, and signed by, a
competent person. Paragraph 4.3 states: A competent person is a person who is a member of the South African Council
for Natural Scientific Professions. Mr. JD Conradie, on behalf of Gemecs (Pty) Limited reviewed the correctness of the
methodology and the assumptions used to obtain coal resource/reserve estimations in tables 1 and 2.

The gross in Situ coal resource is an estimate of the coal tonnage, contained in the full coal seam above the minimum
thickness cut off and relevant coal quality cut off parameters. No loss factors are applied and seam height does not
include external dilution or contamination material.

The recoverable coal reserve is an estimate of the expected recovery of the mines in these areas and is determined by
the subtraction of losses due to geological and mining factors and the addition of dilutants such as moisture and
contamination.

The P% refers to the yield export product from the recoverable coal reserve and the S% refers to secondary product
yield, which will be supplied to the Synfuels factory. The balance of this is discard material.

Mt refers to 1 million tons. Reference is made of tons, each of which equals 1,000 Kilograms, approximately
2,205 pounds or 1,102 short tons.

The Rooipoort area contains some coal which can be beneficiated for the export market. Investigations to prove the
viability of beneficiation are underway.

105

Coal qualities per associated reserve estimation (remaining reserves at 31 March 2006)

In tables 2 and 3, additional information regarding coal qualities is provided.

Table 2.

Coal qualities, on an air dry basis, in respective coal reserve areas, where Sasol Mining has interim
statutory rights (old order mining rights), in the Secunda mining complex, for which applications were
submitted to convert to mining rights, in terms of the Mineral and Petroleum Resources Development Act,
Act 28 of 2002

Average

Heat

inherent superficial

value

moisture moisture

Steam/

(air dry

Sulfur

Wet/dry

content

Assigned/

metallurgical basis)

(air

dry

Reserve area

tons

(%)

unassigned

coal

MJ/kg

basis)

Middelbult Mine

Wet

4.3

4.5

Assigned

Steam

20.9

0.8

Bosjesspruit Mine

Wet

3.7

3.6

Assigned

Steam

22.1

1.4

Twistdraai Mine

Wet

3.8

4.1

Assigned

Steam

21.2

1.1

Syferfontein Mine

Wet

6.3

4.3

Assigned

Steam

22.4

0.7

Brandspruit Mine

Wet

4.1

3.5

Assigned

Steam

18.9

1.3

Rooipoort Area

Wet

3.8

3.1

Assigned

Steam

21.2

1.1

Evander Town

Wet

4.3

3.1

Unassigned

Steam

21.1

0.8

Secunda Town

Wet

3.8

3.1

Unassigned

Steam

21.6

1.0

Block 2, number 4 seam

Wet

4.3

4.5

Unassigned

Steam

21.5

0.9

Block 2, number 2 seam

Wet

3.9

4.5

Unassigned

Steam

19.6

0.7

Block 5 East

Wet

3.7

3.1

Unassigned

Steam

20.8

1.0

Table 3.

Coal qualities, on an as received basis, in respective coal reserve areas, where Sasol Mining has interim
statutory rights (old order mining rights), in the Secunda mining complex, to convert to mining rights in
terms of the Mineral and Petroleum Resources Development Act, Act 28 of 2002

Average

Heat

inherent superficial

value (as Sulfur

moisture moisture

Steam/

received (as

Wet/dry

content

Assigned/

metallurgical basis)

received

Reserve area

tons

(%)

unassigned

coal

MJ/kg

basis)

Middelbult Mine

Wet

4.3

4.5

Assigned

Steam

20.3

0.8

Bosjesspruit Mine

Wet

3.7

3.6

Assigned

Steam

21.3

1.4

Twistdraai Mine

Wet

3.8

4.1

Assigned

Steam

20.6

1.1

Syferfontein Mine

Wet

6.3

4.3

Assigned

Steam

21.5

0.7

Brandspruit Mine

Wet

4.1

3.5

Assigned

Steam

18.2

1.3

Rooipoort Area

Wet

3.8

3.1

Assigned

Steam

20.5

1.1

Evander Town

Wet

4.3

3.1

Unassigned

Steam

21.1

0.8

Secunda Town

Wet

3.8

3.1

Unassigned

Steam

20.9

1.0

Block 2, number 4 seam

Wet

4.3

4.5

Unassigned

Steam

20.8

0.9

Block 2, number 2 seam

Wet

3.9

4.5

Unassigned

Steam

19.0

0.7

Block 5 East

Wet

3.7

3.1

Unassigned

Steam

20.3

1.0

106

Criteria for proven and probable

Over and above the definitions for coal reserves, probable coal reserves and proven coal reserves, set forth

in Industry Guide 7, under the US Securities Act of 1933, as amended, which are included in our glossary, we
consider the following criteria to be pertinent to the classification of the reserves.

Probable reserves are those reserve areas where the drill hole spacing is sufficiently close in the context of

the deposit under consideration, where conceptual mine design can be applied, and for which all the legal and
environmental aspects have been considered. Probable reserves can be estimated with a lower level of
confidence than a proven coal reserve. Currently this classification results in variable drill spacing depending on
the complexity of the area being considered and is generally less than 500 meters, although in some areas it may
extend to 880 meters. The influence of increased drilling in these areas should not materially change the
underlying geostatistics of the area on the critical parameters such as seam floor, seam thickness, ash and
volatile content.

Proven reserves are those reserves for which the drill hole spacing is generally less than 350 meters, for

which a complete mine design has been applied which includes layouts and schedules resulting in a full financial
estimation of the reserve. This classification has been applied to areas in the production stage or for which a
detailed feasibility study has been completed.

Legal rights on coalfields

Mineral rights were substituted with interim statutory rights in accordance with the transitional provisions

of the Mineral and Petroleum Resources Development Act, 2002 (Act 28 of 2002), which came into effect on
1 May 2004. Sasol, therefore, hold these interim statutory rights (old order mining rights), to mine more than
98% of the mineral rights previously owned in the Secunda area. Sasol holds four old order mining rights,
(previously Section 9 mining authorizations under the repealed Minerals Act), consisting of 157,000 hectares of
coal rights. In terms of the aforementioned transitional provisions, Sasol must convert these interim rights to
mining rights by May 2009. Applications for the conversion of the four old order mining rights have been
submitted to the Department of Minerals and Energy during April 2006. See also “Item 4.B Business Overview
– Regulation of mining activities in South Africa”.

Sasolburg operations

Exploration history

The Northern Free State area was first explored in the late 1930s. The exploration was conducted by

drilling core recovery boreholes over the current Sasolburg area. Some boreholes were initially drilled by the
South African government. The Sigma mine was established in 1950. Subsequent drilling by the General Mining
and Finance Corporation in the 1960s identified more coal reserves in the southwest of the existing Sigma Mine
as well as extensions to the south and east. Page M–3 includes a map showing the location of our Sasolburg coal
operations.

Drilling conducted by Sasol Mining has continued to the present. All analytical work was initially done by

the state laboratory, the Fuels Research Institute. More recently, it was conducted by the laboratories of the
South African Bureau of Standards in Pretoria (now Coal and Mineral Technology).

Coal seam geology

There are two primary coal seams of importance, the Number 2 Coal Seam and the Number 3 Coal Seam.

These coal seams are separated by a carbonaceous mudstone to siltstone parting and consist of a number of coal
plies and carbonaceous mudstone interburdens. The individual coal plies are numbered from the base upwards
and selected mining horizons are identified on the basis of the coal quality required. The major controlling factor
on the coal development is the pre-Karoo basement.

107

Selective mining within coal seams implies that strict horizon control is exercised to maintain mining on

the selected horizon. This has been done very successfully at the old Sigma underground operations and at the
Mohlolo underground operation, which was closed during the year. The same principles will be applied at the
Mooikraal Mine. In the visible coal seam a well-defined marker within the seam assists in the identification and
verification of the pre-determined minable horizon underground, even in areas where the coal seam is displaced
by faulting.

In general, the quality of the coal (the ash yield or the fixed carbon content) deteriorates from the base of

the coal seam to the top of the coal seam.

In-seam occurrence of inorganic material is rare in the selected minable area and may consist of locally

developed carbonaceous mudstone lenses. Inorganic material occurs mainly towards the top of the coal seam,
but has been excluded from the selected minable horizon.

Sigma Mine has been active since 1950 and has completed total extraction of room and pillar and longwall

mining on both the major coal seams. The operations at the Mohlolo underground mines, developed from the
highwalls of the Wonderwater strip mine, was closed during 2006.

The development of the Mooikraal mine is on schedule and production has started from the mine. The

current expected production (2007) is 1.6 Mt per year, where the number 3 B seam is mined.

Selected mining horizon

The determination of the selected mining horizon is driven primarily by the required coal quality for the

steam process at Sasol Infrachem. In order to define the mining horizon, detailed sampling, with associated coal
seam descriptions, are conducted. From this, both a visual and chemical correlation of the plies are made.

Reserve estimation

Sasol Mining has 28 Mt proven recoverable coal reserves for supply to Sasol Infrachem for steam

generation from the number 3B coal seam. The reserve estimation is depicted in Table 4 below.

Table 4.

Coal reserve estimation

of proven and probable reserves, in areas where Sasol Mining has interim

statutory rights (old order mining rights) in the Sasolburg mining complex, to be converted to mining
rights pursuant to the Mineral and Petroleum Resources Development Act, Act 28 of 2002

Gross in

Mine

Recoverable

situ coal

Geological

layout Extraction

coal

Proven/

Coal

resource

discount

losses

rate

reserves

3&4

probable

Reserve area

seam

(Mt)

(%)

(Mt)

(%)

Mooikraal

Proven

Mooikraal (Remainder)

Probable

Mooikraal South(devol)

1100

Probable

Total Sasolburg area

210

_______

________

Mr. B Fourie compiled the coal reserve estimations in this table, under the supervision of Mr. Phill Grobler Pr.Nat.Sci.,
Divisional Manager, Strategic Capacity Management, Sasol Mining. The “South African Code for Reporting of
Minerals Resources and Minerals reserves, (The SAMREC Code)”dealing with competence and responsibility,
paragraph 4.1 states: Documentation detailing exploration results, mineral resources and mineral reserves estimates
from which a public report on exploration results, mineral resources and mineral reserves is prepared, must be prepared
by or under the direction of, and signed by, a competent person. Paragraph 4.3 states: A competent person is a person
who is a member of the South African Council for Natural Scientific Professions (SACNASP).

108

The gross in situ coal resource is an estimate of the coal tonnage, contained in the full coal horizon, selected for
mining, above the minimum thickness cut off and relevant coal quality cut off parameters. No loss factors are applied
and seam height does not include external dilution or contamination material.

Recoverable coal reserve refers to the economically minable coal, inclusive of diluting and contaminating material, and
allows for losses that may occur when material is mined.

At Sasolburg, no coal beneficiation is conducted with 100% of the recoverable coal supplied to the client.

Mt refers to 1 million tons. One tons equals 1 000 kilograms, approximately 2 205 pounds or 1 102 short tons.

In the southern portion of the Mooikraal reserve area, the coal is overlain by a dolerite sill, which had an effect on the
coal seam which is planned to be mined. The reserves in this area is therefore indicated as probable reserves. The
reserves’ minebility will be proven once mining is attempted in this area.

Coal qualities per associated reserve estimation (remaining reserves at 31 March 2006)

In tables 5 and 6 additional information regarding coal qualities is provided.

Table 5.

Coal qualities on an Air Dry Basis, per reserve estimation area, in areas where Sasol Mining has interim
statutory rights (old order mining rights), in the Sasolburg mining complex, to be converted to mining
rights in terms of the Mineral and Petroleum Resources Development Act, Act 28 of 2002.

Average

Heat

inherent superficial

value

moisture moisture

Steam/

(air dry

Sulfur

Wet/dry

content

Assigned/

metallurgical basis)

(air

dry

Reserve area

tons

(%)

unassigned

coal

MJ/kg

basis)

Mooikraal

Wet

4.8

3.2

Assign

Steam

19.5

0.2

Mooikraal (Remainder)

Wet

3.7

3.2

Assign

Steam

20.6

0.6

Mooikraal South (devol)

Wet

2.9

3.2

Assign

Steam

21.2

0.6

Table 6.

Coal qualities on an as received basis, per reserve estimation area, in areas where Sasol Mining has
interim statutory rights (old order mining rights), in the Sasolburg mining complex, to be converted to
mining rights pursuant to the Mineral and Petroleum Resources Development Act, Act 28 of 2002.

Average

Heat

inherent superficial

value (as Sulfur

moisture moisture

Steam/

received (as

Wet/dry

content

Assigned/

metallurgical basis)

received

Reserve area

tons

(%)

unassigned

coal

MJ/kg

basis)

Mooikraal

Wet

4.8

3.2

Assigned

Steam

18.9

0.2

Mooikraal (Remainder)

Wet

3.7

3.2

Assigned

Steam

19.9

0.6

Mooikraal South (devol)

Wet

2.9

3.2

Assigned

Steam

20.5

0.6

109

Oil and gas production and exploration operations

SPI, our dedicated oil and gas exploration and production company, currently has reserves in two fields:

• In Gabon, the company holds a 27.75% non-operated interest in the offshore Etame field. An internally

determined assessment of oil reserves was conducted during April 2006. As the license held over this
property is a Production Sharing Contract, reserves reported represent the net economic interest volumes
attributable to the company, after deduction for royalties, grossed up for income taxes.

• In Mozambique, the company holds a 70% operated interest in the Pande and Temane gas fields. An

internally determined assessment of gas reserves was conducted during April 2006. Reserves reported
represent the net economic interest volumes attributable to the company, after deduction of production
tax. Additionally, the volumes booked are restricted to the take-or-pay quantities defined in the gas sales
agreement for the 25-year term. A phased approach to field development has been followed and only the
Temane field has currently been developed. Development of the Pande field is planned to begin in 2007.

Reserve and production disclosure

See unaudited supplemental oil and gas information to “Item 18 – Financial statements” for further

disclosures of oil and gas operations.

Crude Oil and Condensate

Natural Gas

Other

Mozambique

areas

Total

Mozambique

Total

Millions of barrels

Billions of cubic feet

Proved developed and undeveloped reserves
First estimate

–

9.2

1,445.0

Production

–

(1.5)

(7.0)

Balance at 30 June 2004

–

7.7

1,438.0

Revisions

7.5

2.7

10.2

(24.9)

Extensions and discoveries

–

1.0

–

Production

(0.2)

(1.6)

(1.8)

(45.2)

Balance at 30 June 2005

7.3

9.8

17.1

1,367.9

Revisions

0.3

0.2

0.5

(6.7)

Extensions and discoveries

0.1

–

0.1

–

Production

(0.4)

(1.4)

(1.8)

(55.1)

Balance at 30 June 2006

7.3

8.6

15.9

1,306.1

Proved developed reserves
At 30 June 2004

–

4.3

375.0

At 30 June 2005

3.1

4.7

7.8

385.7

At 30 June 2006

3.1

3.0

6.1

373.5

The table above records estimates of the reserve quantities held by Sasol, through its various operating

entities under Sasol Petroleum International (Pty) Limited.

The oil and gas reserve estimations in this table were compiled by:

• Mr L Williams, Technical Manager (SPI), Bachelor of Science Petroleum and Natural Gas;

• Mr M Waterhouse, General Manager (SPI), Bachelor of Science Geology.

110

ITEM 4A.

UNRESOLVED STAFF COMMENTS

There are no unresolved written comments from the SEC staff regarding our periodic reports under the

Exchange Act received more than 180 days before 30 June 2006.

111

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read this section along with our consolidated financial statements for the years ended and as at

30 June 2006, 30 June 2005 and 30 June 2004, including the accompanying notes, that are included in this
annual report on Form 20-F. The following discussion of operating results and the financial review and prospects
as well as our consolidated financial statements have been presented and prepared in accordance with US GAAP.
The Segment review included below is based on our segment results which have been prepared and presented in
accordance with IFRS and reconciled to US GAAP, as IFRS information is utilized by the company’s chief
operating decision maker in allocating resources and making investment decisions. Certain information
contained in the discussion and analysis set forth below and elsewhere in this annual report includes forward-
looking statements that involve risks and uncertainties. See “Item 3.D – Key information – Risk factors” for a
discussion of significant factors that could cause actual results to differ materially from the results described in
or implied by the forward-looking statements contained in this annual report.

5.A

Operating results

Company and business overview

Sasol is an integrated oil and gas company with complementary interests in coal, chemicals and the

international development of synthetic-fuel ventures based on our proprietary Fischer-Tropsch technology. We
mine coal in South Africa and through Sasol Synfuels, we convert this coal, along with Mozambican natural gas,
into fuels and chemical feedstock utilizing our Fischer-Tropsch technology.

We have significant chemical manufacturing and marketing operations in South Africa, Europe, the United

States and Asia. Our chemical portfolios include monomers, polymers, solvents, comonomers, waxes, phenolics,
ammonia, fertilizers and commercial explosives.

In South Africa, we refine imported oil into liquid fuels and retail liquid fuels and lubricants produced in

our refinery and by Sasol Synfuels through Sasol convenience centres and Exel service stations. We also
wholesale fuels in South Africa and export fuels to sub-Saharan Africa. We produce and sell oil in Gabon.

We produce gas in Mozambique for supply to customers and as feedstock for some of our South African

fuel and chemical production. We shall start up our first international GTL plant in Qatar in 2007. A second
GTL plant, under construction in Nigeria, is scheduled to be commissioned in 2009. These plants will use the
Sasol Slurry Phase Distillate™ process.

Formed in 1950, we commenced Fischer-Tropsch-based production in 1955. We employ more than

31,000 people and remain one of South Africa’s largest investors in capital projects and skills training.

In 2003, Sasol determined that it would continue to grow its chemical business conditional upon projects

leveraging its technology or securing integrated and highly cost-competitive feedstock positions. The Sasol
Olefins & Surfactants business is only partially integrated upstream into feedstocks and has not adequately
provided the integration benefits required. On 1 August 2005, Sasol announced that it was considering the
divestment of its Sasol Olefins & Surfactants business excluding its activities in South Africa subject to fair
value being obtained. At 30 June 2006, the sales process was sufficiently advanced such that management
believe that the business will be sold, as a going concern, within the next financial year. With effect from
30 June 2006, the business has been classified as a disposal group held for sale and reported as discontinued
operations.

The income statement has been restated for all periods to exclude Sasol Olefins & Surfactants from

continuing operations and report these results as discontinued operations on a single line item under
discontinued operations. The cash flow statement for all periods presented and the 2005 balance sheet include
both continuing and discontinued operations. On classification as held for sale, the net assets of the business
were written down by R3.1 billion (before tax) to the estimated fair value less costs to sell.

112

We divide our operations into the following segments:

Continuing operations

• Sasol Mining;

• Sasol Synfuels;

• Sasol Oil (previously Sasol LFB);

• Sasol Gas;

• Sasol Synfuels International;

• Sasol Polymers;

• Sasol Solvents; and

• Other – which consists of Sasol Wax, Sasol Nitro, Sasol Technology, Sasol Petroleum International,

Sasol Financing, Sasol Infrachem, Merisol and the group’s corporate head office.

Discontinued operations

• Sasol Olefins & Surfactants.

External factors and conditions

Our business, operating results, cash flow and financial condition are subject to the influence of a number

of external factors and conditions. These include conditions in the markets in which we sell our products,
including the effect of fluctuations in the currency markets, most notably in the exchange rate between the rand
and the US dollar, fluctuations in the international price of crude oil, cyclicality in the prices of chemical
products, the effect of coal prices on export coal operations and the effects of inflation on our costs.
Other factors which may influence our business and operating results include economic, social, political and
regulatory conditions and developments in the countries in which we operate our facilities or market our
products. See “Item 3.D – Key information – Risk factors”.

Exchange rate fluctuations

The rand is the principal functional currency of our operations. However, a large part of our group’s

turnover is denominated in US dollars and some part in euro, derived either from exports from South Africa or
from our manufacturing and distribution operations outside South Africa. A significant part of our turnover is
also determined by the US dollar (approximately 90%), as petroleum prices in general and the price of most
petroleum and chemical products are based on global commodity and benchmark prices which are quoted in
US dollars. A significant part of our capital expenditure is also US dollar-denominated, as it is directed to
investments outside South Africa or constitutes materials, engineering and construction costs imported into
South Africa.

113

After the significant weakening of the rand against the US dollar, in 2002 the rand has appreciated against

the US dollar since 2003 to 2005. This appreciation had a negative impact on our operating results over this
period. During 2006 we saw a marginal weakening of the rand against the US dollar, with the average exchange
rate for 2006 of R6.41 per US dollar compared to R6.21 per US dollar in 2005. This weakening in the rand had
a positive impact on our operating results in 2006. Similarly, the strengthening of the euro against the US dollar
over the last two years has negatively impacted the profitability of our European operations where our costs are
euro-based and a significant portion of our turnover is US-dollar based.

Although the exchange rate of the rand is primarily market-determined, its value at any time may not be an

accurate reflection of the underlying value of the rand, due to the potential effect of, among other factors,
exchange controls. These regulations also affect our ability to borrow funds from non-South African sources for
use in South Africa or to repay these funds from South Africa and, in some cases, our ability to guarantee the
obligations of our subsidiaries with regard to these funds. These restrictions have affected the manner in which
we have financed our acquisitions outside South Africa and the geographic distribution of our debt.
See “Item 10 – Additional information”.

The average exchange rate for the year has a significant effect on our turnover and our operating profit. In

2007, for budgeting and forecasting purposes, we estimate that for every R0.10 weakening or strengthening in
the annual average rand/US dollar exchange rate, our operating profit will increase or decrease by approximately
R570 million as applicable.

We manage our foreign exchange risks through the selective use of forward exchange contracts and cross

currency swaps. We use forward exchange contracts to reduce foreign currency exposures arising from imports
into South Africa. Forward exchange contracts which result in exposure of R100 million or more require the pre-
approval of our Group Executive Committee. We apply the following principal policies in order to protect
ourselves against the effects (on our South African operations) of a volatile rand against other major currencies
as well as an anticipated long-term trend of a devaluing rand:

• all major capital expenditure in foreign currency is hedged on commitment of expenditure or on approval

of the project (also with South African Reserve Bank approval), by way of forward exchange contracts;
and

• all imports in foreign currency in excess of an equivalent of US$50,000 per transaction are hedged on

commitment by way of forward exchange contracts.

See “Item 11 – Quantitative and qualitative disclosure about market risk”.

114

Fluctuations in refining margins and crude oil, natural gas and petroleum products prices

Through our equity participation in the Natref refinery, we are exposed to fluctuations in refinery margins

resulting from fluctuations in international crude oil and petroleum product prices. We are also exposed to
changes in absolute levels of international petroleum product prices through our synfuels operations.
Fluctuations in international crude oil prices affect our results mainly through their indirect effect on the
BFP formula. A key factor in the BFP is the Mediterranean and Singapore (gasoline) or the Arab Gulf (diesel)
spot price. See “Item 4.B – Business overview – Sasol Synfuels”, “Sasol Oil” and “Sasol Petroleum
International”. Furthermore, prices of petrochemical products and natural gas are also affected by fluctuations in
crude oil prices.

Market prices for crude oil, natural gas and petroleum products fluctuate as they are subject to local and

international supply and demand fundamentals and factors over which we have no control. Worldwide supply
conditions and the price levels of crude oil may be significantly influenced by international cartels, which
control the production of a significant proportion of the worldwide supply of crude oil, and by political
developments, especially in the Middle East.

The volatility of the crude oil price is illustrated in the following table, which shows the annual high, low

and average of the European Brent crude oil price (free on board) in US dollars for the past ten calendar years
and to 26 September in the 2006 calendar year:

US dollars per barrel (US$/b)

Calendar year

Average

High

Low

1996

20.64

25.40

16.23

1997

19.11

24.83

15.86

1998

12.76

16.28

9.10

1999

17.90

26.46

9.77

2000

28.66

37.43

21.05

2001

24.46

30.68

16.51

2002

24.99

32.02

18.17

2003

28.85

34.94

23.23

2004

38.26

52.28

29.02

2005

54.57

67.26

40.75

2006 (six months through 30 June)

65.61

74.45

56.78

July 2006

73.67

76.13

71.62

August 2006

73.23

78.26

67.01

September 2006

62.43

70.49

57.89

Source: Energy Information Administration (US Department of Energy)

The average price was calculated as an arithmetic average of the quoted daily spot price.

115

On 26 September 2006, the price of European Brent crude oil was US$58.53/b.

Significant changes in the price of crude oil, natural gas and petroleum products over a sustained period of

time may lead us to increase or decrease our production, which could have a material impact on our turnover.
Decreases in the price of crude oil and petroleum products can have a material adverse effect on our business,
operating results, cash flows and financial condition.

Other factors which may influence the aggregate demand and hence affect the markets and prices for

products we sell may include changes in economic conditions, the price and availability of substitute fuels,
changes in product inventory, product specifications and other factors. In recent years, prices for petroleum
products have fluctuated widely.

We make use of derivative instruments, including commodity options and futures contracts of short

duration as a means of mitigating price and timing risks on crude oil and other energy-related product purchases
and sales. While the use of these derivative instruments provides some protection against short-term volatility in
crude oil prices, it does not protect against longer-term trends in crude oil prices.

As a result of the group’s substantial capital investment programme and cash flow requirements, it was

deemed necessary to protect the group’s cash flow from fluctuations in crude oil prices by means of appropriate
hedging strategies. For 2005, we hedged the equivalent of approximately 30% of Sasol Synfuels’ production
(45,000 bpd) by entering into a forward sale agreement. This resulted in a charge to the income statement of
R1,147 million. After revising our hedging strategy, for 2006, we again hedged the equivalent of approximately
30% of Sasol Synfuels’ production by entering into a zero cost collar pursuant to which the group was protected
at crude oil prices below US$45.00/b but able to take advantage of higher crude oil prices, only incurring a cash
outflow should average crude oil prices be above US$82.61/b. The crude oil price traded within the range of this
collar throughout the hedging period and therefore the collar had no cash flow effect.

This revised strategy is believed to be more appropriate in the context of high but volatile crude oil prices

and, as a result of our continued requirement to fund our extensive capital investment programme, we have again
for 2007, hedged the crude oil equivalent of approximately 30% of our Sasol Synfuels’ production (45,000 bpd)
by means of a zero cost collar. In respect of the hedged portion of production, the group is protected at average
monthly crude oil prices below US$63.00/b and will incur a cash outflow should average crude oil prices exceed
US$83.60/b during the period of the hedge. As a result of the significant increase in monthly crude oil prices

116

before 30 June 2006, after entering into the collar for 2007, the market value of the collar resulted in a charge of
R93 million at year end. See “Item 11. – Quantitative and qualitative disclosure about market risk”.

In 2007, for budgeting and forecasting purposes, we estimate that for every US$1/b increase in the annual

average crude oil price, our group operating profit will increase by approximately US$45 million (approximately
R290 million) (excluding Sasol Olefins & Surfactants). Should the average annual crude oil price move outside
the range of our zero cost collar hedging instrument, the effect of the hedge on operating profit will be
approximately US$17 million (R110 million) for each US$1/b change in the average crude oil price above or
below the range of the collar.

Cyclicality in petrochemical products prices

The demand for our chemical products is cyclical. Typically, higher demand during peaks in industry cycles

leads producers to increase production capacity, at which point prices decrease. Most commodity chemical
prices tend, over the longer term, to track the crude oil price. However, over the past years, in which significant
increases in the crude oil price have been experienced, we have been unable to pass all of these increases in raw
materials costs on to our customers. We saw a 3% and 18% increase in the polymer and ammonia product prices
in 2006 compared to 2005 respectively and a 7% decrease in solvent product prices during 2006.

Although peaks in these cycles have in the past been characterized by increased market prices and higher

operating margins, such peaks have prompted further world wide capital investment which has led to supply
exceeding demand and a resultant reduction in selling prices and operating margins.

The group’s strategic policy is to invest in downstream chemical activities which are backward integrated

into the primary feed streams of those commodities. In times of high crude oil and related product prices (the
primary feedstock of most commodity chemicals), the profit margin shifts towards the feedstock producer while
in times of high chemical prices and lower feedstock prices, the profit margin shifts towards the downstream
activities. Our decision to divest Sasol Olefins & Surfactants, as a result of it not having the required degree of
backward integration into its feed streams evidences this strategy.

As a result of this backward integration, the group has elected not to hedge its exposure to commodity

chemical prices as this may, in part, negate the benefits of being backward integrated into its primary feed
streams.

Divestment of Sasol Olefins & Surfactants business

On 1 August 2005, we announced that we were considering the disposal of our Sasol Olefins & Surfactants

business excluding its comonomers activities in South Africa subject to an acceptable price being obtained.
Since August 2005 substantial work was undertaken to prepare the business for sale as a going concern
including:

• the carve-out of the business from the group to enable it to operate independently;

• finalisation of various agreements for the formation of a stand-alone divestiture group;

• issuance of an Information Memorandum on 22 May 2006 to interested parties inviting them to

participate in the auction process to acquire the business;

• completion of vendor due diligence regarding finance and tax, safety, health and environmental, human

resources and market/ industry aspects of the business; and

• evaluation of indicative bids received on 16 June 2006 and inviting certain interested parties to

participate in the next round of bidding.

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At 30 June 2006, the disposal process was sufficiently advanced such that management believe that the

business will be sold, as a going concern, within the next financial year. With effect from 30 June 2006, the
business has been classified as a disposal group held for sale and reported as discontinued operations.

The income statement has been restated for all periods to exclude Sasol Olefins & Surfactants from

continuing operations and report these results as a single line item. In the 2006 balance sheet the assets and
liabilities of Sasol Olefins & Surfactants have been classified as held for sale. The cash flow statement for all
periods and the 2005 and 2004 balance sheet includes both continuing and discontinued operations.

The significant changes in international crude oil prices necessitated a write-down of R3,110 million before

tax of the assets of Sasol Olefins & Surfactants.

Since the start of the divestiture process in August 2005, international oil prices have increased

significantly, which represent fundamental changes in energy costs and their related impact on oil derived
feedstock prices. Irrespective of the negative impact of the increased feedstock costs on the Sasol Olefins &
Surfactants business, the strategic rationale for considering the disposal of the business, as expressed in the
initial announcement, remains relevant and valid. It is not backward integrated into the primary feed streams to
Sasol’s required standards and is also not adequately linked to our proprietary Fischer-Tropsch technology.

Our estimate of the fair value of the Sasol Olefins & Surfactants business as at 30 June 2006 is based on

various assumptions, in particular long-term international oil prices and expected chemicals product prices. The
estimated fair value may be affected by the negotiation process with potential bidders.

Coal prices

Approximately 12% of our coal production is sold to external markets (3.6 Mt sold to the export market,

predominantly in Europe and 2.1 Mt sold to the South African market). External sales to these markets
represented approximately 28% of the total turnover generated by Sasol Mining during 2006.

Export coal sales prices are compared to the published international coal price indices to track

performance. Sasol Mining’s policy is to sell partially based on an API index related basis, and partially on fixed
prices. Sales at fixed prices are not extended beyond nine months forward. Internal coal sales are made to Sasol
Synfuels and Infrachem. Coal sales prices into this market are negotiated on a five year contractual basis and are
subject to periodic price adjustments. Transfer price negotiations are at arms length. Sasol Mining entered into a
three year contract with Eskom during the 2004 financial year. Eskom uses the coal for the purposes of power
generation.

The average free on board Richards Bay price index for the past six financial years:

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Inflation

Whilst over recent years, inflation and interest rates have been at relatively low levels, the economy of

South Africa, though currently well managed, at various times in the past has had high inflation and interest
rates compared to the United States of America and Europe. Should these conditions recur, this would increase
our South African-based costs. High interest rates could adversely affect our ability to ensure cost-effective debt
financing in South Africa. Sasol expects the impact of changes in the inflation rates on our international
operations to be less significant.

The history of the South African producer price index is illustrated in the following table, which shows the

average increase in the index for the past 10 calendar years and the annual percentage change on a monthly basis
in calendar year 2006:

Calendar year

Average

1996

7.0%

1997

7.0%

1998

3.6%

1999

5.8%

2000

9.2%

2001

8.4%

2002

14.2%

2003

1.7%

2004

0.6%

2005

3.1%

January 2006

5.5%

February 2006

5.5%

March 2006

5.4%

April 2006

5.5%

May 2006

5.9%

June 2006

7.5%

July 2006

8.1%

August 2006

9.6%

Source: Statistics South Africa

Our operations are subject to various laws and regulations in the countries in which we operate

The group operates in numerous countries throughout the world and is subject to various laws and

regulations which may become more stringent. Our mining, gas and petroleum-related activities in South Africa
are subject to, amongst others, the following laws or regulations:

• The Broad-based Black Economic Empowerment Act;

• The Gas Act;

• The Gas Regulator Levies Act;

• The Minerals Act;

• The Mineral and Petroleum Resources Development Act (MPRD Act);

• The Mineral and Petroleum Royalty Bill;

• The National Energy Regulator Act;

• The Petroleum Products Act and the Petroleum Products Amendment Act;

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• The Petroleum Pipelines Act;

• The Petroleum Pipelines Levies Act; and

• The Restitution of Land Rights Act.

We are also subject to various local, national and regional safety, health and environmental laws and

regulations. Our global operations are also impacted by international environmental conventions. See “Item 4. –
Business overview” and “Item 3.D – Key information – Risk factors” for the details of the various laws and
regulations which may impact on our operating results, cash flows and financial condition.

In South Africa our operations are required to comply with certain procurement, employment equity,

ownership and other regulations which have been designed to address the country’s specific transformation
issues. These include the Mining Charter, the Liquid Fuels Charter, and the Broad-based Black Economic
Empowerment Act along with the various Codes of Good Corporate Practice for broad-based Black Economic
Empowerment, the MPRD Act and the Restitution of Land Rights Act. See “Item 4.B – Business overview”.

We announced on 16 March 2006 the first phase implementation of Sasol Mining’s broad-based

empowerment strategy for compliance with the Mining Charter and the MPRD Act through the formation of
Igoda Coal, a 65:35 BEE venture with Eyesizwe. Igoda Coal will comprise the full value chain of Sasol
Mining’s coal export business – the Twistdraai Colliery and beneficiation plant at Secunda in Mpumalanga
Province, the marketing and logistics components of its coal export business, as well as Sasol Mining’s interest
in the Richards Bay Coal Terminal.

In compliance with the Liquid Fuels Charter we facilitated the R1.45 billion transaction with our BEE

partner Tshwarisano. Tshwarisano acquired a 25% shareholding in Sasol Oil (Pty) Limited with effect from
1 July 2006. We are providing considerable facilitation and support for Tshwarisano’s financing requirements, of
approximately R1.1 billion, which will significantly lower Tshwarisano’s cost of borrowing. In addition, we are
also establishing and funding trusts within Tshwarisano for the benefit of under-privileged communities.

The implementation of these or any future BEE ventures may require us to provide facilitation and support

for the financing requirements of the transactions.

A task team appointed by the South African Minister of Finance during May 2006 investigated possible

reforms to the fiscal regime applicable to windfall profits in South Africa’s liquid fuel energy sector, with
particular reference to the synthetic fuel industry and a discussion document for public comment was released by
the task team. During August 2006, we publicly released a comprehensive written submission in response to the
discussion document and also presented our views in an oral presentation to the members of the task team. The
task team handed their report containing its recommendation to the Minister of Finance on 22 September 2006.
It is expected that an announcement on the decision will be made during 2007 by the Minister of Finance. We
cannot predict whether this investigation will lead to amendments to the current fiscal regime.

Competition from products originating from countries with low production costs

Certain of our chemical production facilities (both from continuing and discontinued operations) are

located in developed countries, including the United States of America and Europe. Economic and political
conditions in these countries result in relatively high labor costs and, in some regions, inflexible labor markets,
compared to others. Increasing competition from regions with lower labor costs and feedstock prices, for
example the Middle East and China, exercises pressure on the competitiveness of our chemical products and,
therefore, on our profit margins and may result in the withdrawal of particular products or closure of facilities.

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Engineering contract costs

The increase worldwide in the sanctioning of large engineering contracts has resulted in a shortage of

engineering resources and strains in that industry. These have impacted on some of our projects and have
affected construction timing schedules and costs. Whilst higher international crude oil prices may boost post-
commissioning income streams and compensate for construction delays higher capital costs, these strains in the
engineering industry are nevertheless a cause for concern and may impact on our project plans and growth
ambitions.

HIV/AIDS in sub-Saharan Africa

HIV/AIDS is a healthcare challenge faced by our South African and other sub-Saharan operations. Based

on an actuarial study, which excludes the positive impact of any prevention and management intervention
programs, we estimate that, while the percentage of infected employees may not rise significantly in the
forthcoming years, there will be a significant increase in the number of AIDS-related fatalities. See “Item 6 –
Directors, senior management and employees”.

Based on the results of our voluntary counseling and testing program which had an 82% uptake amongst all

We incur costs relating to the medical treatment and loss of infected personnel, as well as the related loss of

productivity. We also incur costs relating to the recruitment and training of new personnel. We are not in a
position to accurately quantify these costs. Based on our actuarial models, we estimate that the impact of
HIV/AIDS on our payroll expenses should be less than 1% of our current payroll for our South African
employees by the year 2007. This calculation is based on the estimated financial impact on production resulting
from the projected prevalence of HIV/AIDS among our workforce, but does not take into account indirect costs
of productivity losses. We are investing human and financial resources to establish and maintain programs to
address the HIV/AIDS pandemic. In September 2002, we launched SHARP, which is our initiative to respond to
the HIV/AIDS pandemic, on which we have spent a total sum of approximately R22 million to June 2006. We
are committed to the on-going funding of SHARP.

Significant accounting policies and estimates

The preparation of our consolidated financial statements requires management to make estimates and

assumptions that affect the reported results of its operations. Some of our accounting policies require the
application of significant judgments and estimates by management in selecting the appropriate assumptions for
calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty
and are based on our historical experience, terms of existing contracts, management’s view on trends in the
industries in which we operate and information from outside sources and experts. Actual results may differ from
those estimates.

Our significant accounting policies are described in more detail in note 2 to the consolidated financial

statements. See “Item 18 – Financial statements”. This discussion and analysis should be read in conjunction
with the consolidated financial statements and related notes included elsewhere in this annual report.

Management believes the following significant accounting policies, among others, affect the more

significant judgments and estimates used in the preparation of Sasol’s consolidated financial statements and
could potentially impact our financial results and future financial performance.

We evaluate our estimates, including those relating to trade receivables, inventories, investments, intangible

assets, income taxes, pension and other post-retirement benefits and contingencies and litigation on an ongoing
basis. We base our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for making our judgments about carrying
values of assets and liabilities that are not readily available from other sources.

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Share options and other share-based payments

The Sasol Share Incentive Scheme allows certain senior group employees the option to acquire shares in

Sasol Limited over a prescribed period. The objective of the Scheme is the retention and reward of key
employees.

Effective 1 July 2005, we adopted, under the modified retrospective basis, the provisions of SFAS 123(R),

which establishes accounting for share-based awards exchanged for employee services. Under the provisions of
the standard share-based payments expenditure is measured at the grant date, based on the fair value of the
award, and is recognized as an expense over the employee’s requisite service period. The application of the
modified retrospective method provides that the financial results of prior periods are adjusted to reflect the fair
value method of expensing share-based payments for all awards which had not vested as at 1 July 2000. The
disclosure requirements of SFAS 123 were adopted by the group effective 1 July 2000 the first financial year
that the group presented its financial results in terms of US GAAP.

The financial results for the prior periods presented have been restated to reflect the fair value method of

expensing share-based payments, which was consistent with the pro-forma disclosures required for those periods
by SFAS 123.

We recognized share-based payment expense for the years indicated:

2006

2005

2004

Share-based payment expense (Rand in millions)

169

137

146

Weighted average grant-date fair value (Rand)

58.74

33.44

28.40

The total unrecognized share-based payment expenditure related to non-vested share options, expected to

be recognized over a weighted average period of 5.6 years, amounted to R361 million at 30 June 2006.

The weighted average assumptions that were used for option grants in the respective periods are as follows:

2006

2005

2004

Risk free interest rate (%)

8.00

9.25

10.75

Expected volatility (%)

Expected dividend yield (%)

4.0

4.3

Vesting period (years)

2, 4 & 6

2, 4 & 6

The risk free interest rate for periods within the contractual term of the share options is based on South

African government bonds in effect at the time of grant and the expected volatility in the value of the share
options granted is determined using the historical volatility of the Sasol share price.

Estimation of oil and gas reserves

The estimation of oil and gas reserves under SEC rules requires “geological and engineering data (that)

demonstrate with reasonable certainty (reserves) to be recoverable in future years from known reservoirs under
existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made.” Refer to
Table 4, “Proved reserve quantity information,” on page G–4 for the estimates for the year ending 30 June 2006
and to Table 5, “Standardized measure of discounted future net cash flows”, on page G–5 for our standardized
discounted future net cash flow information in respect of proved reserves for year-end 30 June 2006, which were
based on year-end prices at the time.

Estimates of oil and gas reserves are inherently imprecise, require the application of judgment and are

subject to future revision. Accordingly, financial and accounting measures (such as the standardized measure of
discounted cash flows, depreciation and amortization charges and asset retirement obligations), that are based on
proved reserves are also subject to change.

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Proved reserves are estimated by reference to available reservoir and well information, including

production and pressure trends for producing reservoirs and, in some cases, subject to definitional limits, and
similar data in respect of other producing reservoirs. Proved reserves estimates are attributed to future
development projects only where there is significant commitment to project funding and execution and for which
applicable governmental and regulatory approvals have been secured or are reasonably certain to be secured.
Furthermore, estimates of proved reserves only include volumes for which access to markets is assured with
reasonable certainty. All proved reserves estimates are subject to revision, either upward or downward, based on
new information, such as from development drilling and production activities or from changes in economic
factors, including product prices, contract terms or development plans. See “Item 4.D – Information on the
company – Property, plants and equipment”.

Upward revisions in oil reserve estimates for 2005 were enabled by additional performance history

resulting in increased confidence in reserve levels and the effect of higher crude prices in the extension of the
production plateau. Additionally condensate volumes which were excluded from estimates prior to 2005 are now
included based upon the recognition of a spot market and a history of sales. Revisions to our oil and gas reserves
during 2006 and 2005 did not have a material impact on our financial position and results of operations.

Our exploration assets included under property, plant and equipment on the balance sheet largely consist of

our 5% interest in the OPL249 license in deepwater Nigeria. The costs include acquisition costs and exploration
costs for three wells. Current activities include unitization of one discovery in the license area with a
neighboring field due to the field stretching across both license areas. Further exploration wells are planned to be
drilled in the license area in the near future. The declaration of proved reserves is pending commencement of
front end engineering and design and finalization of the development plan. This is expected to be completed
in 2007.

Amortization of coal mining assets

We calculate amortization charges on coal mining assets using the units-of-production method, which is

based on our proved and probable reserves. Proved and probable reserves used for the amortization of life-of-
mine assets are the total proved and probable reserves assigned to that specific mine (accessible reserves) or
complex which benefit from the utilization of those assets. Inaccessible reserves are excluded from the
calculation. A unit is considered to be produced once it has been removed from underground and taken to the
surface, passed the bunker and been transported by conveyor over the scale at the shaft head. The lives of the
mines are estimated by our geology department using interpretations of mineral reserves, as determined in
accordance with Industry Guide 7 under the US Securities Act of 1933, as amended. The estimate of the total
reserves of our mines could be materially different from the actual coal mined. The actual usage by the mines
may be impacted by changes in the factors used in determining the economic value of our mineral reserves, such
as the coal price and foreign currency exchange rates. Any change in management’s estimate of the total
expected future lives of the mines would impact the amortization charge recorded in our consolidated financial
statements, as well as our estimated asset retirement obligations. See “Item 4.D – Information on the company –
Property, plants and equipment”.

Fair value and useful life of intangible assets

In assessing the recoverability of goodwill (which requires the assessment of fair value of the reporting

unit) and other intangible assets, we must make assumptions (including inflation, exchange rates and oil and
chemicals product prices amongst others) regarding estimated future cash flows and other factors to determine
the fair value of the respective assets. If these estimates or their fair value assessments change in the future, we
may need to record impairment charges for these assets. Identifiable intangible assets with definite useful lives,
such as patents, trademarks and licenses, are currently amortized on a straight-line basis, over their estimated
useful lives.

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Useful life of long-lived assets

Given the significance of long-lived assets to our financial statements, any change in the depreciation

period could have a material impact on our results of operations and financial condition.

In assessing the useful life of long-lived assets, we use estimates of future cash flows and expectations

regarding the future utilization pattern of the assets to determine the depreciation to be charged on a straight-line
basis over the estimated useful lives of the assets. Annually, we review the useful lives and economic capacity of
the long-lived assets with reference to any events or circumstances that may indicate that an adjustment to the
depreciation period is necessary. The assessment of the useful lives takes the following factors into account:

• the expected usage of the asset by the business. Usage is assessed with reference to the asset’s expected

capacity or physical output;

• the expected physical wear and tear, which depends on operational factors such as the number of shifts

for which the asset is to be used, the repair and maintenance program of the business and the care and
maintenance of the asset while idle;

• technological obsolescence arising from changes or improvements in production or from a change in the

market demand for the output of the asset;

• legal or similar limits on the use of the asset, such as expiry dates and related leases; and

• dependency or co-dependency on supply of raw materials.

The assessment performed during 2005 of the useful lives of certain items of property, plant and equipment

resulted in a reduction in our depreciation charge of approximately R1.5 billion. The assessment was undertaken
due to recent significant capital expenditure incurred, for example Project Turbo, primarily designed to enable
our facilities to produce fuel which meets the new South African fuel specifications with effect from 1 January
2006 and to expand our polymers portfolio. As Sasol Synfuels is the primary downstream feedstock provider to
a number of the chemical plants in the Secunda complex, the useful lives of these assets were also assessed. This
resulted in a substantial increase in the expected remaining useful life of our assets in Secunda to a maximum
remaining life of 25 years. In Sasolburg, the introduction of natural gas as the primary feedstock towards the end
of 2004 and the replacement of coal resulted in a similar assessment of the useful lives of the assets in the
Sasolburg region as well as the group’s gas pipeline infrastructure. As part of this process the useful lives of the
assets in our overseas facilities were also evaluated. There were no significant changes to the useful lives of our
long-lived assets during 2006.

Impairment of long-lived assets

Long-lived assets are reviewed using economic valuations to calculate impairment losses whenever events

or a change in circumstance indicate that the carrying amount may not be recoverable. In carrying out the
economic valuations, an assessment is made of the future cash flows expected to be generated by the assets,
taking into account current market conditions, the expected lives of the assets and our latest budgets. The actual
outcome can vary significantly from our forecasts, thereby affecting our assessment of future cash flows. Assets
whose carrying values exceed their estimated recoverable amount, determined on an undiscounted basis, are
written down to an amount determined using discounted net future cash flows expected to be generated by the
asset. The expected future cash flows are discounted based on Sasol’s Weighted Average Cost of Capital
(WACC) which, at 30 June 2006, was 11.75% for our South African operations and 7.25% for our operations in
Europe and the United States. Refer to the discussions included below under the Segment Review for the
financial impact of the impairment assessments performed during the current year.

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Environmental and asset retirement obligations

We have significant obligations to remove plant and equipment, rehabilitate land in areas in which we

conduct operations upon termination of such operations and incur expenditure relating to environmental
contamination treatment and cleanup. Environmental and asset retirement obligations are primarily associated
with our mining and petrochemical operations around the world.

An accrual for environmental matters is recorded when it is probable that a liability has been incurred and

the amount of the liability can be reasonably estimated. Expenditure related to environmental contamination
treatment and cleanup is expensed. The estimated fair value of dismantling and removing these facilities is
accrued for as the obligation arises, if estimable, concurrent with the recognition of an increase in the related
asset’s carrying value. Estimating the future asset removal expenditure is complex and requires management to
make estimates and judgments because most of the removal obligations will be fulfilled in the future and
contracts and regulations often have vague descriptions of what constitutes removal. Further, management is
required to determine the discount rate to be used in calculating the obligation based on the amount of the credit
risk of the group which varies depending on the underlying interest rate environment. Future asset removal costs
are also influenced by changing removal technologies, political, environmental, safety, business relations and
statutory considerations.

The actual liability for rehabilitation costs can vary significantly from our estimate and, as a result, the

liabilities that we report can vary significantly if our assessment of the expenditures changes.

The group’s environmental obligation for continuing operations accrued at 30 June 2006 was

R2,262 million compared to R2,002 million in 2005 (R238 million and R158 million was accrued for 2006 and
2005, respectively, for our discontinued operations).

These obligations are discounted using a credit adjusted rate depending on the expected timing of the

obligation and the currency in which the obligation will be settled, and the discount rates which fall within a
range of between 4.2% to 8.1%. An increase in the discount rate by one percentage point would result in a
decrease in the long-term obligations recognized of approximately R426 million and a decrease of one
percentage point would result in an increase of approximately R523 million.

Employee benefits

We provide for our obligations and expenses for pension and provident funds as they apply to both defined

contribution and defined benefit schemes, as well as post-retirement healthcare benefits. The amount provided is
determined based on a number of assumptions and in consultation with an independent actuary. These
assumptions are described in Note 21 to “Item 18 – Financial statements” and include, among others, the
discount rate, the expected long-term rate of return on pension plan assets, healthcare cost inflation and rates of
increase in compensation costs. The nature of the assumptions is inherently long-term, and future experience
may differ from these estimates. For example, a one percentage point increase in assumed healthcare cost trend
rates would increase the accumulated post-retirement benefit obligation by R547 million.

The group includes the amortization of unrecognized gains and losses on the pension fund valuation as a

component of net pension cost for the year if the net cumulative unrecognized actuarial gains and losses at the
end of the previous reporting period exceed the greater of:

• 10% of the present value of the defined benefit obligation at that date; or

• 10% of the fair value of any plan assets at that date (the 10% corridor rule).

In respect of the post-retirement healthcare benefits valuation the group accounting policy requires the

immediate recognition of net actuarial gains and losses.

While management believes that the assumptions used are appropriate, significant changes in the

assumptions may materially affect our pension and other post-retirement obligations and future expense.

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On 26 September 2006, the South African Financial Services Board approved the Sasol Pension Fund

Surplus Apportionment Scheme. Had this approval been obtained prior to year end, the prepaid pension asset
would have increased by R130 million.

Fair value estimations of financial instruments

We base fair values of financial instruments on listed market prices, where available. If listed market prices

are not available, fair value is determined based on other relevant factors, including dealers’ price quotations and
price quotations for similar instruments traded in different markets. Fair value for certain derivatives based on
pricing models that consider current market and contractual prices for the underlying financial instruments or
commodities, as well as the time value and yield curve or fluctuation factors underlying the positions. Pricing
models and their underlying assumptions impact the amount and timing of unrealized gains and losses
recognized, and the use of different pricing models or assumptions could produce different financial results. See
“Item 11—Quantitative and qualitative disclosures about market risk”.

Deferred tax

We apply significant judgment in determining our provision for income taxes and our deferred tax assets

and liabilities.

Temporary differences arise between the carrying values of assets and liabilities for accounting purposes

and the amounts used for tax purposes. These temporary differences result in tax liabilities being recognized and
deferred tax assets being considered based on the probability of our deferred tax assets being recoverable from
future taxable income. We provide deferred tax at the tax rate applicable to undistributed earnings on all
temporary differences arising between the carrying values of assets and liabilities for accounting purposes and
the amounts used for tax purposes unless there is a temporary difference that is specifically excluded in
accordance with generally accepted accounting principles. To the extent that we believe that recovery is not
likely, we establish a valuation allowance. A valuation allowance of R307 million (2005 – R671 million) has
been established for certain deferred tax assets which we believe are not more likely than not to be recovered.
The carrying value of our net deferred tax assets assumes that we will be able to generate sufficient future
taxable income in applicable tax jurisdictions, based on estimates and assumptions. While we have considered
future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the
valuation allowance, in the event that we were to determine that we would not be able to realize our deferred tax
assets in the future, a valuation allowance may be required which would reduce income in the period that such
determination was made.

Secondary Taxation on Companies

In South Africa, we pay both income tax and Secondary Taxation on Companies (STC). STC is levied on

companies at a rate of 12.5% of dividends distributed. In the case of liquidation STC is only payable on
undistributed earnings earned after 1 April 1993. The tax becomes due and payable on declaration of a dividend.
When dividends are received in the current year that can be offset against future dividend payments to reduce the
STC liability, a deferred tax asset is recognized to the extent of the future reduction in STC.

We do not provide for deferred tax at the tax rate applicable to distributed earnings. We believe that this is

consistent with the accounting principle that allows the accrual of dividend payments after dividend declaration.
If we were to provide for deferred taxes on the potential STC arising on our undistributed earnings, should these
be declared as dividends, there would be the following effects on our reported results:

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2006

2005

(Rand in millions)

Balance sheet
Net deferred tax liability as reported

4,963

5,541

Increase in the deferred tax liability

6,275

5,027

Net deferred tax liability based on the tax rate applicable to

distributed earnings

11,238

10,568

Shareholders’ equity as reported

50,668

40,945

Decrease in shareholders’ equity

(6,275)

(5,027)

Shareholders’ equity after the effect of providing for deferred tax

using the tax rate applicable to distributed earnings

44,393

35,918

2006

2005

2004

(Rand in millions)

Income statement
Income tax as reported

(6,452)

(4,886)

(3,122)

Increase in income tax

(732)

(789)

(478)

Income tax after providing for deferred tax at the rate applicable to

distributed earnings

(7,184)

(5,675)

(3,600)

Earnings attributable to shareholders as reported

11,299

9,719

5,237

Decrease in earnings attributable to shareholders

(732)

(789)

(478)

Earnings attributable to shareholders after providing for deferred tax

at the rate applicable to distributed earnings

10,567

8,930

3,759

We expect that R1,877 million of undistributed earnings earned before 1 April 1993 of two dormant

companies will be distributed without attracting STC of R209 million.

Commitments and contingencies

Management’s current estimated range of liabilities relating to certain pending liabilities for claims,

litigation, tax matters and environmental remediation is based on management’s judgment and estimates of the
amount of loss. The actual costs may vary significantly from estimates for a variety of reasons. A liability is
recognized for these types of contingencies if management determines that the loss is both probable and
estimable. We have recorded the estimated liability where such amount can be determined and the minimum
liability related to those claims where there is a range of loss, and no amount within the range is more probable
than the others. As additional information becomes available, we will assess the potential liability related to our
pending litigation proceedings and revise our estimates. Such revisions in our estimates of the potential liability
could materially impact our results of operation and financial position. See “Item 5.E – Off-balance sheet
arrangements”.

127

OUR RESULTS OF OPERATIONS

The financial results below are stated under US GAAP. Except where otherwise indicated, management’s

discussion and analysis focuses primarily on continuing operations.

Results of operations

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover

61,857

50,687

11,170

43,606

7,081

Other operating income

205

223

(18)

(8)

166

Net foreign exchange

gains/(losses)

189

148

(1,260)

1,408

(112)

Operating costs and expenses

(41,563)

(36,681)

4,882

(33,966)

2,715

Operating profit

20,688

14,377

6,311

8,546

5,831

Net other income/(expenses)

(85)

152

(179)

(177)

(192)

Income before tax, earnings/

(losses) of equity accounted
investees and minority
interest

20,755

14,292

6,463

8,638

5,654

Income tax

(6,452)

(4,886)

1,566

(3,122)

1,764

Income before earnings/

(losses) of equity accounted
investees and minority
interest

14,303

9,406

4,897

5,516

3,890

Earnings/(losses) of equity

accounted investees

308

(295)

(96)

(48)

356

742

Minority interest

(157)

(103)

(92)

Income from continuing

operations

14,159

9,611

4,548

5,376

4,235

Net (loss)/income from

discontinued operations
(including fair value
write-down), net of tax

(2,860)

108

(2,968)

–

(139)

247

178

Earnings attributable to

shareholders

11,299

9,719

1,580

5,237

4,482

Overview

Higher average annual international oil prices (dated Brent US$62.45/b compared to US$46.17/b for 2005

and US$31.30/b in 2004) boosted operating profit in all three years. The benefit of higher oil prices was,
however, mostly realized in the energy and fuel-related businesses and to a lesser extent in the group’s chemical
businesses which have been adversely impacted by the effect of higher crude oil prices on the cost of their
feedstock. This benefit was further enhanced by the positive impact of the slightly weaker rand during 2006
(average rate R6.41 per US dollar for the 2006 year compared to R6.21per US dollar for the 2005 year and
R6.88 per US dollar in the 2004 year). The benefit of the higher oil price was partly offset during 2005 by the
adverse impact of the stronger rand during that year compared to 2004.

128

Turnover

Turnover consists of the following categories:

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Sale of products

60,639

49,830

10,809

42,823

7,007

Services rendered

776

533

243

505

Commission and marketing

income

442

324

118

278

Turnover

61,857

50,687

11,170

43,606

7,081

The primary factors contributing to these increases were:

Change

2006/2005

2005/2004

(Rand in

millions)

Turnover, 2005 and 2004, respectively

50,687

43,606

Exchange rates effects positive/(negative)

1,194

(2,888)

(6)

Product prices increases

9,526

9,553

– crude oil

5,902

6,349

– other products (including chemicals)

3,624

3,204

Net volume increases

450

416

Turnover, 2006 and 2005, respectively

61,857

50,687

Other operating income

Other operating income in 2006 amounted to R205 million, which represents a decrease of R18 million or

8%, compared to R223 million in 2005. Included in operating income for the 2006 year is a gain on hedging
activities of R84 million, insurance proceeds of R40 million and R24 million in respect of income recognized
relating to emission rights.

Other operating income in 2005 amounted to R223 million, which represents an increase of R57 million or

34%, compared to R166 million in 2004. Included in other operating income for 2005 is gain on hedging
activities of R82 million and a profit recognized of R33 million on the sale of part of our participation rights in
the second phase of the Qatar GTL project.

Net foreign exchange gains/(losses)

Net foreign exchange gains for 2006 and 2005 arising primarily from the translation of monetary assets

and liabilities amounted to R189 million and R148 million respectively. A net foreign exchange loss of
R1,260 million was recognized in 2004. The profit recognized in 2006 and 2005 is due to the weakening of the
rand/US dollar exchange rate towards the end of the year closing at R7.17 per US dollar at 30 June 2006
compared to the closing exchange rate at 30 June 2005 of R6.67 per US dollar and as at 30 June 2004 of
R6.21 per US dollar. Additionally the average exchange rate for 2006 was R6.41 per US dollar compared
to R6.21 per US dollar for 2005 and R6.88 per US dollar for 2004. The closing rate is used to translate to rand
all our monetary assets and liabilities denominated in a currency other than the rand at balance sheet date and as
a result a net profit was recognized on these translations.

129

Operating costs and expenses

Operating costs and expenses consists of the following categories:

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Cost of sales

(28,970)

(25,112)

3,858

(23,282)

1,830

Cost of services rendered

(666)

(524)

142

(495)

Selling and distribution costs

(3,895)

(3,840)

(3,824)

Administrative expenses

(4,051)

(3,811)

240

(3,541)

270

Other operating expenses

(3,981)

(3,394)

587

(2,824)

570

Operating costs and expenses

(41,563) (36,681)

4,882

(33,966)

2,715

The variances in operating costs and expenses are described in detail in each of the various reporting

segments, included in the Segment Review below.

Cost of sales. The cost of sales in 2006 amounted to R28,970 million, an increase of R3,858 million or

15%, compared to R25,112 million in 2005 which increased by 8% from R23,282 million in 2004. The increase
over the past two years is due to the increase in the crude oil price and other feedstock prices. Compared to
turnover from the sale of products, the cost of sales was 48% in 2006, 50% in 2005 and 54% in 2004. This
decrease was mainly due to the positive effects of the increase in crude oil prices on our energy related
businesses which generate the majority of the group’s operating profit.

Cost of services rendered. Cost of services rendered amounted to R666 million in 2006, an increase of

R142 million or 27%, compared to R524 million in 2005 which increased by 6% from R495 million in 2004.
Compared to turnover from services rendered, the cost of services rendered was 86% in 2006 and 98% in 2005
and 2004. The decrease is mainly due to the higher refinery margins attained by Natref which resulted in an
increase in the turnover from services rendered.

Selling and distribution costs. These costs comprise marketing and distribution of products as well as

advertising, salaries and expenses of marketing personnel, freight, railage and customs and excise duty. Selling
and distribution costs in 2006 amounted to R3,895 million, R3,840 million in 2005 and R3,824 million in 2004.
Compared to sales of products, selling and distribution costs represented 6% in 2006 compared to 8% in 2005
and 9% in 2004. The increase in these costs has been contained during the years under review.

Administrative expenses. These costs comprise expenditure of personnel and administrative functions,

including accounting, information technology, human resources, legal and administration, pension, post-
retirement healthcare benefits and Sasol Share Incentive Scheme costs. Administrative expenses in 2006
amounted to R4,051 million, an increase of R240 million or 6%, compared to R3,811 million in 2005 which
increased by 8% from R3,541 million in 2004. Increased activity at SSI and SPI resulted in significant increases
in their administrative expenses for 2006. The increase in our administrative expenses during 2005 was also due
to costs incurred on our transaction to form the liquid fuels joint venture Uhambo Oil, and our readiness project
undertaken with respect to our adoption of Sarbanes-Oxley Act, Section 404.

Other operating expenses. Other operating expenses in 2006 amounted to R3,981 million, an increase of

R587 million or 17%, compared to R3,394 million in 2005 which increased by 20% from R2,824 million in
2004. This amount includes impairments of R119 million (2005 – R175 million and 2004 – R205 million),
scrapping of assets of R264 million (2005 – R284 million and 2004 – R22 million) and net loss on the disposal
of property, plant and equipment of R50 million (2005 – a net profit of R43 million and 2004 – a net profit of
R122 million). Other operating expenses includes the effects of our crude oil hedging activities amounting to a
loss of R93 million (2005 – a loss of R1.2 billion and 2004 – a profit of R36 million). Details of the
impairments, scrapping of assets and profit/(loss) on disposals are detailed in the Segment review.

130

Included below are the impairments, scrapping of assets and (profit)/loss on disposal of property, plant and

equipment recognized:

2006

2005

2004

(Rand in millions)

Sasol Mining

(16)

(17)

– impairments

–

– scrapping of assets

–

– profit on disposal of property, plant and equipment

(9)

(36)

(17)

Sasol Synfuels

187

122

– impairments

–

– scrapping of assets

205

123

– profit on disposal of property, plant and equipment

(18)

(17)

(16)

Sasol Oil

–

– impairments

–

– loss on disposal of property, plant and equipment

–

Sasol Gas

–

– impairments

–

Sasol Polymers

(2)

(59)

– impairments

–

– scrapping of assets

– (profit)/loss on disposal of property, plant and equipment

(8)

(64)

Sasol Solvents

229

– impairments

– scrapping of assets

151

–

– profit on disposal of property, plant and equipment

–

(23)

Other divisions

141

159

– impairments

161

– scrapping of assets

–

– loss/(profit) on disposal of property, plant and equipment

(2)

433

416

105

131

Operating profit

The main factors contributing to the increase in operating profit were:

Change

2006/2005

2005/2004

(Rand in

millions)

Operating profit, 2005 and 2004, respectively

14,377

8,546

Exchange rates effects positive/(negative)

1,331

(1,437)

(17)

Net product and feedstock price increases

6,625

7,420

– crude oil effects

4,536

5,062

– effect of the crude oil hedge

1,032

(1,147)

(13)

– other products (including chemicals)

1,057

3,505

Inflation on fixed costs

(1,294)

(9)

(525)

(6)

Net volume and productivity effects

(700)

(5)

(968)

(11)

Capital items effects

187

311

Other effects

162

1,030

Operating profit, 2006 and 2005, respectively

20,688

14,377

This arises primarily from the effects of the average US dollar exchange rate during the year on both turnover and
operating expenses.

Included in capital items is the impairment of long-lived assets and other capital items.

Included in other effects are R182 million relating to the capitalization of mining development costs during 2006 and
the reduction in the depreciation charge in 2005 after a reassessment of the useful lives of various items of property,
plant and equipment was performed. The effect on each business is discussed in detail in the “Segment review”

Net other income/(expenses)

Net other income/(expenses) consists of the following:

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Dividends received

(4)

(31)

117

Interest received

261

179

218

142

(60)

(42)

Finance costs

(203)

(180)

(164)

– interest incurred

(1,152)

(1,208)

(56)

(5)

(1,235)

(27)

(2)

– interest capitalized

949

1,028

(79)

(8)

1,071

(43)

(4)

Gain arising from issuance of

subsidiary’s shares

–

108

(108)

(100)

Net other income/(expenses

)

(85)

152

(179)

(177)

(192)

Interest received amounted to R261 million in 2006, compared to R82 million in 2005, and R142 million in

2004. The increase in the interest received during 2006 is attributable to the significant increase in cash and cash
equivalents available to the group during 2006. The decrease in 2005 is mainly attributable to translation
differences on interest income from investments in foreign countries due to the appreciation of the rand against
the US dollar, as well as lower average cash balances and declining interest rates.

132

Interest incurred in 2006 amounted to R1,152 million, a decrease of 5% from 2005, of which R949 million

was capitalized, compared to interest incurred of R1,208 million in 2005 and R1,235 million in 2004, of which
R1,028 million and R1,071 million was capitalized for the respective years. The decrease in 2006 is mainly due
to the 21% decrease in net debt from 2005. Further interest incurred decreased in 2006 and 2005 due to
declining interest rates which was partially offset in 2005 as a result of increased net borrowings due to capital
project requirements. The Eurobond raised during 2005 in the European capital markets is at a favorable interest
rate compared to our other external borrowings. Capitalized interest decreased due to the lower interest incurred,
partially offset by increased capital expenditure on property, plant and equipment in 2006 and 2005.

In 2004 our shareholding in Naledi Petroleum (Pty) Limited was diluted through the issuing of shares to

minority shareholders which resulted in a gain of R108 million being realized.

Taxation

Income tax expense in 2006 amounted to R6,452 million, an increase of 32%, compared to R4,886 million

in 2004 which increased by 57% from R3,122 million in 2004.

The income statement charge consists of the following:

2006

2005

2004

(Rand in millions)

Current tax
– South African normal tax

(5,607)

(3,325)

(2,842)

– Secondary Tax on Companies (STC)

(551)

(375)

(343)

– Foreign tax

(386)

(420)

(158)

Total current tax

(6,544)

(4,120)

(3,343)

Deferred tax
– South African

(123)

(693)

202

– Foreign

215

(73)

Total deferred tax income/(expense)

(766)

221

Income tax expense for the year

(6,452)

(4,886)

(3,122)

The increase in taxation is broadly in line with the increase in net income before taxation. The effective tax

rate was 31.1% in 2006, 34.2% in 2005 and 36.1% in 2004. The difference between the South African statutory
tax rate of 29% in 2006 and 30% in 2005 and 2004 and the effective tax rate results mainly from STC which is
levied at a rate of 12.5% on dividends paid, differences in foreign tax rates, disallowed expenditure and the
effect of changes in tax rates. The decrease in average effective tax rate is due to the increase in the average rate
of earnings to dividend distributions ratio from 2.1 times in 2004 to 2.9 times in 2005 and increased further to
3.1 times in 2006 (based on continuing operations) which reduces the effect of STC on the effective tax rate.

Earnings/(Losses) of equity accounted investees

Earnings of equity accounted investees amounted to R13 million in 2006 compared to R308 million in 2005 and
loss of equity accounted investees of R48 million in 2004. The earnings in 2006 and 2005 comprise our
attributable share of equity accounted investments held by our Sasol Polymers and Sasol Solvents businesses,
offset in 2006 by losses mainly from equity accounted investments held by our SSI business. The loss incurred
by our SSI business is due to increased activity in respect of developing our GTL projects by this business which
does not currently generate significant turnover. The earnings generated by the equity accounted investments
held by Sasol Polymers and Sasol Solvents are due to the increase in solvents and polymer chemical prices.

133

Net (loss)/income from discontinued operations (including fair value write-down)

With effect from 30 June 2006, the Sasol Olefins & Surfactants business has been classified as a disposal

group held for sale and the results reported as discontinued operations. The income statement has been restated
for all periods to exclude Sasol Olefins & Surfactants from continuing operations and reports these results as a
single line item. Detail of the performance of the Sasol Olefins & Surfactants business is included in the
Segment review.

Included below are the impairments, fair value write-down, scrapping of assets and loss on disposal of

property, plant and equipment included in net loss/income from discontinued operations:

2006

2005

2004

(Rand in millions)

– impairments

131

– fair value write-down

3,110

–

– scrapping of assets

–

– loss on disposal of property, plant and equipment

3,255

108

The write-down of R3,110 million before tax of the assets of Sasol Olefins & Surfactants to their expected

fair value less costs to sell was primarily due to significant changes in crude oil prices.

Minority interest

Minority interest in 2006 amounted to R157 million compared to R103 million in 2005 and R92 million in

2004. The increase is mainly attributable to the increase in profits earned from certain operations of Sasol Oil in
which outside shareholders have an interest. This is due to the increase in the refining margin which was
partially off-set by the appreciation of the rand in 2006.

Segment overview

The following is a discussion of our segment results. Segmental financial performance is measured on a

management basis which is prepared in accordance with IFRS. This approach is based on the way in which the
Group Executive Committee organizes segments within our group for making operating decisions and assessing
performance. For more information on the reconciliation of segmental turnover and operating profit under IFRS
to the corresponding amounts prepared under US GAAP, refer below “Reconciliation of segmental results to
US GAAP” and Note 3 to our consolidated financial statements, see “Item 18. Financial statements”.

Inter-segment turnover was entered into under terms and conditions substantially similar to terms and

conditions which would have been negotiated with an independent third party. The segment information for 2005
and 2004 has been restated for the classification of Sasol Olefins & Surfactants as discontinued operations as
well as the reclassification of the comonomers division from Sasol Olefins & Surfactants to Sasol Solvents.

134

Turnover per segment

Sasol

Synfuels

Total

Sasol

Inter-

Sasol

continuing

2006

Mining

Synfuels

Oil

Gas

national

Polymers

Solvents

Other

operations

(Rand in millions)

External turnover

1,517

915

32,243

1,663

161

7,537

10,485

9,329

63,850

% of external turnover

51%

–

12%

16%

15%

100%

Inter-segment turnover

3,949

24,734

544

1,546

–

102

1,181

4,242

36,298

% of inter-segment

turnover

11%

69%

–

12%

100%

Aggregated turnover

5,466

25,649

32,787

3,209

161

7,639

11,666

13,571

100,148

Sasol

Synfuels

Total

Sasol

Inter-

Sasol

continuing

2005

Mining

Synfuels

Oil

Gas

national

Polymers

Solvents

Other

operations

(Rand in millions)

External turnover

1,471

820

23,525

1,408

–

7,199

9,361

8,713

52,497

% of external turnover

45%

–

14%

18%

16%

100%

Inter-segment turnover

3,744

17,864

187

996

–

947

3,534

27,355

% of inter-segment

turnover

14%

65%

–

13%

100%

Aggregated turnover

5,215

18,684

23,712

2,404

–

7,282

10,308

12,247

79,852

Sasol

Synfuels

Total

Sasol

Inter-

Sasol

continuing

2004

Mining

Synfuels

Oil

Gas

national

Polymers

Solvents

Other

operations

(Rand in millions)

External turnover

1,083

1,329

18,554

1,389

6,576

7,937

8,124

44,999

% of external turnover

41%

–

15%

18%

100%

Inter-segment turnover

4,161

14,664

297

133

–

748

3,609

23,698

% of inter-segment

turnover

18%

62%

–

15%

100%

Aggregated turnover

5,244

15,993

18,851

1,522

6,662

8,685

11,733

68,697

135

Operating profit/(loss) per segment

Sasol

Synfuels

Total

Sasol

Inter-

Sasol

continuing

Mining

Synfuels

Oil

Gas

national

Polymers

Solvents

Other

operations

(Rand in millions)

Operating profit/(loss)

2006

1,180

13,499

2,432

1,526

(642)

822

873

1,042

20,732

% of total continuing

operations

65%

12%

(3%)

100%

Operating profit/(loss)

2005

1,239

7,546

1,892

931

(201)

1,475

1,021

480

14,383

% of total continuing

operations

52%

13%

(1%)

10%

100%

Operating profit/(loss)

2004

1,185

5,498

1,421

386

(140)

1,021

(239)

9,136

% of total continuing

operations

13%

60%

16%

(2%)

11%

–

(3%)

100%

136

Reconciliation of segment results to US GAAP

Our segments’ financial performance is prepared, measured and presented in accordance with IFRS which

is consistent with the basis that is used by the GEC to measure and manage the segments of our business. This
basis differs from the presentation of our consolidated financial statements which are prepared under US GAAP.
The differences between US GAAP and IFRS as they affect external turnover and operating profit are discussed
below:

30 June 2006

30 June 2005

30 June 2004

Turnover

Operating

Turnover

Operating

Turnover

Operating

Note

(external)

profit

(external)

profit

(external)

profit

(Rand in millions)

Operating results per IFRS

consolidated income
statements

63,850

20,732

52,497

14,383

44,999

9,136

Reconciliation of IFRS to

US GAAP:

Equity accounting of

incorporated joint ventures
and reversal of
proportionate consolidation

(1,993)

(123)

(1,810)

(180)

(1,659)

Entities previously not

consolidated

–

266

106

Business combinations

–

(15)

–

(151)

Research and development

–

(60)

–

Derivative instruments

–

(4)

–

(1)

–

(12)

Foreign currency translation

–

(3)

–

(253)

Impairment

–

375

–

Asset retirement obligations

–

134

–

(94)

–

(23)

Gain arising from issuance of

subsidiary’s shares

–

(108)

Other

–

(12)

–

(180)

–

(288)

Results per US GAAP

consolidated income
statements

61,857

20,688

50,687

14,377

43,606

8,546

Turnover. The differences between IFRS and US GAAP comprise the following:

Decrease of R1,993 million (2005 – R1,810 million; 2004 – R1,659 million). Proportionate
consolidation is applied with respect to incorporated joint ventures for IFRS reporting purposes.
Under US GAAP, the equity method of accounting is applied.

Increase of Rnil (2005 – Rnil; 2004 – R266 million). From 1 January 2004, Naledi Petroleum
Holdings (Pty) Limited (included in the Sasol Oil segment) was consolidated for both IFRS reporting
purposes and for US GAAP.

Operating profit. The differences between IFRS and US GAAP comprise the following:

Decrease of R123 million (2005 – decrease of R180 million; 2004 – increase of R56 million).
Proportionate consolidation is applied with respect to incorporated joint ventures for IFRS reporting
purposes. Under US GAAP, the equity method of accounting is applied.

Increase of Rnil (2005 – Rnil; 2004 – R106 million). From 1 January 2004, Naledi Petroleum
Holdings (Pty) Limited (included in the Sasol Oil segment) was consolidated for both IFRS reporting
purposes and for US GAAP.

137

Decrease of R15 million (2005 – increase of R77 million; 2004 – decrease of R151 million). The
timing and recording of certain fair value adjustments differs under US GAAP to those recorded for
IFRS reporting purposes because the transactions were not accounted for at the same effective date.
The difference will have a continuing impact on the depreciation of these items. Up to 30 June 2004,
negative goodwill was recognized for IFRS reporting purposes and amortized over the remaining
useful life of non-financial assets acquired. With effect from 1 July 2004, negative goodwill was
written off against opening retained earnings and is no longer amortized. US GAAP requires that
negative goodwill be allocated to reduce the amounts of any non-financial assets acquired and any
excess amount remaining is recognized as an extraordinary gain in the period that it arises.

Decrease of R60 million (2005 – Rnil; 2004 – Rnil). For IFRS reporting purposes certain development
costs are capitalized. US GAAP requires that these development costs be recognized in the income
statement as incurred.

Decrease of R4 million (2005 – R1 million; 2004 – R12 million). Derivative contracts entered into
subsequent to 1 July 2004 met the criteria for hedge accounting under both US GAAP and for IFRS
reporting purposes. Certain derivative contracts entered into prior to 30 June 2002 did not meet the
hedge accounting criteria under US GAAP and as such hedge accounting was not applied. For IFRS
reporting purposes cumulative gains/losses arising from hedge accounting are adjusted against the cost
of the non-financial asset upon recognition of the forecasted transaction. Under US GAAP cumulative
gains/losses are reclassified to earnings over the same period during which the forecasted transaction
affects earnings.

Increase of Rnil million (2005 – decrease of R3 million; 2004—increase of R253 million). Only one
entity was accounted for differently for IFRS reporting purposes and under US GAAP. As a result the
translation gains and losses arising on translation of monetary assets and liabilities of this entity were
recognized in the income statement.

Increase of R36 million (2005 – R372 million; 2004 – R83 million). For IFRS reporting purposes,
property, plant and equipment is considered to be impaired when its carrying value exceeds the
discounted estimated future cash flows, whereas under US GAAP an initial impairment review is
required to be performed on an undiscounted basis.

Increase of R134 million (2005 – decrease of R94 million; 2004 – decrease of R23 million). For IFRS
reporting purposes asset retirement obligations are discounted at a risk free discount rate which is
reassessed annually, whereas under US GAAP, a credit adjusted rate is used for the entire period and
not reassessed. For IFRS reporting purposes, the accretion charge is recognized as an interest expense
in the income statement in the year that it was incurred. Under US GAAP the accretion charge is
recognized as an operating expense.

Decrease of R108 million in 2004 is due to the profit on sale of 2.04% shares in Sasol Oil (Pty)
Limited which was not shown as operating profit for US GAAP and was shown as operating profit for
IFRS reporting purposes.

10. The other decrease of R12 million (2005 – R118 million; 2004 – R176 million) relate to various non-

significant adjustments that affect some of our segments. Other contains non-significant adjustments
related to capitalization of finance leases, depreciation methods and pensions.

138

Segment review – Continuing operations

Sasol Mining – results of operations

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

1,517

1,471

1,083

388

Inter-segment

3,949

3,744

205

4,161

(417)

(10)

Aggregated turnover

5,466

5,215

251

5,244

(29)

(1)

Operating costs and expenses

(4,286)

(3,976)

310

(4,059)

(83)

(2)

Operating profit

1,180

1,239

(59)

(5)

1,185

Operating margin

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment. A share-based payment expense of R8 million and
R9 million for 2005 and 2004, respectively, has been recognized in operating costs and expenses.

Results of operations 2006 compared to 2005

Aggregated turnover increased by 5% from R5,215 million to R5,466 million. Sales volumes increased

from 46.5 Mt to 47.7 Mt mainly because of higher short-term sales to Eskom of 1.7 Mt compared with 0.2 Mt in
2005. Contributing to the increased aggregated turnover was higher Eskom sales volumes and higher sales to
Sasol Synfuels mainly because of a higher transfer price. Export sales volumes for 2006 and 2005 was 3.6 Mt
for each year, however, the average free on board Richards Bay coal price decreased by 4% in rand terms.

Against the backdrop of reduced production volumes, operating costs and expenses increases were

contained to 8%, including the higher price of coal purchases from Anglo Operations of 3.1 Mt during 2006.

The main factors contributing to the 5% decrease in operating profit were:

Change

2006/2005

(Rand in

millions)

Operating profit 2005

1,239

Exchange rate effects

Net product price increases

Inflation on fixed costs

(157)

(13)

Net volume and productivity effects

Capital items effects

Operating profit 2006

1,180

139

Results of operations 2005 compared to 2004

The increase in Sasol Mining’s external turnover in 2005 of R388 million or 36% was mainly attributable

to the increase in the US dollar price of coal which increased turnover by R470 million. This was partially
negated by the effect of the appreciation of the rand against the US dollar.

The decrease in inter-segment turnover in 2005 of R417 million or 10% is due to inter-segment sales

volumes to Infrachem and Sasol Synfuels decreasing by 4.6 Mt or 10% to 42.4 Mt in 2005, due to the
introduction of natural gas at Infrachem and Sasol Synfuels.

Operating costs and expenses of Sasol Mining amounted to R3,976 million in 2005, compared to

R4,059 million in 2004, a decrease of R83 million or 2%. The decrease was mainly attributable to lower sales
volumes and cost saving initiatives.

Sasol Mining’s property, plant and equipment is depreciated over its estimated remaining useful lives.

These useful lives were reassessed during 2005. Due to the extension of the useful lives of certain items of
property, plant and equipment, the depreciation charge was reduced by R29 million for 2005. These changes in
estimate were accounted for prospectively with no adjustment made to prior years.

Capital items for the years under review

During the years under review operating costs and expenses includes the effect of the following capital

items:

2006

2005

2004

(Rand in millions)

Impairment of property, plant and equipment

–

(16)

–

Scrapping of property, plant and equipment

(25)

(4)

–

Profit on disposal of business

–

Profit on disposal of property, plant and equipment

Total

(16)

During 2006 numerous assets with small carrying values were retired from use and the remaining carrying

values attributable to these assets were written off.

The Syferfontein opencast mine was sold on 1 April 2005 to Anglo Operations. Whilst a profit of

R36 million was realized on the sale of mining assets, certain assets excluded from the disposal were impaired.
An impairment of R16 million was recognized.

140

Sasol Synfuels – results of operations

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

915

820

1,329

(509)

(38)

Inter-segment

24,734

17,864

6,870

14,664

3,200

Aggregated turnover

25,649

18,684

6,965

15,993

2,691

Operating costs and expenses

(12,150)

(11,138)

1,012

(10,495)

643

Operating profit

13,499

7,546

5,953

5,498

2,048

Operating margin

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment. A share-based payment expense of R14 million for both
2005 and 2004 has been recognized in operating costs and expenses.

Results of operations 2006 compared to 2005

Sasol Synfuels again benefited from a combination of higher oil prices, focused cost containment and an

all-round effort to streamline operations and lift productivity, which resulted in a record operating profit.
Aggregated turnover increased by 37% from R18,684 million to a record R25,649 million on the strength of
higher product prices and marginally higher sales volumes. Overall production was below target due to
instability in our support utilities. Despite this, we increased production by 1%. Our costs increased mainly
because of higher coal and gas feedstock prices, as well as the unscheduled plant interruptions, including power
outages.

The main factors contributing to the increase in operating profit were:

Change

2006/2005

(Rand in

millions)

Operating profit 2005

7,546

Exchange rate effects

704

Net product and feedstock price increases/(decreases)

6,769

– crude oil effects

6,013

– effect of the crude oil hedge

1,032

– other products

(276)

(4)

Inflation on fixed costs

(728)

(10)

Net negative volume and productivity effects

(862)

(11)

Management interventions

147

Capital items effects

(77)

(1)

Operating profit 2006

13,499

Includes the net positive effects of the delay of the scheduled maintenance shutdown of the plant to 2007.

141

Results of operations 2005 compared to 2004

External turnover amounted to R820 million in 2005, compared to R1,329 million in 2004, a decrease of

R509 million or 38%, mainly resulting from the suspension of the sale of certain products (e.g. metcoke). This
decision was taken as a result of low profit margins earned on these products as well as lower sales volumes of
ammonia, sulfur, krypton xenon and wood preservative product sales. The increase in Sasol Synfuels’ aggregated
turnover of R2,691 million was mainly due to higher crude oil prices of R5,614 million as well as higher other
product prices of R201 million partly reduced by the negative effect of a strengthening of the rand against the
US dollar of R2,278 million as well as lower production volumes of R846 million.

Operating costs and expenses of Sasol Synfuels amounted to R11,138 million in 2005, compared to

R10,495 million in 2004, an increase of R643 million or 6 %. The increase includes a realized opportunity loss
on our commodity derivative financial instruments of R1,147 million, offset by a small profit realized on other
derivative instruments of R11 million, compared to the loss of R54 million in 2004. The other main reasons for
the increase in our costs is due to feedstock price increases of R79 million and higher overhead costs of
R337 million. This was partly reduced by the decrease in costs due to lower volumes produced of R309 million,
due to three unplanned shut downs mentioned below.

Production volumes for 2005 decreased to 7.5 Mt, a decrease of 3% over 2004 production of 7.7 Mt,

mainly due to three unplanned shutdowns, most significantly the flooding of the ash dams due to a rainstorm.
Sales volumes for 2005 decreased to 7.4 Mt, a decrease of 6% over 2004 sales of 7.9 Mt resulting in a stock
build up of intermediate products at year end.

Sasol Synfuels reassessed the useful lives of certain items of property, plant and equipment during 2005.

The estimated useful life of certain assets was extended due to technological innovations, product life cycles and
maintenance programs. Due to these extensions of the useful lives of certain items of property plant and
equipment the depreciation charge was reduced by R656 million for the 2005 year. These changes in estimates
were accounted for prospectively with no adjustment made to prior years.

Capital items for the years under review

During the years under review operating costs and expenses includes the effect of the following capital

items:

2006

2005

2004

(Rand in millions)

Impairment of property, plant and equipment

–

(16)

(2)

Scrapping of property, plant and equipment

(205)

(111)

(17)

Profit on disposal of property, plant and equipment

Total

(187)

(110)

(3)

The capital items in 2006 include the scrapping of property, plant and equipment during the year of the

remaining carrying value of costs capitalized as part of the C4 Skeletal Isomerisation scheme of R81 million,
R79 million for items of property, plant and equipment which formed part of the sulfur recovery project and the
remaining carrying value of R10 million on the CFB reactors were scrapped during the year.

The capital items in 2005 include:

• Impairment of property, plant and equipment—following a business decision to utilize an alternative kiln

for processing low sulfur coke, the electrical kiln was idle for a period of eight months. Although
potential uses for this asset are being investigated, there are presently no expected future cash flows to be
derived from this asset and as a result an impairment of the carrying value of the asset was recognized;
and

• Scrapping of property, plant & equipment—various items of property, plant and equipment were

scrapped during the year. These consist mainly of development costs for certain projects as well as
certain smaller assets which are no longer being used by Sasol Synfuels.

142

Sasol Oil – results of operations

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

32,243

23,525

8,718

18,554

4,971

Inter-segment

544

187

357

191

297

(110)

(37)

Aggregated turnover

32,787

23,712

9,075

18,851

4,861

Operating costs and expenses

(30,355)

(21,820)

8,535

(17,430)

4,390

Operating profit

2,432

1,892

540

1,421

471

Operating margin

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment. A share-based payment expense of R8 million for both
2005 and 2004 has been recognized in operating costs and expenditure.

Results of operations 2006 compared to 2005

At a time when the South African liquid-fuels sector is enjoying strong volume growth, we continue to

increase our market share, mostly on the strength of vigorous marketing efforts and the continuing expansion of
our retail network launched in January 2004. We increased our complement of Sasol Convenience Centres and
Exel retail service stations in South Africa by 9% from 345 to 376.

The business increased aggregated turnover by 38% from R23,712 million to R32,787 million due to a 3%

increase in refining margins during 2006 and the weakening of the rand against the US dollar. Operating profit
rose by 29% from R1,892 million to R2,432 million, due mostly to the strength of better refining margins and
greater efficiency. On the downside, a drop in production volumes from the Sasol Synfuels operations and the
Natref refinery restrained profit growth. Operating costs and expenses increased by 39% as a result of higher
feedstock, such as crude oil.

The main factors contributing to the increase in operating profit were:

Change

2006/2005

(Rand in

millions)

Operating profit 2005

1,892

Exchange rate effects

139

Net product and feedstock price increases

608

Inflation on fixed costs

(52)

(3)

Net negative volume and productivity effects

(210)

(11)

Capital items effects

Operating profit 2006

2,432

143

Results of operations 2005 compared to 2004

The net increase in Sasol Oil’s aggregated turnover of R4,861 million was mainly due to higher product

prices of R6,970 million (primarily as a result of higher refining margins) and higher sales volumes
of R294 million, which was partially offset by the strengthening of the rand against the US dollar of
R2,403 million.

Operating costs and expenses of Sasol Oil amounted to R21,820 million in 2005, compared to

R17,430 million in 2004, an increase of R4,390 million or 25%. The increase of 25% is mainly due to increases
in direct productions costs as a result of higher prices of feedstock, such as crude oil prices, of R6,108 million
and increased costs as a result of higher production of R248 million reduced by the effects of the strengthening
of the rand against the US dollar resulting in reduction in feedstock cost of R2,024 million. Other operating
costs increased as a result of annual fixed cost escalations of R84 million, increased depreciation cost of
R76 million due to commencement of the depreciation of additional items of property, plant and equipment
capitalized, an increase in the provision for doubtful debts of R16 million and other smaller increases of
R12 million, offset by lower foreign exchange translation losses of R154 million.

The useful lives of our property, plant and equipment were assessed during 2005. Due to the extension of

the useful lives of certain items of property plant and equipment the depreciation charge was reduced by
R39 million. These changes in estimate were accounted for prospectively with no adjustment made to prior
years.

Capital items for the years under review

During the years under review operating costs and expenses includes the effect of the following capital

items:

2006

2005

2004

(Rand in millions)

Impairment of property, plant and equipment

(4)

(3)

–

Impairment of intangible assets

(1)

(8)

–

Impairment of equity accounted investee

–

(42)

–

Loss on disposal of property, plant and equipment

(3)

(10)

–

Total

(8)

(63)

–

The capital items in 2006 include:

• Impairment of property, plant and equipment – Due to worse than expected performance of the truckstop

in Sasolburg it was necessary to recognize an impairment of R4 million; and

• Impairment of intangible assets – During the 2004 year Sasol acquired Exel Petroleum. The carrying

value of intangible assets of R1 million for 6 commercial contracts established in the allocation of the
purchase price was impaired during the year as these contracts were performing worse than expected.

The capital items in 2005 include:

• Impairment of intangible assets – Of the commercial contracts acquired through the acquisition of Exel

Petroleum, fourteen were terminated during the current year. The carrying value of these contracts
amounting to R8 million were impaired; and

• Impairment of equity accounted investee – As part of the acquisition of Exel Petroleum we acquired an

investment in Black Top Holdings (Pty) Limited (BTH). It was anticipated that this investment would be
sold in the near future and it was therefore valued at fair value. During 2005, business problems surfaced
at BTH which resulted in the deterioration of the cash flow position of the company and it was unable to
meet its obligations. Accordingly, the investment in BTH was impaired by R42 million to a zero carrying
value.

144

Sasol Gas – results of operations

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

1,663

1,408

255

1,389

Inter-segment

1,546

996

550

133

863

649

Aggregated turnover

3,209

2,404

805

1,522

882

Operating costs and expenses

(1,683)

(1,473)

210

(1,136)

337

Operating profit

1,526

931

595

386

545

141

Operating margin

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment. A share-based payment expense of R1 million for both
2005 and 2004 has been recognized operating costs and expenses.

Results of operations 2006 compared to 2005

Sasol Gas experienced strong growth and delivered pleasing financial results on the strength of higher

pipeline-gas sales and prices. The business completed its second full financial year as a supplier and marketer of
natural gas, which is produced in Mozambique. Sasol Gas achieved a 22% increase in sales volumes from
87 MGJ to 106 MGJ. The increase was attributable to higher sales to the Sasol chemicals plant at Sasolburg,
Sasol Synfuels at Secunda and to South African industrial and commercial customers, mostly in Gauteng,
Mpumalanga and KwaZulu-Natal. The business again benefited from higher selling prices, which are based on
indices linked to producer price inflation and alternative energy prices, specifically oil products. Operating costs
and expenditure increased by 24% after the effects of the profit of R203 million recognized on the disposal of a
25% interest in ROMPCO to iGas and the impairment R67 million of the dedicated pipeline during 2006. The
increase was maintained in line with the increased gas sales through continued cost containment.

The main factors contributing to the increase in operating profit were:

Change

2006/2005

(Rand in

millions)

Operating profit 2005

931

Exchange rate effects

(3)

–

Net product price increases

201

Inflation on fixed costs

(10)

(1)

Net volume and productivity effects

269

Capital items effects

138

Operating profit 2006

1,526

145

Results of operations 2005 compared to 2004

The net increase in Sasol Gas’ aggregated turnover of R882 million was mainly due to increased sales

volumes as a result of the introduction of natural gas from Mozambique to inter-segment operations. The natural
gas was introduced in March 2004, therefore the 2005 year reflects a full-year production compared to four
months in the 2004 year.

The increase in external turnover in 2005 of R19 million or 1% is attributable to higher sales prices being

achieved as a result of higher inflation and alternate energy price variations and higher volumes to new
customers partly offset by energy optimization strategies followed by some of our major existing customers.

The increase in inter-segment turnover for 2005 of R863 million or 649% is mainly attributable to the sale

of natural gas to the Sasol plants at Infrachem (Sasolburg) and Sasol Synfuels (Secunda) for the full year as
compared to a four month period (March 2004 to June 2004) in the 2004 year.

Operating costs and expenses of Sasol Gas amounted to R1,473 million in 2005, compared to

R1,136 million in 2004, an increase of R337 million or 30%. This increase of 30% is mainly attributable to the
higher cost of gas of R141 million and increased fixed costs of R69 million as a result of increased activity,
additional depreciation of R222 million due to the fact that certain items of property, plant and equipment
relating to the natural gas project were depreciated for a full year in 2005 compared to four months in the 2004
year, less other income of R5 million earned and customer plant conversion costs incurred by us of R50 million,
all associated with the introduction of natural gas.

Additionally Sasol Gas reassessed the useful lives of certain items of property, plant and equipment during

2005. The useful lives of certain assets was extended due to technological innovations, product life cycles and
maintenance programs. Due to these extensions of the useful lives of certain items of property, plant and
equipment the depreciation charge was reduced by R50 million in 2005. These changes in estimate were
accounted for prospectively with no adjustment made to prior years.

Capital items for the years under review

During the years under review operating costs and expenses includes the effect of the following capital

items:

2006

2005

2004

(Rand in millions)

Impairment of property, plant and equipment

(67)

–

Profit on disposal of business

205

–

Total

138

–

The impairment in 2006 is a result of the fact that Sasol Gas was required to supply both hydrogen-rich

and natural gas during the period of converting customers to natural gas. A dedicated pipeline was built from
Sasolburg to continue to supply hydrogen-rich gas. Upon completion of the natural gas conversion project,
this pipeline was intended to be utilized in a number of applications which have proved not to be feasible.
A portion of the pipeline with no alternative use to Sasol Gas has been impaired.

Effective 1 July 2005 a 25% interest in the Republic of Mozambique Pipeline Investment Company

(Pty) Limited was sold to iGas under the shareholders’ agreement. A profit of R205 million was realized on this
transaction.

146

Sasol Synfuels International – results of operations

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

161

–

161

(7)

Inter-segment

–

Aggregated turnover

161

–

161

(7)

Operating costs and expenses

(803)

(201)

602

300

(147)

Operating loss

(642)

(201)

(441)

219

(140)

(61)

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment. A share-based payment expense of R2 million for both
2005 and 2004 has been recognized in operating costs and expenses.

Results of operations 2006 compared to 2005

The aggregated turnover generated during 2006 relates to the external portion of sales of catalyst for our

Oryx GTL plant. This business hosts the growth ambitions of the group relating to GTL and CTL ventures. Its
costs are associated with establishing and advancing the various opportunities that Sasol has to commercialize its
proprietary Fischer-Tropsch technology. An operating loss of R642 million was incurred in the year as a direct
consequence of our increased activity in this respect.

Results of operations 2005 compared to 2004

No turnover was generated during 2005 by Sasol Synfuels International. The aggregated turnover in 2004

was derived from the external portion of recoveries from joint ventures. Operating costs and expenses of Sasol
Synfuels International amounted to R201 million in 2005, compared to R147 million in 2004, an increase of
R54 million or 37%. This increase is a direct consequence of these increased activities in advancing the various
opportunities.

In 2005 Sasol Synfuels International sold business rights to Chevron Synfuels Limited, a subsidiary of

Chevron to enable the joint venture to participate in the second phase of the Qatar GTL project. A profit
of R33 million was realized on this sale.

147

Sasol Polymers – results of operations

Our polymer-related activities are managed in two separate entities, Sasol Polymers a division of Sasol

Chemical Industries Limited and Sasol Polymers International Investments a subsidiary of the Sasol Investment
Company.

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

7,537

7,199

338

6,576

623

Inter-segment

102

(3)

(4)

Aggregated turnover

7,639

7,282

357

6 662

620

Operating costs and expenses

(6,817)

(5,807)

1,010

(5,641)

166

Operating profit

822

1,475

(653)

(44)

1,021

454

Operating margin

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment. A share-based payment expense of R9 million for both
2005 and 2004 has been recognized in operating costs and expenses.

Results of operations 2006 compared to 2005

Sasol Polymers experienced tougher trading conditions, but retained focus on optimizing production,

marketing and logistics with particular emphasis on improving safety, productivity and customer service.
Harsher trading conditions were attributable mostly to higher oil-derived feedstock costs and relatively low
international polymer prices. Polymer selling prices tend to move with oil prices, but during 2006 there was a
significant squeeze on our operating margin. On average, international oil prices rose by almost 35%, but
average international polymer selling prices increased by only 3%. Having reported an 11% drop in production
volumes in the previous year, due primarily to the incident at the Secunda ethylene plant, we increased
production volumes by 5% during 2006. A greater increase was targeted, but we had to contend with lower
production mostly due to upstream feedstock constraints, the impact of Project Turbo work at Sasolburg and
Secunda and unplanned power outages at Sasolburg. Sasol Polymers increased aggregated turnover by 5% on the
basis of the increased sales volumes, however, the impact of a decrease in the operating margin, through
increased feedstock prices, decreased operating profit by 44%.

148

The main factors contributing to the decrease in operating profit were:

Change

2006/2005

(Rand in

millions)

Operating profit 2005

1,475

Exchange rate effects

153

Net product and feedstock price decreases

(851)

(58)

– crude oil

(764)

(52)

– other products

(87)

(6)

Inflation on fixed costs

(56)

(4)

Net volume and productivity effects

252

Other

(146)

(10)

Capital items effects

(5)

–

Operating profit 2006

822

Includes the effect of the insurance proceeds received during 2005.

Results of operations 2005 compared to 2004

The increase in Sasol Polymers’ aggregated turnover of R620 million, was mainly due to US dollar product

price increases of R1,764 million partially offset by the appreciation of the rand against the US dollar resulting
in a negative financial impact of R567 million and decreased sales volumes of R577 million. Our sales volumes
decreased by 9% as production was interrupted for a 90 day period due to an explosion at the ethylene plant at
the Secunda site in September 2004.

Operating costs and expenses of Sasol Polymers amounted to R5,807 million in 2005, compared to

R5,641 million in 2004, an increase of R166 million or 3%. This increase is due to higher input cost as a result
of higher oil prices of R995 million and higher cost due to inflation of R38 million. This increase was partially
offset by the appreciation of the rand against the US dollar resulting in a positive effect of R257 million and
lower input costs of R207 million resulting from the decreased volumes. R304 million, net of excess payments,
was received as insurance payments to cover the contribution losses sustained in an explosion. An increase
of R3 million due to various other differences was offset by management initiated cost reduction
exercises of R42 million compared to the previous year.

Additionally Sasol Polymers reassessed the useful lives of certain items of property, plant and equipment

during the 2005 year. The useful life of certain assets was extended due to technological innovations, product
life cycles and maintenance programs. Due to these extensions of the useful lives of certain items of property
plant and equipment the depreciation charge was reduced by R170 million for 2005. These changes in estimate
were accounted for prospectively with no adjustment made to prior years.

149

Capital items for the years under review

During the years under review operating costs and expenses includes the effect of the following capital

items:

2006

2005

2004

(Rand in millions)

Impairment of property, plant and equipment

(23)

(5)

–

Scrapping of property, plant and equipment

(2)

(5)

Profit/(loss) on disposal of property, plant and equipment

(2)

Total

(17)

(12)

The impairment of property, plant and equipment is mainly due to DPI Holdings, in which Sasol has a 50%

interest, which has been classified as a disposal group held for sale during 2006, after identifying a potential
buyer and approval by the Sasol Polymers divisional board to divest. The classification of DPI Holdings as held
for sale necessitated the impairment of the net assets to the fair value less costs to sell.

Sasol Solvents – results of operations

The 2005 and 2004 Sasol Solvents segment results have been restated for the reclassification of the

comonomers operations from Sasol Olefins & Surfactants.

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

10,485

9,361

1,124

7,937

1,424

Inter-segment

1,181

947

234

748

199

Aggregated turnover

11,666

10,308

1,358

8,685

1,623

Operating costs and expenses

(10,793)

(9,287)

1,506

(8,681)

606

Operating profit

873

1,021

(148)

(15)

1,017

Operating margin

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment. A share-based payment expense of R4 million and
R5 million for 2005 and 2004, respectively, has been recognized in operating costs and expenses in operating costs
and expenses.

Results of operations 2006 compared to 2005

Sasol Solvents performed well in general considering the previous year’s exceptional performance. Demand

for most of our product portfolios remained robust. Plants ran well mostly at or above design capacity; logistical
and marketing operations were well coordinated. While demand remained largely buoyant in most regional
markets, with some growth being achieved for certain portfolios, escalating oil and related commodity prices
impacted on margins, with some products being more harshly affected. Mostly on the strength of higher sales
volumes and some price increases, aggregated turnover increased by 13%, however, operating costs and
expenses increased by 16% primarily because of increased feedstock prices, thus reducing operating margins,
and the negative impact of increased expenditure on capital items. Total sales volumes increased from 1.38 Mt
to 1.58 Mt.

150

The main factors contributing to the decrease in operating profit were:

Change

2006/2005

(Rand in

millions)

Operating profit 2005

1,021

Exchange rate effects

Net product and feedstock price decreases

(761)

(75)

– crude oil

(864)

(85)

– other products

103

Inflation on fixed costs

(66)

(6)

Net volume and productivity effects

(79)

(8)

Capital items effects

698

Operating profit 2006

873

Results of operations 2005 compared to 2004

Change

Aggregated turnover

2005

2004

2005/2004

(Rand in millions)

(%)

After the reclassification of comonomers

10,308

8,685

1,623

Reclassification of comonomers

(1,904)

(2,230)

326

(15)

Before the reclassification of comonomers

8,404

6,455

1,949

The increase in aggregated turnover in 2005 before the reclassification of the comonomers activities was

R1,949 million. This increase was due to the increase in external turnover of R2,107 million, which was
attributable to an increase in product prices of R2,026 million which was offset by the appreciation of the rand
against the US dollar resulting in a negative effect of R538 million and by an increase in sales volumes of
R619 million. The increased prices and volumes were due to customer demand outstripping supply, and it is
believed that these price levels have reached unsustainable levels. The increase in external turnover was partially
offset by the decrease in inter-segment turnover of R158 million, which was mainly attributable to a decrease in
sales volumes of R187 million and increase in product prices which was partly offset by the appreciation of the
rand against the US dollar resulting in a negative effect of R18 million, partly offset by price increases of
R11 million.

Change

Operating costs and expenses

2005

2004

2005/2004

(Rand in millions)

(%)

After the reclassification of comonomers

(9,287)

(8,681)

606

Reclassification of comonomers

2,121

2,339

(218)

(9)

Before the reclassification of comonomers

(7,166)

(6,342)

824

Operating costs and expenses before the reclassification of the comonomers activities increased by R824

million or 13%. This net increase is mainly attributable to variable costs increases of R771 million as a result the
following:

• higher prices of R734 million;

• increase in the cost of feedstock due to higher crude oil prices of R565 million;

• partly reduced through the appreciation of the rand against the US dollar of R492 million; and

• lower production volumes of R36 million.

151

In addition fixed costs increased by R7 million, due to the inflationary increases of R19 million as well as

various other increases amounting to R18 million, which were offset by the appreciation of the rand against the
US dollar of R30 million. Additionally profits incurred on translation of foreign exchange transactions were
R367 million higher than in the previous year.

Other income amounted to R38 million compared to R49 million in 2004, a reduction of R11 million or

22%. Other income consists mainly of rebates and management fees received.

Depreciation on the Acrylates plant for a full year after commissioning was higher by R90 million while

depreciation on other property, plant and equipment was lower by R61 million due to the extension of the useful
life of certain items. The useful life of certain assets was extended due to technological innovations, product life
cycles and maintenance programs. These changes in estimate were accounted for prospectively with no
adjustment made to prior years. Included in net operating costs and expenses in 2004 was the profits realized on
the disposal of the Acrylates plant of R50 million and various other items of property, plant and equipment of
R2 million.

Operating profit of comonomers increased from R109 million in 2004 to R217 million in 2005 primarily

due to the increase in chemical product prices which was partially offset by increases in the cost of feedstock
due to higher crude oil prices.

Capital items for the years under review

During the years under review operating costs and expenses includes the effect of the following capital

items:

2006

2005

2004

(Rand in millions)

Impairment of property, plant and equipment

–

(437)

(42)

Reversal of impairment of property, plant and equipment

140

–

Impairment of intangible assets

(26)

(5)

–

Scrapping of property, plant and equipment

(7)

(151)

–

Loss on disposal of business

(2)

–

Profit on disposal of property, plant and equipment

–

Total

105

(593)

(19)

The capital items in 2006 include:

• Reversal of a previously recognized impairment – During 2005 an impairment was recognized

of R140 million for Octene train 3 project due to increases in the capital costs. This project was not
impaired under US GAAP. The successful outcome of negotiations of the selling price of the product
which were finalized during the last quarter of 2005, has resulted in the return (based on a discounted
cash flow model) expected to be generated by this plant exceeding the expected cost of construction. As
a result, due to the change in economic circumstances, the impairment has been reversed.

• Impairment of intangible assets – includes:

Impairment of Acrylates train 2 technology license (South Africa) – An impairment of the
technology license for the second train of R14 million was recognized due to uncertainty regarding
the expected product mix that will be manufactured and the decision to postpone the project due to
the current de-bottlenecking of train one.

Impairment of emission rights (carbon credits) – The group accounts for emission rights granted by
government as an indefinite life intangible asset. This intangible asset is recognized at the fair value
of the allowance on the date it is granted. No amortization is provided and the intangible asset is
tested for impairment at least annually. Due to the decrease in the market price of emission rights

152

during the year, from euro 26.00 to euro 16.00 per right (one right unit entitles the holder the right to
emit one ton of carbon dioxide per year), the carrying value of the intangible asset at year-end was
impaired by R12 million.

The capital items in 2005 include:

• Impairment of property, plant and equipment – includes:

Impairment of Octene train 3 (South Africa) – The economic evaluation of the project indicated that
it will be substantially more expensive than the original approved amount. As a result the entire
amount of capital expenditure (including interest capitalized of R8 million) of R140 million was
impaired. The Octene train 3 was not impaired under US GAAP as the carrying value did not exceed
the undiscounted future cash flows. On 9 September 2005 the Sasol Limited board of directors
approved the continuation of the project at a substantially higher capital cost subject to successful
renegotiations of the product selling price to recover the cost of the capital to be invested. This
impairment relates to the comonomers activities which have been reclassified from Sasol Olefins &
Surfactants;

Impairment of ketones and alcohols plants (Germany) – Both the ketones and ethanol plants were
evaluated for impairment during 2005. The impairment assessment resulted in an impairment of the
ketones plant of R13 million and of the ethanol plant of R71 million including an impairment
of R5 million of intangible assets; and

Impairment of n-butanol plant (South Africa)—The lower than budgeted economic performance and
final cost of the n-butanol plant both lead Solvents to perform an assessment of impairment on the
n-butanol plant. The results of the impairment assessment yielded an impairment of R218 million
which is primarily attributed to the interest capitalized on the construction of the n-butanol plant.

• Scrapping of property, plant and equipment (South Africa)—During the current year, as a result of

decisions taken by the Solvents board, the following items of property, plant and equipment assets were
scrapped:

Crotonaldehyde plant – R16 million;

Propylene oxide and glycol ethers plants – R47 million; and

Acetic acid plant – R 2 million

Furthermore, certain study costs were evaluated by Sasol Technology during the course of the year and

these costs (R83 million) written off. Other smaller items scrapped amounted to R3 million.

153

Other Businesses – results of operations

Other businesses include Sasol Financing, Sasol Technology, Sasol Petroleum International, Sasol Nitro,

Sasol Wax, Sasol Infrachem, Merisol and various smaller chemical businesses.

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

9,329

8,713

616

8,124

589

Inter-segment

4,242

3,534

708

3,609

(75)

(2)

Aggregated turnover

13,571

12,247

1,324

11,733

514

Operating costs and expenses

(12,529)

(11,767)

762

(11,972)

(205)

(2)

Operating profit

1,042

480

562

117

(239)

719

(301)

Sasol Financing

Operating profit

101

154

(70)

(45)

Sasol Petroleum International

Aggregated turnover

1,237

841

396

312

529

170

Operating profit/(loss)

600

280

320

114

(119)

399

(335)

Sasol Nitro

Aggregated turnover

3,402

3,485

(83)

(2)

3,226

259

Operating profit/(loss)

466

449

(157)

606

(386)

Sasol Wax

Aggregated turnover

4,584

4,075

509

4,042

Operating profit

276

208

266

(58)

(22)

Infrachem

Aggregated turnover

2,270

2,013

257

2,329

(316)

(14)

Operating (loss)/profit

(297)

(364)

(18)

(453)

(509)

Merisol

Aggregated turnover

556

535

(21)

497

Operating (loss)/profit

(11)

(38)

(141)

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment.

Results of operations 2006 compared to 2005

Sasol Financing provides financing and treasury services to our group and also acts as our in-house bank.

Its operating profit amounted to R101 million in 2006, compared to operating profit of R84 million in 2005.
Changes in Sasol Financing’s operating profit are mainly attributable to movements in the rand against the
US dollar.

Sasol Petroleum International, through our partnership with Mozambique’s state-owned company, Empresa

Naçional de Hidrocarbonetos de Moçambique and the International Finance Corporation produced and sold
94 MGJ of natural gas from the Temane field. Sasol Petroleum International’s share of the sales was 66 MGJ, a
22% increase on the previous year’s 54 MGJ. Our share of gas condensate sales doubled from 225,000 b to
450,000 b. Through our 27.75% stake in Gabon’s Etame field, we sold for our own account 1.7 million b of
crude oil. Higher oil and gas prices, the weakening of the rand against the US dollar and increased volumes
enabled Sasol Petroleum International to increase aggregated turnover by 47% and to more than double

154

operating profit from R280 million to R600 million. A loss of R82 million was recognized on the disposal of a
30% interest in the Temane central processing facility to Companhia Moçambicana Hidrocarbonetos and the
International Finance Corporation effective 1 April 2006 mainly due to the strengthening of the rand since the
construction of the facility. Total exploration costs expensed against operating profit amounted to R123 million
for 2006 compared to R121 million for 2005. A new onshore exploration, appraisal and development drilling
campaign will commence in 2007 with a budget of US$195 million. Drilling will be concentrated in the
Pande and Temane field areas and targeted at increasing annual gas production over the next few years
beyond 120 MGJ.

Sasol Nitro, which comprises our South African ammonia, fertilizers and explosives portfolios, benefited

from high ammonia prices and a strong performance from explosives being partially offset by a substantial
decrease in fertilizer sales. Sales volumes for our combined nitrogen value chain decreased by 20% mostly
as a result of lower fertilizer sales and the switch of our Phalaborwa phosphoric acid operation to toll
manufacturing in September 2005. Capital items in the previous year included a R28 million profit on the sale of
our US operation, whereas 2006 includes a net loss of R28 million mostly due to the disposal of our electronic
detonator business. The average ammonia price was significantly higher than that of the previous year and
benefited Sasol Nitro by making a higher contribution to operating profit, which was also boosted by higher
margins and strong sales for our non-fertilizer products. The ammonia production volumes at Sasolburg also
increased. Fertilizer sales were down substantially due to an estimated 44% decline in South African maize
plantings.

Sasol Wax produces and markets wax and wax related products to commodity and specialty wax markets

globally. Sasol Wax maintained steady production and increased sales with the advantage of achieving better
margins than in the previous year. High oil prices, however, impacted on feedstock prices in South Africa,
Europe and the US, with the effects being more dramatic in the latter two regions. To Sasol Wax’s benefit, the
second half of 2006 was characterized by a worldwide shortage of paraffin waxes due to an overall buoyant
global market and, more so, because of strong growth in general demand for waxes and related products.
Shortages drove sales prices up significantly for most wax grades, including those produced through Sasol’s
Fischer-Tropsch process. An impairment of R17 million was recognized for the Pass Christian plant in the US
which was damaged by Hurricane Katrina.

Sasol Infrachem has settled into its new role as a dedicated producer of reformed gas derived from natural

gas, which it produces at Sasolburg through two autothermal reformers operated on behalf of Sasol Gas.
Reformed gas production was stable during the year and above the set target. Gas production increased by
almost 46% from 25.9 MGJ to 37.7 MGJ. Greater gas production – along with the increased provision of onsite
utilities and ongoing cost containment – enabled an increase in turnover by 13%.

Merisol, our 50:50 cresylic acids joint venture with Merichem Company, had a tough year because of

feedstock constraints at Secunda in South Africa early in 2006 and the disruptive impact of Hurricane Rita on its
US operations at Houston, Texas, which lowered production. The hurricane interrupted the supply of gas and
process chemicals to our plants for an extended period. This necessitated plant idling and a subsequent
interruption in our supply of products to customers. Sales volumes decreased by almost 5% from 103 kt to 99 kt.
Turnover increased by 5% on the strength of higher prices necessitated by higher energy and feedstock prices.
Variable costs increased by 20% because of higher utility and feedstock prices worldwide.

Results of operations 2005 compared to 2004

Sasol Financing’s operating profit amounted to R84 million in 2005, compared to operating losses of

R154 million in 2004. Changes in Sasol Financing’s operating profit are mainly attributable to movements in the
rand against the US dollar.

Sasol Petroleum International’s aggregated turnover increased to R841 million in 2005 from

R312 million in 2004, mainly as a result of increased oil production and higher oil prices from the Etame oil
field in Gabon, and a full year of production from the Temane gas field in Mozambique. Operating profit

155

amounted to R280 million in 2005 compared to an operating loss of R119 million in 2004 largely as a result of
the increase in turnover. Total exploration costs expensed against operating profit amounted to R121 million for
2005 compared to R223 million for 2004 mainly as a result of a temporary decline in exploration activity in
Mozambique.

Sasol Nitro’s aggregated turnover increased to R3,485 million in 2005 from R3,226 million in 2004, an

increase of R259 million or 8%. This increase is mainly because of stronger selling prices, as well as higher
explosives and accessories volumes, which was partially offset by the stronger rand, lower phosphoric acid sales
and the disposal of our investment in Sasol Southwest Energy joint venture in the United States. Following an
impairment charge recognized in 2004, the final disposal of the investment realized a profit for the group
of R28 million. Operating costs were contained through cost savings initiatives and greater efficiency, as well as
benefits arising from the repositioning of the electronic detonator business and the increased sales volumes from
the Sasol Dyno Nobel joint venture. Sasol Nitro’s contribution to group profit was R449 million compared to the
loss of R157 million in 2004.

Sasol Wax’s aggregated turnover increased 5% in euro. The rand equivalent increase was 1% up from

R4,042 million to R4,075 million. Higher oil-based feedstock prices kept operating margins under pressure.
Sales volumes of wax and associated paraffinic products increased by 5% from 779.9Kt to 821.6Kt primarily as
a result of securing new business. Sasol Wax’s contribution to group operating profit decreased by 22% from
R266 million to R208 million.

The conversion of Sasol Infrachem from coal gasification to natural gas reforming at Sasolburg towards the

end of 2004 went smoothly when the two new autothermal reformers were brought into commercial production.
The reformers production during 2005 alternated between prolonged periods of stable operations in line with
planned production and intermittent downtime to resolve post commissioning technical shortcomings that
limited full reformer capability. As a result of these interruptions, turnover dropped by almost 14% from
R2,329 million to R2,013 million. Gas production fell from 53.4 MGJ (coal-based) to 25.9 MGJ (natural
gas-based) and 12.5 MGJ (coal-based), a total of 38.4 MGJ. Sasol Infrachem incurred a loss of R364 million,
primarily due to the consequence of the one-off costs incurred during the commissioning of the natural gas-fed
autothermal reformers that have replaced the coal-fired gasifiers in Sasolburg which could not be passed on to
customers.

Merisol, performed well and increased turnover by 6% from R497 million to R528 million. The increase is

largely due to the strength of higher prices and sustained good sales across the product portfolio. Higher oil
prices drove up costs for Merisol products manufactured in South Africa, Japan and the US. Merisol was able to
absorb cost increases through price increases. Feedstock constraints, however, reduced sales volumes to 103.3Kt.

During the year Sasol undertook a reassessment of the useful lives of certain items of property, plant and

equipment. The useful life of certain assets was extended due to technological innovations, product life cycles
and maintenance programs. Due to these extensions of the useful lives of certain items of property, plant and
equipment owned by Sasol Nitro, Sasol Wax and Sasol Technology, the depreciation charge was reduced by
R25 million. These changes in estimate were accounted for prospectively with no adjustment made to prior
years.

156

Segment review – discontinued operations

Sasol Olefins & Surfactants – results of operations

We acquired Condea in March 2001 from German-based RWE DEA AG for euro 1.3 billion (R8.3 billion).

Most of this business was subsequently hosted in Sasol Olefins & Surfactants with production facilities mainly
in the US, Europe and South Africa. In 2003, it was determined that we would continue to grow our chemical
businesses conditional upon projects leveraging our technology or securing integrated and highly cost-
competitive feedstock positions. We announced in August 2005 that we are considering the divestment of the
Sasol Olefins & Surfactants business excluding our comonomers activities in South Africa. The Sasol Olefins &
Surfactants business is not vertically integrated to our required standards; is not adequately linked to our
proprietary Fischer-Tropsch technology process and has not adequately provided the integration benefits which
we require. The financial impact of changes in the input costs of the business – together with current market-
place dynamics – exceeds the benefits of significant reductions that have successfully been achieved in the fixed
costs of the business and various other productivity improvements. After a review of valuations and bids received
from interested parties, which confirmed our valuation, it was necessary to write-down the net asset value of the
business to its fair value. By 30 June 2006, we had completed most of the activities required to prepare this
business for sale as a going concern and are presently in negotiations with potential buyers. It is envisaged that
the disposal of the Sasol Olefins & Surfactants business will be completed within the next 12 months, subject to
obtaining the relevant regulatory and other approvals. Until the business is sold, we remain committed to the
strategic and operational goals of Sasol Olefins & Surfactants and will continue to provide the business with the
support necessary to uphold its effectiveness and success.

Change

2006

2005

2 & 3

2006/2005

2004

2 & 3

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Turnover
External

18,545

16,742

1,803

15,152

1,590

Inter-segment

550

354

196

265

Aggregated turnover

19,095

17,096

1,999

15,417

1,679

Operating costs and expenses

(22,662) (17,110)

5,552

(15,385)

1,725

Operating (loss)/profit

(3,567)

(14)

(3,553)

(144)

Operating costs and expenses net of other income.

Restated for the adoption of IFRS 2, Share-based payment. A share-based payment expense of R10 million for both
2005 and 2004 has been recognized in operating costs and expenses.

Restated for the reclassification of the comonomers operations to Sasol Solvents.

Results of operations 2006 compared to 2005

Sasol Olefins & Surfactants continued to build on its groundwork of the last three years, with emphasis on

reducing fixed costs in a sustainable manner, improving customer relations, lifting productivity and optimizing its
portfolio of surfactants, surfactant intermediates and speciality inorganic chemicals in the face of tougher market
conditions. Despite ongoing optimization, the business was again severely hampered by largely unfavorable
market conditions which impacted more harshly on some businesses. Most markets remain highly competitive due
to continuing and, in some cases, increasing oversupply. Further substantial increases in oil prices and related
feedstock prices, as well as natural gas and utility prices, could not be fully accommodated in higher selling
prices. This led to sustained margin pressure and, in some instances, severe margin erosion. Aggregated turnover
increased by 12% due mostly to higher sales prices. This benefit was fully absorbed by the higher feedstock and
energy costs. Our global sales volumes were largely unchanged and, in general, the markets we sell into remained
stable to stronger with the dominating characteristic being the oversupply of many products.

157

The financial impact of changes in the input costs of the business – together with current market-place

dynamics – exceeds the benefits of significant reductions that have successfully been achieved in the fixed costs
of the business and various other productivity improvements.

The main factors contributing to the increase in operating loss were:

Change

2006/2005

(Rand in

millions)

Operating loss 2005

(14)

Exchange rates effects

(4)

–

Net product and feedstock prices (decreases)/increases

280

– crude oil

(674)

(66)

– other products

954

Inflation on fixed costs

(24)

(2)

Net volume and productivity effects

(234)

(23)

Capital items effects

(375)

(37)

Fair value write down

(3,196)

(313)

Operating loss 2006

(3,567)

Results of operations 2005 compared to 2004

Change

Turnover

2005

2004

2005/2004

(Rand in millions)

(%)

After the reclassification of comonomers

17,096

15,417

1,679

Reclassification of comonomers

1,298

1,965

(667)

(34)

Before the reclassification of comonomers

18,394

17,382

1,012

The net increase in Sasol Olefins & Surfactants’ aggregated turnover of R1,012 million was mainly due to

higher product prices. This increase was partially offset by a decrease in sales volumes and the appreciation of
the rand against the euro and the US dollar.

Change

Operating costs

2005

2004

2005/2004

(Rand in millions)

(%)

After the reclassification of comonomers

(17,110)

(15,385)

1,725

Reclassification of comonomers

(1,505)

(2,064)

559

(27)

Before the reclassification of comonomers

(18,615)

(17,449)

1,166

Operating costs and expenses of Sasol Olefins & Surfactants amounted to R18,615 million in 2005,

compared to R17,449 million in 2004, an increase of R1,166 million or 7%. This increase was mainly due to
higher chemical feedstock and crude oil related costs of R2,134 million, offset by the appreciation of the rand
against the euro and the US dollar which resulted in a positive effect of R1,229 million. The useful lives of
certain items of property, plant and equipment were assessed during the 2005 year. Due to the extension of the
useful lives of certain items of property plant and equipment the depreciation charge was reduced by
R517 million for the current year. These changes in estimate were accounted for prospectively with no
adjustment made to prior years. Additionally the costs were reduced through our restructuring initiatives in
North America and Italy and a reduction of certain of our environmental obligations of approximately
R127 million.

158

Capital items for the years under review

During the years under review operating costs and expenses includes the effect of the following capital

items:

2006

2005

2004

(Rand in millions)

Impairment of property, plant and equipment

(804)

(313)

(54)

Impairment of intangible assets

(104)

–

Impairment of goodwill

(4)

(209)

–

Scrapping of property, plant and equipment

(21)

(16)

(4)

(Loss)/Profit on disposal of business

–

(11)

Loss on disposal of property, plant and equipment

(14)

(23)

(14)

(947)

(572)

(20)

Fair value write down

(3,196)

–

Total

(4,143)

(572)

(20)

The capital items in 2006 include:

• Impairment of property, plant and equipment – includes:

Impairment of the organics business unit (Italy) – The organics business unit of Sasol Italy
comprises the Augusta alkylates and alcohols plants, the Sardinian alkylates plant and the Terranova
surfactant plants. Based on current market conditions (i.e. high oil derived feedstock prices, pressure
on sales prices due to over supply in the market, amongst other) the assets of the cash generating
unit have been impaired by R791 million to their estimated recoverable amount based on the value in
use. This cash generating unit has not been impaired under US GAAP as the carrying value did not
exceed the undiscounted future cash flows;

Impairment of Sasol Gulf assets (United Arab Emirates) – A significant increase in the production
capacity in the Middle East and the Gulf has increased the competitiveness of the surfactants market.
After the performance of an impairment review, based on value in use, the entire carrying value of
the assets of R22 million was impaired.

Impairment of inorganic specialities plant (Italy) – In the previous year, the carrying value of this
plant was impaired. During the current year, in order to support the business requirements of the
global Sasol Olefins & Surfactants business unit, further capital expenditure was incurred on
continuing operation of this plant. This expenditure, while meeting the requirements for
capitalization in order to continue operating the plant, was reviewed for impairment. The plant
continues to incur losses and therefore all additional expenditure of R16 million on this asset has
been impaired.

• Impairment of intangible assets – The group accounts for emission rights (carbon credits) granted by

government as an indefinite life intangible asset. This intangible asset is recognized at the fair value of
the allowance on the date it is granted. No amortization is provided and the intangible asset is tested for
impairment at least annually. Due to the decrease in the market price of emission rights during the year,
from euro 26.00 to euro 16.00 per right (one right unit entitles the holder the right to emit one ton
of carbon dioxide per year), the carrying value of the intangible asset at year-end was impaired
by R83 million.

• After a review of valuations and bids received from interested parties, which confirmed our valuation, it

was necessary to write-down the net asset value of the business to its fair value less costs to sell.
This resulted in a reduction of net asset value and a charge to the income statement of R3.2 billion
(R2.8 billion after tax).

159

The capital items in 2005 include:

• Impairment of property, plant and equipment and goodwill – includes:

Impairment of the alkylates plant (North America) – The alkylates cash generating unit comprises
the assets of the Baltimore and Lake Charles alkylate plants and the Lake Charles paraffin and
solvents plants. An impairment was recognized of R288 million which is allocated first to goodwill
(R79 million) and then to the underlying property, plant and equipment (R209 million). This cash
generating unit has not been impaired under US GAAP as the carrying value did not exceed the
undiscounted future cash flows;

Impairment of inorganic specialties plant (Italy) – Due to prolonged losses being incurred by the
inorganic business unit in Sasol Italy the long-lived assets were assessed for impairment. The net
present value of estimated future cash flows is less than the carrying value of the asset and
accordingly an impairment of R103 million was recognized under IFRS and US GAAP;

Goodwill of R130 million in Sasol Italy was impaired as a result of the losses incurred in this
business.

• Scrapping of property, plant and equipment – In Sasol North America miscellaneous assets with a

carrying value of R16 million were scrapped.

• Loss on disposal of assets – A loss on disposal of various items of property, plant and equipment

of R23 million was incurred.

• Loss on disposal of business – The final purchase price for the disposal of Sasol Servo to Elementis in

2004 was finalized. A reduction in the settlement proceeds and the profit on disposal realized in 2004 of
R11million was recognized during the current year.

On the adoption of IFRS 3 – Business combinations we have derecognized the carrying value of the

negative goodwill of R610 million at the beginning of the 2005 financial year, with a corresponding adjustment
to our opening retained earnings. As a result our net operating costs as internally reported in 2005 are higher due
to the fact that we have not amortized the goodwill during the current year and therefore excluded the
amortization of R162 million, which was included in the 2004 year.

RECENT ACCOUNTING PRONOUNCEMENTS

The following recent accounting pronouncements which are applicable to the group have been issued by

the FASB and have been adopted by the group during 2006:

Statement of Financial Accounting Standards No. 123R, Share-based payment (SFAS 123(R)),

FSP FAS 123(R)-1, FSP FAS 123(R)-2, FSP FAS 123(R)-3 and FSP FAS 123(R)-4

The standard requires the measurement of the cost of employee services received in exchange for an award

of equity instruments based on the grant-date fair value of the award. The cost will be recognized over the period
during which an employee is required to provide service in exchange for the reward.

The group adopted SFAS 123(R) and the related FASB Staff Positions retrospectively from 1 July 2005 for

all periods presented. The impact of adopting this standard is set out in the accounting policies, see
“Item 18 – Financial statements”.

Statement of Financial Accounting Standards No. 151, Inventory costs, an amendment of ARB No. 43, Chapter 4
(SFAS 151)

In November 2004, the FASB issued SFAS 151 which amends the guidance in Accounting Research

Bulletin (ARB) No. 43, Chapter 4, “Inventory Pricing” to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs and spoilage. In addition, the standard requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity of the production facilities.

160

The group adopted SFAS 151 effective from 1 July 2005. The adoption of this standard did not have a

material impact on the group’s results of operations, financial position or liquidity.

Statement of Financial Accounting Standards No. 153, Exchanges of nonmonetary assets, an amendment to
APB Opinion No. 29 (SFAS 153)

SFAS 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar

productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity
are expected to change significantly as a result of the exchange. The standard requires nonmonetary exchanges
to be accounted for at fair value of the assets exchanged, with gains and losses recognized, if the fair value is
determinable and the transaction has commercial substance.

The group adopted SFAS 153 effective from 1 July 2005. The adoption of this standard did not have a

material impact on the group’s results of operations, financial position or liquidity.

FASB Interpretation No. 47, Accounting for conditional asset retirement obligations, an interpretation
of FASB Statement No. 143 (FIN 47)

In March 2005, the FASB issued FIN 47, which is effective for the group from 1 July 2005. FIN 47

clarifies that the phrase “conditional asset retirement obligation,” as used in SFAS 143, refers to a legal
obligation to perform an asset retirement activity for which the timing and/or method of settlement are
conditional on a future event that may or may not be within the control of the company. The obligation to
perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or
method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability when sufficient information exists. It is
acknowledged in SFAS143 that in certain cases, sufficient information may not be available to reasonably
estimate the fair value of an asset retirement obligation. FIN 47 clarifies when an entity would have sufficient
information to reasonably estimate the fair value of an asset retirement obligation.

There were no additional asset retirement obligations requiring recognition by the group as a result of the

initial adoption of FIN 47 with effect from 1 July 2005.

EITF Issue 06-3, How taxes collected from customers and remitted to governmental authorities should be
presented in the income statement (that is, gross versus net presentation) (EITF 06-3)

During its meeting in March 2006, the EITF reached tentative conclusion on how taxes, assessed by a

governmental authority that is directly imposed on a revenue-producing transaction between a seller and a
customer and collected from customers and remitted to governmental authorities, should be presented in the
income statement. Taxes within EITF 06-3 can be presented either on a gross (included in revenues and costs) or
a net (excluded from revenues) basis as provided in the entities accounting policy. For taxes that are reported on
a gross basis disclosure should be provided of the amount of those taxes for each period for which an income
statement is presented if those amounts are significant.

The group has adopted the guidance of EITF 06-3 and presents taxes within the scope on a net basis

(excluded from revenue). The adoption of this guidance had no impact on the group’s accounting policies.

EITF Issue 04-6, Accounting for stripping costs incurred during production in the mining industry (EITF 04-6)

During 2004, a committee of the EITF began discussing the accounting treatment for stripping costs

incurred during the production phase of a mine. In March 2005, the EITF reached a consensus (ratified by the
FASB) that stripping costs incurred during the production phase of a mine are variable production costs that
should be included in the costs of inventory produced during the period that the stripping costs are incurred.

161

The group adopted EITF 04-6 effective from 1 July 2005. The adoption of this standard did not a material

impact on the group’s results of operations, financial position or liquidity or the group’s accounting policies.

EITF Issue No. 04-13, Accounting for purchases and sales of inventory with the same counterparty (EITF 04-13)

The EITF reached consensus on EITF 04-13 at its September 2005 meeting. This issue addresses when it is

appropriate to measure purchases and sales of inventory at fair value and record the effect of this transaction in
cost of sales and turnover and when these transactions should be recorded as exchanges measured at the carrying
value of the item sold. It was concluded that purchases and sales of inventory with the same counterparty that
are entered into in contemplation of one another should be combined and recorded as exchanges measured at the
carrying value of the items sold.

The group adopted EITF 04-13 effective from 1 July 2005. The adoption of this standard did not have a

material impact on the group’s results of operations, financial position or liquidity.

EITF Issue No. 03-13, Applying the conditions in Paragraph 42 of FASB Statement No. 144, Accounting for the
impairment or disposal of long-lived assets, in determining whether to report discontinued operations
(EITF 03-13)

In November 2004, the EITF of the FASB reached a consensus on EITF 03-13 on evaluating whether the

criteria in paragraph 42 of Statement of Financial Accounting Standards No. 144, Accounting for the impairment
or disposal of long-lived assets, have been met for the purposes of classifying the results of operations of an
entity that either has been disposed or classified as held for sale as discontinued operations.

The group adopted EITF 04-13 effective from 1 July 2005. The EITF was considered in the presentation of

the group financial statements.

The following recent accounting pronouncements which are applicable to the group but not yet effective have
been issued and have not been adopted by the group:

Staff Accounting Bulletin No. 108, Considering the effects of prior year misstatements when quantifying
misstatements in current year financial statements (SAB 108)

In September 2006, the SEC issued SAB 108. SAB 108 provides interactive guidance on how the effects of

prior-year uncorrected misstatements should be considered when quantifying misstatements in the current year
financial statements. SAB 108 requires registrants to quantify misstatements using both an income statement
(rollover) and balance sheet (iron curtain) approach and evaluate whether either approach results in a
misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year
errors that had been previously considered immaterial now are considered material based on either approach, no
restatement is required so long as management properly applied its previous approach and all relevant facts and
circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in
opening accumulated earnings (deficit) as of the beginning of the fiscal year of adoption. SAB 108 is effective
for fiscal years ending on or after 15 November 2006, with earlier adoption encouraged. The group is currently
in the process of assessing the impact the adoption of SAB 108 will have on its financial statements.

Statement of Financial Accounting Standards No. 158, Employers’ accounting for defined benefit and other
postretirement plans, an amendment to FASB Statements No. 87, 88, 106 and 132(R) (SFAS 158)

On 29 September 2006, the FASB issued SFAS 158 which improves financial reporting by requiring an

employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than
a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in
that funded status in the year in which the changes occur through comprehensive income. This statement also
improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its
year-end statement of financial position, with limited exceptions. SFAS 158 requires a company to initially

162

recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of
the end of the year ending after 15 December 2006. The requirement to measure plan assets and benefit
obligations as of the date of the employer’s fiscal year-end is effective for years ending after 15 December 2008.

The group is in the process of evaluating the impact of this pronouncement on our results of operations,

financial position or liquidity.

FASB Interpretation No. 48, Accounting for uncertainty in income taxes—an interpretation of FASB Statement
No. 109 (FIN 48)

In July 2006, the FASB issued FIN 48 which prescribes a recognition threshold and measurement attribute

for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. The evaluation of a tax position in accordance with this interpretation firstly requires the determination
whether it is more likely than not that a tax position will be sustained upon examination, based on the technical
merits of the position and secondly the position is measured to determine the amount of benefit to recognize in
the financial statements. The Interpretation also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective in fiscal years beginning
after 15 December 2006. The provisions of FIN 48 are to be applied to all tax positions upon initial adoption,
with the cumulative effect adjustment reported as an adjustment to the opening balance of retained earnings.

The group is in the process of evaluating the impact of this pronouncement and it is believed that it will not

have a material impact on our results of operations, financial position or liquidity.

FASB Staff Position No. FAS 13-1, Accounting for rental costs incurred during a construction period
(FSP No. 13-1)

In October 2005, the FASB issued FSP FAS 13-1 which addresses the accounting for rental costs

associated with operating leases that are incurred during a construction period. The guidance requires rental
costs associated with ground or building operating leases that are incurred during a construction period to be
recognized as rental expense. The rental costs shall be included in income from continuing operations.
FSP FAS 13-1 is effective for reporting periods beginning after 15 December 2005 and will be adopted by the
group in the year ended 30 June 2007.

The group is in the process of evaluating the impact of this pronouncement and it is believed that it will not

have a material impact on our results of operations, financial position or liquidity.

FASB Staff Position No. FAS 115-1 and FAS 124-1, The meaning of other-than-temporary impairment and

its application to certain investments (FSP FAS 115-1 and FAS 124-1)

In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1 providing guidance for the

determination as to when an investment is considered impaired, whether that impairment is other than temporary,
and the measurement of an impairment loss. The guidance also includes accounting considerations subsequent to
the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses
that have not been recognized as other-than-temporary impairments. FSP FAS 115-1 and FAS 124-1 is effective
for reporting periods beginning after 15 December 2005 and will be adopted by the group in the year ended
30 June 2007.

The group is in the process of evaluating the impact of this pronouncement and it is believed that it will not

have a material impact on our results of operations, financial position or liquidity.

163

FASB Staff Position No. FIN 46(R)-6, Determining the variability to be considered in applying FASB
Interpretation No. 46(R) (FSP FIN 46(R)-6)

In April 2006, the FASB issued FSP FIN 46(R)-6 to address how to determine the variability to be

considered in applying FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest
Entities (FIN 46(R)). The variability to be considered in applying FIN 46(R) is based on an analysis of the
design of the entity considering the nature of the risks in the entity, determining the purpose for which the entity
was created and determining the variability the entity is designed to create and pass along to its interest holders.
FSP FIN 46(R)-6 is effective the first day of the first reporting period beginning after 15 June 2006.

The group is evaluating the impact of this statement and believes that it will not have a material impact on

our results of operations, financial position or liquidity.

5.B

Liquidity and capital resources

Liquidity

Management believes that cash on hand and funds from operations, together with our existing borrowing

facilities, will be sufficient to cover our reasonably foreseeable working capital and debt requirements. We
finance our capital expenditure from funds generated out of our business operations, existing borrowing facilities
and, in some cases, additional borrowings to fund specific projects.

The following table provides a summary of our cash flows for each of the three years ended 30 June:

2006

2005

2004

(Rand in millions)

Net cash generated by operating activities

18,875

14,097

9,686

Net cash utilized in investing activities

(11,766)

(11,732)

(9,677)

Net cash utilized in financing activities

(6,214)

(1,465)

(1,729)

The cash generated from our operating activities is applied first to pay our debt and tax commitments and

then to provide a return in the form of a dividend to our shareholders. The remaining cash is applied primarily to
invest in our capital investment program.

The cash flows generated/(utilized) by discontinued operations has been combined with continuing

operations in the presentation of the cash flow statement. The following table provides a summary of the cash
flows of our discontinued operation (Sasol Olefins & Surfactants) for each of the three years ended 30 June:

2006

2005

2004

(Rand in millions)

Net cash generated by operating activities

1,275

596

1,256

Net cash utilized in investing activities

(980)

(554)

(732)

Net cash utilized in financing activities

(17)

(1,265)

(1,219)

The absence of cash flows generated/(utilized) by Sasol Olefins & Surfactants, are not expected to have a

significant impact on the liquidity of the group. Strong expected cash flows from continuing operations and the
anticipated proceeds from the disposal of Sasol Olefins & Surfactants will have a positive impact on liquidity.

164

Operating activities

Net cash generated by operating activities has increased for the past three years in succession to

R18,875 million in 2006 from R14,097 million in 2005 and R9,686 million in 2004. Cash flows generated by
operating activities include the following significant cash flows:

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Cash generated from operating

activities

24,215

17,868

6,347

13,839

4,029

Income tax paid

(5,484)

(3,616)

1,865

(4,005)

(389)

(10)

In 2006 we saw a further increase in the average dated Brent crude oil price to US$62.45/b from the

average of US$ 46.17/b in 2005 and US$31.30/b in 2004. This increase in the crude oil price has had a positive
impact on our operating profit and cash generated by operating activities. Cash generated by operating activities
has increased by 36% to R24,215 million in 2006 and by 29% to R17,868 million in 2005. In line with operating
profit generated by our businesses, the most significant contributor to our cash generated by operations is Sasol
Synfuels. The increase in tax paid during the year is due to the increase in taxable profit as discussed under the
operating results above.

Investing activities

In line with our capital investment program cash utilized in investing activities has increased over the past

three years from R9,677 million in 2004 to R11,732 million in 2005 and R11,766 million in 2006. Cash flows
utilized in investing activities include the following significant cash flows:

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Purchases of property, plant and

equipment

(9,703)

(10,157)

(454)

(4)

(8,671)

1,486

Investments in equity accounted

investees

(1,831)

(768)

1,063

138

(376)

392

104

165

The increase in purchases of property, plant and equipment and investments in equity accounted joint

ventures is primarily due to an increase in capital expenditure on projects to expand our operations which
includes the following key projects:

Projects and investments

Business categories

2006

2005

2004

(Rand millions)

Project Turbo – polymers projects

low-density polyethylene and
polypropylene

Sasol Polymers

2,608

3,321

936

Sasol Oil distribution network

Sasol Oil

191

294

114

and 3

Octene trains

Sasol Solvents

714

288

519

Mozambique Natural Gas

Sasol Gas and Sasol Petroleum International

244

2,077

Clean Fuels Project

Sasol Oil

–

215

–

Acrylic acid and acrylates

Sasol Solvents

–

740

Oxygen train

Sasol Synfuels

–

104

Capital projects of equity

accounted investees

Oryx GTL and Escravos GTL

Sasol Synfuels International

1,734

1,245

1,235

Arya Sasol Polymer (Iran)

Sasol Polymers International Investments

1,590

823

295

The amounts include business development costs and our group’s share of capital expenditure of equity accounted joint
ventures.

In addition we invested R5,331 million, R5,163 million and R3,363 million on property, plant and

equipment in 2006, 2005 and 2004, respectively, to enhance existing operations.

Financing activities

The group’s operations are financed primarily by means of its operating cash flows. Cash shortfalls are

usually short-term in nature and are met primarily from short-term banking facilities and the commercial paper
program. Long-term capital expansion projects and acquisitions of businesses are financed by a combination of
floating and fixed rate debt. This debt is usually in the measurement currency of the project or acquisition being
financed and repayment terms match the expected cash flow to be generated by the asset or business acquired.

Net cash effect of financing activities was R6,214 million, R1,465 million and R1,729 million in 2006,

2005 and 2004 respectively. The following significant cash flows are included in financing activities:

Change

2006

2005

2006/2005

2004

2005/2004

(Rand in millions)

(%)

(Rand in millions)

(%)

Dividends paid to shareholders

(3,660)

(2,856)

804

(2,748)

108

Repayment of debt

(5,035)

(4,957)

(10,789)

(5,832)

(54)

Proceeds from borrowings

1,840

5,911

(4,071)

(69)

11,932

(6,021)

(50)

Dividends paid amounted to R3,660 million in 2006 compared to R2,856 million in 2005 and

R2,748 million in 2004. Our dividend distribution policy is to distribute increasing dividends on a regular basis,
to the extent permitted by our earnings. In particular, we intend to distribute dividends, provided our annual
attributable earnings represent a range of 2.5 to 3.5 times the amount distributed in the form of dividends. The
average rate of earnings to dividend distributions in the past five years was approximately 2.7 times. Our
dividend cover for 2006 of 2.3 is outside the target range, however, when measured against earnings from
continuing operations is 3.1, which is within the target range.

166

During 2005 a Eurobond of 300 million euro (R2.4 billion) was raised. The proceeds of the Eurobond were

used to reduce our short-term borrowings in South Africa and assist in diversifying and extending the average
tenure of our portfolio. In addition we replaced specific asset based financing used to acquire Condea with group
debt. This debt has reduced the value of assets pledged as security, as well as the negotiation of better interest
rates and less onerous covenants.

Capital resources

Sasol Financing and Sasol Financing International act as our group financing vehicles. All our group

treasury, cash management and borrowing activities are facilitated through Sasol Financing and Sasol Financing
International.

Our long-term capital expansion projects are financed by means of a combination of floating and fixed-rate

long-term debt. This debt is normally financed in the same currency as the underlying project and repayment
terms are designed to match the expected cash flows to be generated by that project.

Our debt comprises the following:

2006

2005

(Rand in millions)

Long-term debt, including current portion

11,211

10,747

Short-term debt

1,606

4,546

Bank overdraft

442

266

Total debt

13,259

15,559

Less cash and cash equivalents

(2,808)

(2,350)

Net debt

10,451

13,209

Our debt profile has moved significantly toward a longer-term bias which is a reflection of both our capital

investment program and the excellent results generated by existing operations over the last three years. This
operating performance has reduced our dependency on short-term borrowing facilities.

The group has borrowing facilities with major financial institutions of approximately R34,689 million

(2005 – R34,219 million). Of these facilities R13,259 million (2005 – R15,559 million) has been utilized at
year end.

There were no events of default for the years ended 30 June 2006 and 30 June 2005.

167

Our major funding facilities at 30 June 2006 are set out below.

Expiry Date

Currency

Facilities

Utilization

(Rand in millions)

Uncommitted facilities

Commercial banking facilities

Various

Rand

12,880

1,102

(short-term)

International commercial paper program

Various

(short-term)

Euro

151

–

Commercial paper program

None

Rand

6,000

–

Committed facilities

Revolving credit facility (syndicated)

May 2008

Euro

1,834

–

Revolving credit facility

May 2008

Euro

1,834

487

Debt arrangements

RSA Bond

August 2007

Rand

2,000

Japan Bank for International Co-operation

June 2013

US dollar

419

Eurobond

June 2010

Euro

2,750

Natref

Various

Rand

1,230

1,078

Asset based finance

The Republic of Mozambique Pipeline Investment

Company (Pty) Limited

December 2017

Rand

2,502

Euro and

Sasol Petroleum Temane Limitada

June 2015

Rand

1,202

Property finance leases

Sasol Oil

Various

Rand

687

Other banking facilities and debt arrangements

Various

1,200

1,032

34,689

13,259

Comprising
Long-term debt, including current portion

11,211

Short-term debt

1,606

Bank overdraft

442

13,259

Facilities held by these subsidiaries.

Excluded from the above analysis are borrowing facilities held by the group’s joint ventures:

Facilities

Utilization

(Rand in millions)

Oryx GTL Limited

2,459

2,329

Arya Sasol Polymer Company

1,911

1,795

Sasol Dia Acrylates (South Africa) (Pty) Limited

1,179

712

Other

130

5,679

4,925

168

Besides our normal commercial banking facilities, the majority of which is in South Africa, another facility

to fund short-term funding requirements in South Africa is our commercial paper program of R6 billion,
normally at fixed interest rates. We had no exposure on the program at 30 June 2006.

We manage our short-term debt interest rate exposure by making use of a combination of commercial

banking facilities with variable interest rates and commercial paper issues at fixed interest rates.

Debt profile

We actively monitor and manage our cash flow requirements and to the extent that core long-term financing

requirements are identified, we will finance these with longer-term debt issues.

Less than

More than

1 year

1 to 2 years

2 to 5 years

5 years

Total

(Rand in millions)

Maturity profile long-term debt

571

2,682

4,569

3,389

11,211

We endeavor to match the tenure of our debt with the nature of the asset or project being financed.

Covenants

The group is subject to certain covenants on its debt facilities relating to earnings, debt cover, net asset

value, amongst other. There were no events of default in the year ended 30 June 2006.

The covenant terms above are defined contractually in each of the agreements for the above facilities using

definitions agreed to between the parties derived from amounts published in the financial statements of Sasol
prepared in terms of IFRS for any year and adjusted in terms of the agreed definitions.

Moody’s assigned Sasol Aa3.za long-term and Prime-1.za short-term South African national scale credit

ratings and a global Baa1 rating. Standard and Poor’s affirmed the long-term foreign-currency rating as BBB+
equivalent to Moody’s global Baa1 rating.

For information regarding our material commitments for capital expenditure see “Item 4.D – Property,

plants and equipment”.

5.C

Research and development, patents and licenses

Research and development

Our research and development function consists of a central research and development division in South

Africa, which focuses on fundamental research while our decentralized divisions focus on applications. The
central research function has a full suite of state-of-the-art pilot plants to support both current and future
technology being developed.

Our application research and development capabilities are focused around four areas:

• technical service;

• analytical service;

• plant support; and

• new applications, products and processes.

Total expenditure on research and development in years 2006, 2005 and 2004 was R277 million,

R188 million and R358 million respectively.

For further information regarding our research and development activities, see “Item 4.B – Business

overview – Sasol Technology”.

169

5.D

Trend information

Our financial results since the end of 2006 have been principally affected by fluctuations in dated Brent

crude oil prices and a further weakening of the rand to US dollar.

In recent months, the derived European Brent crude oil spot price has declined from the year-end level of

US$71.10/b to US$58.53/b on 22 September 2006 with a high of US$78.26/b and a low of US$57.89/b during
that period. Given the current uncertain political environment the oil price has been volatile and this volatility is
expected to continue in the foreseeable future. As discussed above, a high oil price generally results in increased
profitability for our group.

The rand to US dollar exchange rate was R7.17 at 30 June 2006. After trading in a range of between

R6.72 and R7.23 to the US dollar during July and August 2006, the rand weakened further reaching R7.76 per
US dollar at 29 September 2006 with a high of R7.76 per US dollar and a low of R6.72 per US dollar during
that period. Whilst the exchange rate during the current year has been relatively less volatile than in previous
years we are unable to forecast whether this will continue in the foreseeable future.

5.E

Off-balance sheet items

We do not engage in off-balance sheet financing activities and do not have any off-balance sheet debt

obligations, special purpose entities or unconsolidated affiliates.

Guarantees

The group has issued the following guarantees for which the liabilities have not been included in the

balance sheet.

2006

Maximum

Guarantee

potential

included in the

Note

amount

balance sheet

(Rand in millions)

In respect of GTL ventures

8,301

109

In respect of joint venture commitments

1,360

–

Guarantees issued in respect of letter of credit

1,172

–

Performance guarantees

1,035

238

Other guarantees and claims

313

To RWE-DEA AG

276

–

Customs and excise

111

–

In respect of the natural gas project

–

Subsidiaries financial obligations

–

12,656

371

– continuing operations

12,001

371

– discontinued operations

655

–

Sasol Limited has issued the following significant guarantees for the obligations of various of its
subsidiaries in respect of the GTL Ventures. These guarantees relate to the construction and funding of
Oryx GTL Limited in Qatar and Escravos GTL in Nigeria, including inter alia:

• A completion guarantee has been issued for Sasol’s portion of the project debt of Oryx GTL Limited

capped at US$343 million (R2,459 million) plus interest and costs subject to the project demonstrating a
minimum level of sustained production over a continuous period of ninety days and catalyst deactivation
within acceptable parameters for at least two hundred and seventy days, after commissioning. It is
estimated that the project will be commissioned during the fourth quarter of the 2006 calendar year.

170

• A guarantee for the take-or-pay obligations of a wholly owned subsidiary has been issued under the gas

sale and purchase agreement (GSPA) entered into between Oryx GTL Limited, Qatar Petroleum and
ExxonMobil Middle East Gas Marketing Limited, by virtue of this subsidiary’s 49% shareholding in
Oryx GTL Limited. Sasol’s exposure is limited to the amount of US$123 million (approximately
R884 million). In terms of the GSPA, Oryx GTL Limited is contractually committed to purchase
minimum volumes of gas from Qatar Petroleum and ExxonMobil Middle East Gas Marketing Limited on
a take-or-pay basis. Should Oryx GTL terminate the GSPA prematurely, Sasol Limited’s wholly owned
subsidiary will be obliged to take or pay for its 49% share of the contracted gas requirements. The term
of the GSPA is 25 years from the date of commencement of operations. It is estimated that the project
will be commissioned during the fourth quarter of the 2006 calendar year.

• A guarantee has been issued for the obligation of a wholly owned subsidiary to contribute 49% of the

required equity in respect of the investment in Oryx GTL Limited. Sasol’s equity contribution is
estimated at US$160 million (R1,147 million). It is expected that the project will be commissioned
during the fourth quarter of the 2006 calendar year.

• A guarantee in respect of the performance of the Oryx GTL plant has been issued to the joint venture

partners, amounting to approximately US$31million (R225 million). An amount of R109 million has
been accrued in respect of this guarantee. The inter-company guarantee and liability has been eliminated
on consolidation.

• A performance guarantee for the obligations of subsidiaries has been issued in respect of the construction

of Escravos GTL in Nigeria for the duration of the investment in Escravos GTL Limited to an amount of
US$250 million (R1,793 million).

• A performance guarantee for the obligations of subsidiaries in respect of and for the duration of the

investment in Sasol Chevron Holdings Limited, limited to an amount of US$ 250 million
(R1,793 million). Sasol Chevron Holdings Limited is a joint venture between a wholly owned subsidiary
of Sasol Limited and Chevron Corporation.

All guarantees listed above are issued in the normal course of business.

Guarantees issued to various financial institutions in respect of debt obligations of joint venture companies
accounted for using the equity method. The total liability included on the balance sheet of the joint venture
is R848 million.

Various guarantees issued in respect of letters of credit issued by subsidiaries.

Various performance guarantees issued by subsidiaries. An accrual of R238 million was recognized in
respect of certain guarantees.

Included in other guarantees are environmental guarantees of R123 million.

Various performance guarantees issued in favor of RWE-DEA AG.

Various guarantees were issued in respect of the group’s customs and excise obligations.

Product warranties

The group provides product warranties with respect to certain products sold to customers in the ordinary

course of business. These warranties typically provide that products sold will conform to specifications. The
group generally does not establish a liability for product warranty based on a percentage of turnover or other
formula. The group accrues a warranty liability on a transaction-specific basis depending on the individual facts
and circumstances related to each sale. Both the liability and the annual expense related to product warranties
are immaterial to the consolidated group financial statements.

171

5.F

Tabular disclosure of contractual obligations

Contractual obligations/commitments. The following significant contractual obligations existed at

30 June 2006:

Amount

More

Contractual obligations

Total

finance

Within

1 to 2

2 to 3

3 to 4

4 to 5

than

(excluding capital

amount

charges

1 year

years

5 years

expenditure)

(Rand in millions)

Operating leases

2,372

–

261

225

206

181

173

1,326

External long-term debt

11,211

(3,851)

1,424

3,369

1,133

3,768

912

4,456

External short-term debt

1,606

(49)

1,655

–

Bank overdraft

442

(10)

452

–

Purchase commitments

273

–

Capital leases

958

(824)

165

156

158

145

143

1,015

Total

16,862

(4,734)

4,051

3,836

1,570

4,114

1,228

6,797

Capital commitments. Commitments are budgeted, approved and reported in accordance with our

management policy for segmental reporting.

The following table sets forth our authorized capital expenditure as of 30 June:

Capital expenditure

2006

(Rand in millions)

Authorized and contracted for

28,060

Authorized but not yet contracted for

6,306

Authorized capital expenditure

34,366

Less expenditure to date

(20,500)

Unspent capital commitments (continuing operations)

13,866

Discontinued operations

762

Total operations

14,628

For more information regarding our planned capital expenditure see “4.A History and development of the

company – Capital expenditure”.

It is estimated that the expenditure will be incurred as follows:

Total

Within

1 to 2

2 to 5

Over

Contractual commitments

amount

1 year

years

5 years

(Rand in millions)

Capital commitments

13,866

8,786

3,506

1,530

The above amounts are as reported to our Board. They exclude capitalized interest but include business

development costs and our group’s share of capital expenditure of equity accounted investees.

We make use of forward exchange contracts and cross currency swaps to hedge all our major capital

expenditure in foreign currency (i.e. contracts contracted in a currency other than the rand) immediately upon
commitment of expenditure or upon approval of the project. See “Item 11 – Quantitative and qualitative
disclosure about market risk”.

172

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A

Directors and senior management

We are managed by our Board of Directors (Board), the Group Executive Committee (GEC) and the chief

executive. Corporate governance structures and processes are continuously reviewed to reflect national and
international best practice.

We comply with the JSE Listings Requirements and the applicable US corporate governance requirements

of the SEC, the NYSE and legislation such as the Sarbanes-Oxley Act. In addition we have compared our
corporate governance practices to those required to be applied by domestic US companies listed on the NYSE
and have confirmed to the NYSE that we comply in all significant respects with such NYSE corporate
governance standards, except as disclosed in our annual report and on our website (www.sasol.com). We endorse
the principles of the South African Code of Corporate Practices and Conduct (SA Code) as recommended in the
King II report.

The board of directors

As at 16 October 2006 our Board comprised sixteen directors, of which eleven were non-executive and five

were executive directors. During the reporting year all the non-executive directors, with the exception of Messrs.
Pieter Cox, Anshu Jain, Dr. Mandla Gantsho and Ms Hixonia Nyasulu, were considered to be independent in
accordance with the SA Code and the rules of the NYSE. However, the Board is of the view that all our non-
executive directors bring independent judgment to bear on material decisions of the company.

The offices of chairman and chief executive are separate and the office of the chairman is filled by a

non-executive director. With effect from 1 January 2006 Mr. Pieter Cox became the chairman in place of
Mr. Paul Kruger. Mr. Pat Davies took over the role of chief executive from Mr. Pieter Cox on 1 July 2005.

Our Board currently comprises the following:

Current

Name

Position

Age

Member since

term expires

Pieter Vogel Cox

Non-executive chairman

January 1996

November 2006

Lawrence Patrick Adrian Davies

Chief executive

August 1997

November 2006

Trevor Stewart Munday

Deputy chief executive

May 2001

November 2006

Elisabeth le Roux Bradley

Independent non-executive

February 1998

November 2006

director

Warren Alexander Morten Clewlow

Independent non-executive

July 1992

November 2006

director

Brian Patrick Connellan

Independent non-executive

November 1997 November 2006

director

Hendrik George Dijkgraaf

Independent non-executive

October 2006

November 2006

director

Victoria Nolitha Fakude

Executive director

October 2005

November 2007

Mandla Sizwe Vulindlela Gantsho

Non-executive director

June 2003

November 2006

Anshuman Jain

Non-executive director

July 2003

November 2007

Imogen Nonhlanhla Mkhize

Independent non-executive

January 2005

November 2007

director

Anthony Madimetja Mokaba

Executive director

May 2006

November 2006

173

Current

Name

Position

Age

Member since

term expires

Sam Montsi

Independent non-executive

March 1997

November 2007

director

Thembalihle Hixonia Nyasulu

Non-executive director

June 2006

November 2006

Kandimathie Christine Ramon

Executive director

May 2006

November 2006

Jürgen E Schrempp

Independent non-executive

November 1997 November 2006

director

Under our Articles of Association, one-third of the serving directors shall retire at the annual general meeting of the
company or, if the total number of serving directors who shall retire does not constitute a multiple of three, the number
of directors who shall retire shall be the number, adjusted upwards, that is the closest to one-third. The number of
directors that will retire at the annual general meeting in future years can therefore not be determined accurately in
advance.

Pieter Cox has been our non-executive chairman since January 2006. He joined the group in 1971 and

became our director in 1996. From 1997 to 2005, he served as chief executive of our group. He is also a director
of a number of major companies in the group. In 1993, he was appointed managing director and chief executive
of Polifin Limited. In May 1996, he became chief operating officer of Sasol Limited and served in this role prior
to assuming the position of chief executive of Sasol. He received a Bachelor of Science Engineering
(Metallurgy) degree in 1966 and a Bachelor of Science Engineering (Mining) degree in 1968 from the
University of the Witwatersrand, South Africa. He attended the Executive Program at Stanford Business School
in the United States in 1990. He received honorary doctorates from the University of the Free State, South Africa
and the University of St Andrews, Scotland in 2006.

Pat Davies became our chief executive on 1 July 2005 and has been our director since 1997. He is also a

director of several other companies in the group. He joined the group in 1975 and has been responsible for
various portfolios, the most recent of which was the oil, gas and liquid fuels businesses, including Sasol
Synfuels, Sasol Petroleum International, Sasol Synfuels International, Sasol Oil, Sasol Gas and Sasol
Technology. He was also responsible for the globalization of Sasol’s GTL technology. He received a Bachelor of
Science Engineering (Mechanical) from the University of Natal, South Africa in 1975 and attended the
Management Program at Harvard Business School in the United States in 1986.

Trevor Munday has been our director since 2001. He was appointed deputy chief executive with effect

from 1 July 2005 and was chief financial officer until he relinquished the position on 1 May 2006. He will retire
from our Board at the end of December 2006. He joined the group in 1996 and has been responsible for investor
relations, planning, corporate affairs, brand management and Sasol’s chemical businesses. He will remain
responsible for our chemical businesses until 31 December 2006. He served as the managing director of Polifin
Limited from 1996 to 2001 prior to its acquisition by us. He received a Bachelor of Commerce from Natal
University, South Africa in 1970.

Elisabeth Bradley has been our director since 1998. She is currently chairman of Toyota SA (Pty) Limited,

Wesco Investments Limited, Metair Investments Limited and the Winkler Hotel. She is also a director of several
other companies, including Standard Bank Group Limited, the Tongaat-Hulett Group Limited and Anglogold
Ashanti Limited. She is deputy chairman of the South African Institute of International Affairs and chairman of
the Centre for Development and Enterprise. She received her Bachelor of Science from the University of the
Free State, South Africa in 1961 and a Master of Science from the University of London in 1964.

Warren Clewlow has been our director since 1992. He is currently chairman of Barloworld Limited and

Pretoria Portland Cement Company Limited. He is past chairman of the State President’s Advisory Council and
was awarded the Order of Meritorious Service, Gold Class, for service to South Africa. He became a chartered
accountant in 1959 and was awarded an honorary doctorate by the University of Natal in 1990.

174

Brian Connellan has been our director since 1997. From 1990 to 2000, he served as executive chairman of

Nampak Limited and from 2000 to 2001 as non-executive chairman of Nampak. He was a director of Nampak
until September 2005. He is also a director of several other companies, including Tiger Brands Limited, ABSA
Group Limited, Reunert Limited, Illovo Sugar Limited and Oceana Group Limited. He is past councilor of the
South African Foundation, The Corporate Forum and The Institute of Directors and a contributor to both King
Reports on Corporate Governance in South Africa. He received his Certificate in Theory of Accountancy from
Witwatersrand University, South Africa in 1961 and became a chartered accountant in 1963.

Henk Dijkgraaf became our director on 16 October 2006. He is the former chief executive officer of

Gasunie Trade and Supply BV and held various positions in the Royal Dutch Shell group between 1972 and
2003 in the Netherlands, Malaysia, Gabon, Syria and the United Kingdom including the positions of President,
Shell Nederland BV, Director, Shell Exploration and Production and Chief Executive, Gas, Power and Coal. He
is a member of the Board of the Royal Tropical Institute KIT and deputy chairman of the Netherlands Institute
for the Near East NINO. He obtained a Master of Science (Mining Engineering) from Delft University in 1972
and attended the Senior Executive Program at the Massachusetts Institute of Technology in the United States in
1987.

Nolitha Fakude became our director on 1 October 2005. She is responsible for the world-wide Human

Resources for the group as well as stakeholder relationships and transformation. She is also a director of several
other companies in the group. Before joining Sasol, she was a member of the Group Executive Committee at
Nedbank Group Limited. She is also a non-executive director of BMF Investments (Pty) Limited, the majority
shareholder of the Black Management Forum, of which she is the president. She holds Bachelor of Arts and
Honors degrees in Psychology from the University of Fort Hare and attended the Senior Executive Program at
Harvard Business School in the United States in 1999.

Mandla Gantsho has been our director since 2003. He is the Vice President Operations: Infrastructure,

Private Sector & Regional Integration of the African Development Bank, prior to which he was chief executive
officer and managing director of the Development Bank of Southern Africa. Between 1999 and 2000 he was
seconded as advisor to a vice-president of the International Finance Corporation in Washington. He obtained a
Bachelor of Commerce from the University of Transkei in 1983 and a Certificate in Accountancy Theory and a
Bachelor of Commerce (with Honors) in Financial Management from the University of Cape Town, South Africa
in 1985 and 1986, respectively. He became a chartered accountant in 1987. He also obtained a Masters in
Science from The George Washington University in 2002 and a PhD from the University of Pretoria, South
Africa in 2006.

Anshu Jain has been our director since 2003. He has been a member of the General Executive Committee

of Deutsche Bank AG since 2002. He is currently the managing director and head of global markets at Deutsche
Bank. Prior to this appointment he was a managing director of Merrill Lynch in New York. He obtained a
Bachelor of Arts (with Honors) in economics from Delhi University in 1983 and a Master of Business
Administration in Finance from the University of Massachusetts in 1985.

Imogen Mkhize has been our director since 1 January 2005. She is a director of Murray & Roberts

Holdings Limited, Illovo Sugar Limited, Datacentrix Holdings Limited, Allan Gray South Africa Limited and
Vodafone Investments (SA) and serves on the Financial Markets Advisory Board. She was the chief executive
officer of the 18th World Petroleum Congress from June 2003 to July 2006. Previously, she was the executive
chairman of the Zitek Group and the managing director of Lucent Technologies South Africa. In 2001, the World
Economic Forum recognized her as a Global Leader for Tomorrow. She obtained a Bachelor in Science in
Information Systems from Rhodes University in 1984 and a Masters in Business Administration from Harvard
Business School in 1995.

Benny Mokaba became our director on 1 May 2006. He is responsible for the South African energy cluster

including Sasol Mining, Sasol Synfuels, Sasol Oil, Sasol Gas and Sasol Secunda Shared Services. He is also a
director of several other companies in the group. Before joining Sasol, he was the executive chairman and
regional vice president of Shell Southern Africa. He also worked for, among others, the Development Bank of

175

Southern Africa. He was acting director general in the national department of welfare, headed Steinmüller Africa
(which was subsequently acquired by Deutsche Babcock) and was chairman of Siemens Southern Africa. He
obtained a Masters in Social Work from Fort Hare University, South Africa in 1988 and completed a doctorate in
Public Policy and Economics on a Fulbright Scholarship at Brandeis University in Waltham, Massachusetts in
the United States in 1993. He completed the Advanced Executive Programme at the University of South Africa
in 1997.

Sam Montsi has been our director since 1997. He is chairman of Montsi Investments (Pty) Limited. He is a

director of Independent News and Media (SA) (Pty) Limited, Business Arts South Africa and all companies in
which Montsi Investments has invested. He received a Bachelor of Arts in Development Economics from the
University of Botswana, Lesotho and Swaziland in 1970 and a Masters in Development Economics from
Williams College in Massachusetts in the United States in 1973.

Hixonia Nyasulu became our director on 1 June 2006. She is the executive chairman of Ayavuna Women’s

Investments (Pty) Limited. She is also a director of Anglo Platinum Limited, Defy (Pty) Limited, the Tongaat-
Hulett Group Limited and chairperson of the Development Fund of the Development Bank of Southern Africa.
She has a Bachelor of Arts in Social Work and a Bachelor of Arts (Honors) degree in Psychology. She also holds
an Executive Leadership Development Programme certificate from the Arthur D Little Management Education
Institute (Cambridge, Massachusetts) and attended the International Programme for Board Members at the
Institute of Management Development in Lausanne, Switzerland in 1997.

Christine Ramon became our director on 1 May 2006. She is the chief financial officer and a director of

several other companies in the group. Before joining Sasol, she was the chief executive of Johnnic Holdings
Limited, prior to which she held several senior positions including acting chief operating officer and financial
director. She started her career with Coopers & Lybrand and progressed to audit manager at their offices in
South Africa and Italy. During this time she was, amongst other things, seconded to the Independent Electoral
Commission as deputy finance director. She is also a director of Transnet Limited. She obtained a Bachelor of
Accounting Science and Honors degree from the University of South Africa in 1988 and 1989 respectively and
became a chartered accountant in 1990. She attended the Senior Executive Program at Harvard Business School
in the United States in 1999.

Jürgen Schrempp has been our director since 1997. He is the former chairman of the board of

management of DaimlerChrysler AG and a director of Vodafone Group, Compagnie Financière Richemont SA
and non-executive chairman of Daimler Chrysler South Africa. He is founding chairman of the Southern Africa
Initiative of German Business (SAFRI), and a member of the South African President’s International Investment
Council. He is chairman emeritus of the Global Business Coalition on HIV/AIDS and Honorary Consul-General
in Germany of the Republic of South Africa. He has received numerous national and international awards,
including the Order of Good Hope, South Africa’s highest civilian award. He holds a Professorship of the
Federal State of Baden-Württemberg, Germany and Honorary Doctorates from the University of Graz, Austria
and the University of Stellenbosch, South Africa.

Chief executive

Our chief executive, who is appointed by the Board, is responsible for the day-to-day management and the

strategic direction of the company. Our Board may from time to time confer upon our chief executive any of
their powers as they deem fit, and may confer, recall, revoke, vary or alter these powers.

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Senior management

The following is a list of our senior executive officers as of 1 October 2006, as well as members of our

GEC, whose current areas of responsibility we set out below:

Name

Position and areas of responsibility

Lawrence Patrick Adrian Davies

Chief executive.

Trevor Stewart Munday

Deputy chief executive.

Kandimathie Christine Ramon

Chief financial officer.

Johannes Albertus Botha

Group general manager, responsible for Sasol Technology.

Abraham de Klerk

Group general manager, responsible for operations excellence, including
health, safety and the environment, integration across business units and
skills development.

Victoria Nolitha Fakude

Executive director responsible for group human resources, key stakeholder
relationships and transformation.

Nereus Louis Joubert

Group general manager and company secretary, responsible for legal,
procurement and supply, insurance, risk management and internal audit
functions.

Anthony Madimetja Mokaba

Executive director responsible for the energy businesses in South Africa,
including Sasol Mining, Sasol Synfuels, Sasol Oil, Sasol Gas and Sasol
Secunda Shared Services.

Max Vuyisile Sisulu

Group general manager currently handing over responsibility for government
relations to Ms Fakude in anticipation of his retirement at the end of
December 2006.

Giullean Johann Strauss

Group general manager responsible for Sasol Petroleum International, Sasol
Synfuels International and Sasol Chevron.

Jan Adrian van der Westhuizen

Group general manager responsible for Sasol Mining, the establishment of
an organizational approach suitable for Sasol’s future, Sasol Secunda Shared
Services, and group information management.

Rynhardt van Rooyen

Group general manager, responsible for strategic projects such as our future
black economic empowerment (BEE) equity ownership strategy and our
future joint venture business and partnership model, particularly for our
envisaged offshore CTL and GTL ventures.

Hannes Botha has been our group general manager since 2003. He has been responsible for Sasol

Technology since August 2006, prior to which he was responsible for Sasol’s liquid fuel business, gas business
and Sasol Synfuels. He joined Sasol in 1981 as a divisional manager and after acting as general manager
responsible for manufacturing facilities and engineering activities of various plants, was promoted to managing
director of Sasol Synfuels in 1993 and the managing director of Sasol Oil in 1998. He is a director of several
companies in the group. He obtained his Bachelor of Science (Electrical Engineering) in 1970 from the
University of Pretoria, South Africa and in 1980 his Master of Business Leadership from the University of South
Africa.

Bram de Klerk became our group general manager in 2003. He has been responsible for operations

excellence, including health, safety and the environment, integration and skills development since August 2006.
Prior to that he was responsible for Sasol Technology and safety, health and the environment. He was the
managing director of Sasol Synfuels from 1998 until 2003 and was appointed a director of Sasol Technology in
September 2003. He joined Sasol in 1973 as an assistant design engineer and became managing director of

177

National Petroleum Refiners of SA (Pty) Limited in 1993. He is a director of several companies in the Sasol
group. He received a Bachelor of Science (Mechanical Engineering) from the University of Pretoria, South
Africa in 1973 and a Master of Business Administration from the University of Potchefstroom, South Africa
in 1978.

Nereus Joubert has been our company secretary since joining Sasol in 1994 and a group general manager

since 2003. Currently he is responsible for the group company secretarial, legal, procurement and supply,
insurance, risk management and internal audit functions and serves on the boards of several of the companies of
the Sasol group. He obtained a Bachelor of Laws degree, a post-graduate Bachelor of Laws degree and a Doctor
of Laws degree from Rand Afrikaans University, South Africa (now the University of Johannesburg) in 1978,
1980 and 1985 respectively and attended the Advanced Management Program at Harvard Business School in the
United States in 2000. He also conducted post doctoral research at the University of Saarland, Germany as an
Alexander Von Humboldt scholar during 1989 and 1993. Prior to joining the company, he was a professor of law
and vice dean of the faculty of law of the Rand Afrikaans University, South Africa (now the University of
Johannesburg).

Max Sisulu joined Sasol as our group general manager in 2003. He is currently handing over responsibility

for government relations to Ms. Fakude in anticipation of his retirement at the end of December 2006. He is a
council member of the Human Sciences Research Council and a member of the recently established National
Environment Advisory Forum of the Department of Environmental Affairs and Tourism. He is a non-executive
director of African Rainbow Minerals Limited, Imperial Holdings Limited and the Resolve Group, non-executive
chairman of Ukhamba Holdings as well as a director of several companies in the Sasol group. He obtained a
Master of Arts in Political Economy from the Plekhanov Institute in Moscow in 1969 and a Masters of Arts in
Public Administration from the Kennedy School for Government at Harvard University in the United States in
1993. He was the recipient of the Govan Mbeki Fellowship at the University of Amsterdam, Netherlands, where
he completed and published an extended research paper on the micro-electronics industry in South Africa from
1984 to 1985.

Lean Strauss became our group general manager in August 2005, responsible for Sasol Synfuels

International, Sasol Petroleum International and Sasol Chevron. He joined Sasol in 1982 as an investment officer
of the Sasol Pension Fund. He spent most of his career with Sasol Oil and held the positions of general manager,
manufacturing and supply as well as general manager, marketing. He was appointed general manager of Sasol
Gas in 1997 and managing director of Sasol Nitro in 2002. He is also a director of several companies in the
Sasol group. He obtained Bachelor of Commerce and Honors degrees from the University of Stellenbosch prior
to joining Sasol and a Masters of Commerce degree in Business Management from the Rand Afrikaans
University (now the University of Johannesburg) in 1986.

Jannie van der Westhuizen has been our group general manager since 2003, responsible for the mining

division, the establishment of an organizational approach suitable for Sasol’s future, Sasol Secunda Shared
Services, and group information management, previous to which he was the general manager responsible for
group human resources and mining. He joined Sasol Mining in 1986 and was the general manager of
Brandspruit Colliery, Sasol Mining when he left in 1993 to join Eskom as Fuel and Water Manager. In 1996, he
joined Organization Development International as the Director and Head of Mining Practice and in April 1997
rejoined Sasol as managing director, Sasol Mining. He is a director of several companies in the group. He
obtained his Bachelor of Science (Industrial Engineering) in 1972, a Master of Business Administration in 1975
and in 1979 a Post Graduate Diploma in Mining (Cum Laude) from the University of Pretoria, South Africa. He
attended the Executive Management Program in 1991 at the Pennsylvania State University, United States and in
2002, attended the Stanford Executive Program at Stanford University, United States.

Rynhardt van Rooyen is our group general manager responsible for strategic projects such as our future

black economic empowerment (BEE) equity ownership strategy and our future joint venture business and
partnership model, particularly for our envisaged offshore CTL and GTL ventures. Prior to this he was
responsible for the group financial function. He joined Sasol in 1977 as a senior accounting officer. He is a
director of several companies in the group. He obtained a Bachelor of Commerce from the University of the
Orange Free State, South Africa in 1971 and a Bachelor of Accounting Science and Honors degree from the

178

University of South Africa in 1975. He became a chartered accountant in 1976 and is registered with the South
African Institute of Chartered Accountants. In 1986, he attended the Executive Management Program and in
1994, the Strategic Purchasing Management Program at the Pennsylvania State University in the United States.

See above for biographies of our executive directors.

6.B

Compensation

Compensation of senior management under the JSE Listings Requirements. We are not required to, and do

not otherwise, disclose compensation paid to individual senior managers.

For details on the shares and shares options held by our Board named in Item 6.A see “Item 6.E – Share

ownership”.

The following tables summarize the compensation received by our executive and non-executive directors in

the year 2006.

Compensation

Executive directors’ remuneration for the year were as follows:

Annual

Retirement

Other

Total

Total

Salary incentives

funding

benefits

2006

2005

Executive directors

R’000

R’000

Pat Davies

4,515

2,085

820

388

7,808

4,640

Nolitha Fakude

1,727

365

354

246

2,692

–

Benny Mokaba

441

400

979

–

Trevor Munday

3,796

1,940

758

400

6,894

4,316

Christine Ramon

383

n/a

510

–

Pieter Cox

1,323

4,169

–

238

5,730

9,227

Jan Fourie

n/a

n/a

743

Total

12,185

8,959

2,101

1 368

24,613

18,926

Refers to incentives awarded, based on the group results for the 2005 financial year and includes the once-off sign-on
bonus received by Ms Fakude and Dr Mokaba.

Other benefits disclosed in the table above include:

Vehicle

insurance

Total

Vehicle

Medical

fringe

Security

Other

other

benefits

Executive directors

R’000

Pat Davies

337

–

388

Nolitha Fakude

223

–

246

Benny Mokaba

–

Trevor Munday

337

–

400

Christine Ramon

–

Pieter Cox

–

218

238

Included under other benefits are travel benefits (R98,585), leave encashment on retirement (R117,962) and retirement
funding in compliance to retirement fund rules up to actual retirement date (R1,300), in respect of the period during
which Mr. Cox was an executive director.

179

The group executive committee’s remuneration (excluding the executive directors disclosed separately

above who are members of the group executive committee) for the year was as follows:

Annual

Retirement

Other

Total

Total

Salary incentives

funding

benefits

2006

2005

Group executive committee

R’000

R’000

Total

13,336

5,741

2,452

1,827

23,356

15,674

Number of members

Refers to incentives awarded, based on the company results for the 2005 financial year.

Non-executive directors’ remuneration for the year was as follows:

Share

Board

incentive

meeting

Paid by

Committee

trustee

Total

Total

fees

subsidiaries

fees

2006

2005

Non-executive directors

R’000

Elisabeth Bradley

243

–

145

408

369

Warren Clewlow

243

–

266

–

509

513

Brian Connellan

243

–

388

651

542

Pieter Cox (chairman)

333

1,819

327

–

2,479

–

Mandla Gantsho

243

–

121

–

364

300

Anshu Jain

519

–

519

495

Imogen Mkhize

243

–

316

139

Sam Montsi

243

–

290

553

426

Hixonia Nyasulu

–

Jürgen Schrempp

601

–

601

509

Paul Kruger

243

1,289

181

–

1,713

3,263

Conrad Strauss

121

–

258

416

Jan Fourie

n/a

n/a

462

Steven Pfeiffer

n/a

n/a

182

Total

3,295

3,148

1,894

8,397

7,616

Deputy chairman of the board, thereafter appointed chairman from 1 January 2006

Fees paid in US dollars. Rand equivalent of US$82,500 at actual exchange rates.

Appointed as a non-executive director of Sasol Limited with effect from 1 June 2006.

Retired as a non-executive director of Sasol Limited with effect from 1 January 2006.

Retired as a non-executive director of Sasol Limited with effect from 2 December 2005.

Mr. Fourie retired as non-executive director of Sasol Limited with effect from 1 January 2005.

Mr. Pfeiffer resigned as non-executive director of Sasol Limited with effect from 31 October 2004.

Directors’ service contracts

There are no fixed-term service contracts for executive and non-executive directors. Executive directors

have standard employee service agreements with notice periods ranging between 30 and 90 days.

An executive director is required to retire from the board at the age of 60, unless requested by the board to

extend his or her term. A non-executive director is required to retire from the board at the end of the year in
which the director turns 70, unless the board, subject to the articles of association and by unanimous resolution
on a year-to-year basis, extends the director’s term of office until the year in which he or she turns 73.

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6.C

Board practices

The board of directors

Refer to item 6.A Directors and senior management for the composition of our board of directors.

Appointment, retirement and re-election of directors

Our directors are elected by our shareholders at the annual general meeting. The Board may appoint any

person as a director, either to fill a vacancy or as an addition to the Board, provided that the total number of
directors does not at any time exceed the maximum of 16 directors of which a maximum of five may be
executive directors. Directors appointed by the Board in this manner are required to retire at the next annual
general meeting following their appointment, but are eligible for re-election. There is no requirement in the
Articles of Association that directors must hold qualifying shares. If the number of persons nominated as
directors does not exceed the number of vacancies available, then the nominated directors are deemed to have
been duly elected.

At the annual general meeting of the company, one-third of the serving directors shall retire or, if the total

number of serving directors who shall retire does not constitute a multiple of three, the number of directors who
shall retire shall be the number, adjusted upwards, that is the closest to one-third.

A director who was appointed for the first time at an annual general meeting or by the Board after

27 October 1997 shall retire five years after his initial appointment. Directors who have retired in this manner
are eligible for automatic re-election by the shareholders if they were re-appointed after retirement by either the
Board or the shareholders.

Board procedures and matters

The Board has adopted a Board Charter of which a copy is available on our website (www.sasol.com). It

provides a concise overview of:

• the demarcation of the roles, functions, responsibilities and powers of the Board, the shareholders,

individual directors, officers and executives of the company;

• the terms of reference of the various board committees;

• matters reserved for final decision-making or pre-approval by the Board; and

• the policies and practices of the Board in respect of matters such as corporate governance, trading by

directors in the securities of the company, declarations of conflicts of interest, Board meeting
documentation and procedures and the nomination, appointment, induction, training and performance
evaluation of directors and members of Board committees.

A quorum for a Board resolution comprises five directors, three of whom must be non-executive. The

Board meets at least four times a year. It approves the strategic direction of the company defined by the chief
executive, maintains full and effective control over the company and monitors the executive management
through a structured approach to reporting and accountability. However, the company adopts a decentralized
approach to the day-to-day running of the businesses of the group.

The independent non-executive directors are chosen for their experience, business skills and acumen and

bring independent, experienced judgment to bear on issues of strategy, performance and resources, including key
appointments, standards of conduct, protection of stakeholders’ interests and the setting of company policy.
Considerations of gender and racial diversity, as well as diversity in respect of business, geographic and
academic backgrounds, are taken into account when appointments to the Board are considered.

Newly appointed directors are inducted in the company, board matters and their duties as directors in

accordance with their specific needs.

181

The effectiveness and performance of the Board, its committees and the individual directors and members

of the Board and its committees are reviewed annually by the Nomination and Governance Committee.

Our Board is supported by the advice and services of the company secretary, who is appointed in

accordance with the South African Companies Act, and who is responsible to the Board for ensuring the proper
administration of Board proceedings. The company secretary also provides guidance to the directors in
connection with their legal duties and responsibilities and the manner in which such duties and responsibilities,
including not dealing in the company’s securities during restricted periods, should be discharged. A report on
directors’ dealings in the company’s securities is tabled at each Board meeting and publicly disclosed in
accordance with the applicable JSE and NYSE listings requirements.

The directors are entitled to seek independent professional advice at the company’s expense about the

company’s affairs and have access to any information they may require in discharging their duties as directors.

Board committees

To assist our Board in discharging its responsibilities, we have established several committees, which are

accountable to the Board and operate on the basis of specific charters. The charters of the Audit Committee, the
Compensation Committee, the Nomination and Governance Committee and the Risk and Safety, Health and
Environment Committee (Risk and SHE Committee) form part of the Board Charter and are available on our
website (www.sasol.com).

Our subsidiaries, as well as their operating businesses, have also established board and committee

structures to ensure the maintenance of high standards and best practice with respect to corporate governance
and internal control. We retain decision-making involvement in respect of a defined list of material matters in
respect of the businesses of our subsidiaries. This list includes matters such as the appointment of directors,
strategy charters, large capital expenditure and mergers, acquisitions and disposals. The boards of our main
subsidiaries and divisions are constituted in such a way that a majority of directors of each main subsidiary or
divisional board are non-executive directors of the subsidiary or division.

The Chairman of our Board and members of the GEC serve on the Boards of all the main Sasol businesses.

The attendance of the Chairman at our main subsidiary board meetings provides an essential link between our
businesses and the non-executive directors of our Board.

The Compensation Committee

The Compensation Committee was established in 1989 and as of January 2006 comprises five members,

four of whom are independent non-executive directors. As of 30 June 2006, its members were Pieter Cox
(chairman), Elisabeth Bradley, Warren Clewlow, Brian Connellan and Sam Montsi. The Compensation
Committee meets at least twice a year to discuss and determine the group’s remuneration policy and strategy.

The functions of the Compensation Committee are to:

• assist the Board in exercising its function of ensuring that affordable, fair and effective compensation

practices are implemented in our group;

• determine the compensation of group management members;

• make recommendations to the board in respect of directors’ fees and the compensation and service

conditions of the executive directors, including the chief executive; and

• provide a channel of communication between the board of directors and management on compensation

matters.

The Compensation Committee has determined our remuneration philosophy, which is to offer remuneration

that will attract, retain, motivate and reward employees with the skills required for us to achieve our business
goals and to base remuneration on personal and company performance in accordance with competitive market
practices.

182

The Nomination and Governance Committee

The Nomination and Governance Committee was formed during 2002 and as of 1 June 2006 is comprised

of five directors, three of whom are independent non-executive directors. The members of this committee are
Pieter Cox (chairman), Elisabeth Bradley, Warren Clewlow, Sam Montsi and Hixonia Nyasulu. The Nomination
and Governance Committee meets at least twice a year.

The functions of the Nomination and Governance Committee include reviewing and making

recommendations to the Board on the general corporate governance framework of the group, the composition
and performance of the Board, its committees, individual directors and committee members, legal compliance
and the company’s ethics policy and programs.

The Audit Committee

The Audit Committee was established in 1988 and is an important element of the Board’s system of

monitoring and control. The Audit Committee meets at least three times a year. All the members of the Audit
Committee are independent non-executive directors, financially literate and have extensive Audit Committee
experience. They are Brian Connellan (chairman), Warren Clewlow and Jürgen Schrempp. Mr. Warren Clewlow
has been determined by the Board as the Audit Committee financial expert within the meaning of the Sarbanes-
Oxley Act.

The Audit Committee has been established primarily to assist the board in overseeing:

• the quality and integrity of the company’s financial statements and public disclosures in respect thereof;

• the scope and effectiveness of the external audit function; and

• the effectiveness of the company’s internal controls and internal audit function.

The board has delegated extensive powers in accordance with King II and US corporate governance

requirements to the Audit Committee to perform the above functions. In line with these requirements, the Audit
Committee has, among other things, determined which categories of non-audit services provided by the external
auditors should be pre-approved by the Audit Committee and which may be approved by a designated member
of the Audit Committee.

The Audit Committee meets regularly with the group’s external and internal auditors and managers to

consider risk assessment and management, to review the audit plans of the external auditors, and to review
accounting, auditing, financial reporting, corporate governance and compliance matters. The Audit Committee
approves the external auditors’ engagement letter on the terms, nature and scope of the audit function and the
audit fee. The internal audit charter, internal audit plan and internal audit conclusions are similarly reviewed and
approved by the Audit Committee. Interim and annual results of the group and trading statements of the
company are reviewed by the Audit Committee before publication. The Audit Committee usually makes
recommendations and refers matters for information or approval to the Board.

Both the Audit Committee and the board are satisfied that there is adequate segregation between the

external and internal audit functions and that the independence of the internal and external auditors is not in any
way impaired or compromised.

The Risk and Safety, Health and Environment Committee

The Risk and SHE Committee was formed during 2002. It is comprised of five executive and four non-

executive directors, Pat Davies, Nolitha Fakude, Benny Mokaba, Trevor Munday, Christine Ramon, Sam Montsi
(chairman), Brian Connellan, Pieter Cox and Imogen Mkhize. The committee meets at least twice a year. The
functions of the committee include reviewing and assessing the integrity of our risk management process
including effective management of risk policies and strategies in respect of safety, health and environmental
matters.

183

The GEC

Our Board has delegated a wide range of matters relating to the management of our group to the GEC,

including financial, strategic, operational, governance, risk and functional issues. Its focus is on the formulation
of our group strategy and policy and the alignment of group initiatives and activities. The GEC meets weekly
and reports directly to our Board.

For the members of the GEC see “Item 6.A – Directors and senior management”.

The committee of managing directors (CMD)

During the year, the GEC’s functioning was supported by the committee of managing directors, which

replaced the Southern African Executive Committee and International Executive Committee with effect from
17 August 2005. The committee of managing directors consists of the managing directors of Sasol’s most
significant businesses. The focus of the committee is on common material issues pertaining to Sasol’s
businesses. The committee’s main functions include alignment of Sasol’s businesses with the group mission,
vision, strategies, targets and policies and consideration of material business, strategic, financial and functional
issues. The committee meets once a month and reports to the GEC.

Internal control and risk management

Internal controls

Our directors are ultimately responsible for our company’s system of internal control, which is designed to

provide reasonable assurance against material misstatement. The group maintains systems of internal financial
controls that are designed to provide assurance regarding the maintenance of proper accounting records and the
reliability of financial information used within the group and for publication. These systems contain self-
monitoring mechanisms and controls, and actions are taken to correct deficiencies as they are identified. The
internal control systems include:

• a documented organizational structure and reasonable division of responsibility;

• established policies and procedures which are communicated throughout the group, including a code of

conduct to foster a strong ethical climate; and

• established mechanisms and systems to ensure compliance with relevant legislation.

As required by the SEC rules, the general disclosure controls and procedures of our company have been

formalized and are assessed periodically by management and our Board for effectiveness. For more information
on disclosure controls and internal controls over financial reporting see “Item 15. – Controls and procedures”.
With effect from 1 July 2006, we are required to comply with the requirements of Section 404 of the Sarbanes-
Oxley Act. We have concluded our project to comprehensively document and test the internal control
environment to conform to the Section 404 requirements. During 2006 a limited scope review of our testing and
reporting process was performed by our external auditors. Both our testing process and the review by our
external auditors indicate that our internal financial reporting controls are operating effectively. Although some
aspects of internal control were identified for improvement, we do not believe that any of these represent a
significant risk to our business. We expect all these internal control weaknesses to be remediated before the end
of the 2006 calendar year.

184

Internal audit function

We have an internal audit function covering our global operations. Our internal audit function is responsible

for the following:

• assisting the board and management in monitoring the effectiveness of our risk management process; and

• assisting the board and management in maintaining effective controls by evaluating those controls on an

ongoing basis to determine their efficiency and effectiveness and developing recommendations for
improvement.

The controls subject to evaluation include the following:

• the information management environment;

• the reliability and integrity of financial and operating information;

• the safeguarding of assets; and

• the effective and efficient use of the company’s resources.

Audit plans are based on an assessment of risk areas, as well as on issues highlighted by the Audit

Committee and management. Audit plans are updated as appropriate to ensure that they are responsive to
changes in the business. Comprehensive findings are reported to the Risk and SHE Committee and the Audit
Committee at each of their scheduled meetings.

Follow-up audits are conducted in areas where internal control weaknesses are found or were previously

experienced.

Corporate governance best practice requires that the internal audit function report directly to the Audit

Committee. Such a direct reporting requirement is ensured by the Audit Committee mandate and practice to:

• evaluate the effectiveness of internal audit;

• review and approve the internal audit charter, internal audit plans and internal audit conclusions in

respect of internal control;

• review significant internal audit findings and the adequacy of corrective action taken in response to

significant internal audit findings;

• assess the performance of the internal audit function and the adequacy of available internal audit

resources;

• review significant differences of opinion between management and the internal audit function;

• consider the appointment, dismissal or reassignment of the head of internal audit.

The Charter of the Internal Audit Department provides that the head of internal audit has direct access to

the chief executive and the chairman of the Audit Committee.

The head of internal audit reports administratively to the Group General Manager responsible for the

company secretarial, legal, risk management and insurance departments.

Risk management

The Board is responsible for governing risk management processes in the group in accordance with

corporate governance requirements.

185

The establishment of a more formalized enterprise-wide risk management process was initiated during the

2002 year with the following principal objectives:

• providing the Board with assurance that significant business risks are systematically identified, assessed

and reduced to acceptable levels in order to achieve an optimal risk-reward balance; and

• making risk identification and risk management an integral part of the daily activities of everyone in the

organization.

Substantial progress has been made to date in achieving the above objectives. There are still certain

components of the process which need to be further developed and embedded and programs are in place to
address these.

Our enterprise-wide risk management approach is guided by the following key principles:

• a clear assignment of responsibilities and accountabilities;

• a common enterprise-wide risk management framework and process;

• the identification of uncertain future events that may influence the achievement of business plans and

strategic objectives; and

• the integration of risk management activities within the company and across its value chains.

Significant group risks are reviewed at least annually and each risk is assigned to a GEC member that is

responsible for the management of the particular risk.

Our insurance department, with the assistance of external insurance consultants, undertakes regular risk

control audits of all our plants and operations using recognized international procedures and standards.
We participate in an international insurance program that provides, at competitive costs, insurance cover for
losses above tolerable levels.

Disaster recovery plans for critical information management systems are continually reviewed. Certain of

these plans are subject to regular testing and, in other cases, are subjected to ongoing tests to ensure their
robustness and reliability.

For more information on the main risks facing our group see “Item 3.D – Risk factors”.

Sustainability reporting

We currently report on all aspects of the group’s social, transformational, ethical, safety, health and

environmental policies and practices to the Board and, from time to time, to the group’s stakeholders.
A comprehensive sustainability report is published annually and is available on our website (www.sasol.com).

6.D

Employees

We have developed and implemented six values group-wide in order to support our vision, culture and

strategic goals. The six Sasol values – customer focus, winning with people, safety, excellence in all we do,
continuous improvement and integrity have been rolled out to all of our employees. We continue to focus to fully
integrate behavior in accordance with our values in our performance management system.

Our human resources strategy

We refined our group human resources (HR) development and management strategy to ensure its alignment

with, and more effective support of, our business strategy. This is part of a wider commitment to make Sasol an
employer of choice while pursuing growth opportunities. Because of our strong presence in South Africa, we
remain sensitive to national socioeconomic transformation issues and continue to progress our employment
equity (EE) and workplace transformation initiatives.

186

Workforce Composition

1 & 2

Region

2006

2005

2004

South Africa

25,728

24,737

24,888

Europe

1,303

1,196

1,474

North America

208

112

153

Other

694

555

551

Total

27,933

26,600

27,066

Business

2006

2005

2004

Continuing operations:
Sasol Mining

7,084

7,115

7,642

Sasol Synfuels

6,135

6,098

5,792

Sasol Oil

1,718

1,778

1,777

Sasol Gas

194

174

153

Sasol Synfuels International

363

161

Sasol Polymers

2,392

2,467

2,682

Sasol Solvents

1,472

1,339

1,335

Other

8,575

7,468

7,615

Total

27,933

26,600

27,066

Includes the workforce of our incorporated joint ventures accounted for under the equity method for US GAAP.

Excludes the workforce of Sasol Olefins & Surfactants of approximately 3,337 at 30 June 2006.

Maintaining a skilled and stable workforce

Our vision to become a respected global enterprise and our rapid growth over the last decade necessitates

the application of accelerated development programs for our employees. In South Africa we invested more than
R113 million in employee training and development. This investment includes in-house technical training, and
self-learning centres. An additional R25 million was invested in 400 undergraduate and 60 postgraduate
bursaries, with emphasis on developing scientific, engineering and technological skills.

To ensure effective talent management planning, we have finalized ten-year HR development plans for all

businesses. We approved an enhanced strategy aimed at attracting and retaining top talent. This integrated
approach allows us to identify and develop high-caliber leadership, and fill critical and new positions quickly
and with confidence. Our strategic approach to planning HR allows us to anticipate future talent needs and to
develop talent pools of sufficient depth and experience to meet those needs. We were recently rated among the
ten best companies to work for in South Africa.

We have also provided training to 211 Nigerians for our Escravos GTL plant. This training commenced in

August 2005 and is expected to extend for between 26 and 31 months, depending on the disciplines trained.

Promoting workplace equity and diversity

We continued to increase the percentage of employees drawn from historically disadvantaged groups in line

with South Africa’s Employment Equity Act. People from designated groups – Africans, Coloreds and Indians,
women and people with disabilities – comprise 64.9% of our South African workforce. At year end, people from
designated groups held 43% of Sasol managerial, professional and supervisory posts. This is an improvement on
the 39% reported a year ago. We are targeting to increase this figure to 47% by 2007 and 50% by 2008.

187

All our South African businesses maintain employment equity forums to ensure we stay focused on

achieving targets. We endeavor to nurture workplaces that are open, transparent and free from all forms of
discrimination. We also promote employee equity and diversity in all the countries in which we operate in
harmony with global best practices.

Encouraging positive labor relations

We enjoy constructive relationships with representative trade unions throughout the company. About 57%

of our employees in South Africa belong to unions. We experienced industrial action at only one operation, at
Secunda, which led to 900 lost employee days over three working days.

Joint forums between trade unions and management remain active as part of our willingness to sustain

constructive dialogue. These forums discuss wages, conditions of employment, health and safety, training and
development, community care and HIV/Aids, among other important issues. All representative unions and
pensioners are represented on our medical scheme board and senior employees serve on the boards of union
retirement funds.

Promoting employee well-being

Sasol’s employee assistance programme (EAP) plays an increasingly important role in developing and

maintaining a healthy workforce. Focusing on the psycho-social risks of our employees and their dependants, the
EAP provides confidential, professional consultation on any personal problem at no cost to employees.
Employee satisfaction is tracked every two years through an independent external attitude survey of employees
and management. The results of the survey are benchmarked against similar global companies.

HIV/Aids challenge in our South African operations

Recognizing the significant challenge of managing South Africa’s HIV/Aids pandemic, we launched the

Sasol HIV/Aids Response Programme (SHARP) in September 2002. This initiative – which involved input from
business, trade union, community representatives and independent experts – is an integrated approach focused on
reducing the rate of infection throughout the group, and extending the quality of life of infected employees
through the provision of managed healthcare. In developing SHARP, an intensive group-wide risk assessment
was undertaken to understand the impact of HIV/Aids on our operations and communities.

SHARP is co-ordinated at group level by a steering committee, chaired by a GEC member. All steering

committee program reviews are tabled at Sasol board meetings. Our chief executive serves as the group
champion, with the managing directors of each business unit acting as business unit champions. Each Sasol
business site has a dedicated SHARP task team responsible for implementing and sustaining a site-specific
response team.

Through the SHARP initiative we are:

• implementing measures to eliminate discrimination on the basis of a person’s HIV/Aids status;

• encouraging a behavioral change though our HIV/Aids education and awareness programs;

• providing access to free and confidential voluntary counseling and testing (VCT);

• providing treatment of opportunistic illnesses such as tuberculosis, as well as treatment of sexually

transmitted infections;

• providing managed healthcare, including antiretroviral treatment (ART) for employees;

• reducing and managing the total cost to Sasol of the business impact and response to HIV/Aids.

188

A principal focus of SHARP is the provision of VCT, an essential first step in facilitating appropriate

access to healthcare options and a critical component of promoting behavioral change. As a result of our
collaborative approach, we have had one of the highest uptakes for VCT in South Africa: 82% by year end for
our South African operations. This compares with a rate of between 50% and 60% that is typical among most
corporate programs. To date, about 7% of our tested South African employees have tested HIV-positive, which is
well below our estimated actuarial prevalence rate of 19%.

An important focus over the last year has been on providing comprehensive workplace education and

training programs in our South African businesses. In the year ahead we will be extending our activities to cover
our service providers and our franchise network of fuel retailers. Through this initiative we will provide training
and awareness programs, as well as a referral network for VCT and health care services, to 300 franchisees and
5,000 forecourt employees. We are also working with the Government of Mpumalanga Province and a non
governmental organization (NGO) to identify opportunities to improve the level of service at one of the
provincial hospitals that provides services to many of our employees.

Through our corporate social investment (CSI) department we have partnered with numerous community-

based organizations to increase awareness and improve access to care in the communities in which we operate.

Occupational health and safety

Three contractors and one employee were fatally injured in workplace incidents in 2006. This compares

with seventeen fatalities in 2005 and nine in our 2004 financial year. Our goal remains zero fatalities. Our fatal
accident rate (calculated as the number of employees and service providers per 100 million working hours) was
2.57 compared with 11.31 in 2005. The steady reduction in our fatal accident rate is mainly attributable to the
intensified focus on the implementation of our safety improvement plan, which was developed in response to the
series of incidents in 2004. In early 2006, DuPont undertook a comprehensive follow-up review of the
implementation of safety measures in selected South African operations.

Important safety initiatives were undertaken as part of our comprehensive change management program

aimed at ensuring safety remains our first priority and a core value. The effectiveness of our safety improvement
plan was demonstrated by the improvement in our safety record. By 30 June 2006, we achieved a RCR of 0.68.
This compares with 1.23 in 2005 and 1.08 in 2004. Although this is an improvement, we did not reach
the 0.5 group target we set for achievement by July 2006.

189

6.E

Share ownership

Shareholdings of directors and officers

The following table presents the beneficial shareholdings of our directors as of 30 June:

2006

2005

Number

Total

Number

Total

Number

of share

beneficial

Number

of share

beneficial

Beneficial shareholdings

of shares

options

shareholding

of shares

options

shareholding

Executive directors
Pat Davies

200

111,100

111,300

194

98,900

99,094

Trevor Munday

–

127,000

–

112,800

Non-executive directors
Elisabeth Bradley

298,000

–

298,000

–

298,000

Warren Clewlow

13,195

25,000

38,195

13,195

25,000

38,195

Brian Connellan

10,500

–

10,500

–

10,500

Pieter Cox

235,409

202,700

438,109

59,772

138,300

198,072

Paul Kruger

n/a

231,700

–

231,700

Conrad Strauss

n/a

45,250

–

45,250

Total

557,304

465,800

1,023,104

658,611

375,000

1,033,611

Including share options which have vested or which vest within sixty days of 30 June.

2006

2005

Number

Total

Number

Total

Number

of share

beneficial

Number

of share

beneficial

Beneficial shareholdings

of shares

options

shareholding

of shares

options

shareholding

Group executive committee

39,461

160,600

200,061

47,625

142,200

189,825

Excluding the executive directors disclosed separately in the table.

Share ownership of senior managers under the JSE Listings Requirements

Each of our directors and senior managers named under “Item 6.B – Compensation” beneficially own less

than 1% of the outstanding share capital of the company. We are not required to disclose share ownership of
individual senior managers in the share capital of the company.

Our Share Incentive Scheme

We have implemented our Share Incentive Scheme, the objective of which is to retain and reward our key

employees, including executive directors. Non-executive directors received a once-off allocation of share options
in 2000. The non-executive directors at the time were granted 25,000 shares each, 12,500 vesting after two years
and 12,500 vesting after four years from the date of the grant. The scheme is offered to approximately 1,200 of
our most senior employees and includes an option to buy our shares at a price equal to their closing price on the
most recent trading day on the JSE prior to the grant date. The value of the shares offered to each employee is
based on a multiple of the employee’s total cash remuneration and occupation level. Should an employee accept
the offer, he will be entitled to take up a maximum of one-third of the shares after two years, two-thirds of the
shares after four years and the full allocation after six years from acceptance. A share option shall lapse, if,
among other reasons:

• the share option is not exercised by the ninth anniversary of the offer;

• the participant ceases to be an employee for reasons other than death, retirement, incapacity or ill-health;

• the participant may not exercise the option for other legal reasons.

190

On retirement the options vest immediately and the nine year expiry period remains unchanged. On

resignation, share options which have not yet vested will lapse unless the board decides otherwise and share
options which have vested may be taken up before the last day of service.

The Sasol Share Trust allocates share options to employees, annually, at the instruction of our Board and

our Compensation Committee.

The following tables provide the number of share options granted to our executive directors and GEC

through our Share Incentive Scheme:

Share options granted – directors

Balance at

Granted

Average

Granted on

Average

Share

Balance

beginning

on 8 July

offer price 14 September offer price

options

at end

of year

2005

per share

2005

per share

exercised*

of year

(number)

(Rand)

(number)

(Rand)

(number)

Executive directors
Pat Davies

304,300

390,000

193.25

47,200

232.38

49,900

691,600

Nolitha Fakude

–

121,900

219.50

–

121,900

Trevor Munday

276,100

280,000

193.25

33,700

232.38

43,900

545,900

Non-executive directors
Warren Clewlow

25,000

–

25,000

Pieter Cox

574,200

–

371,500

202,700

Sam Montsi

25,000

–

25,000

–

Total

1,204,600

791,900

80,900

490,300

1,587100

*Exercise in the context of this table means the implementation of the share option.

As approved by the Sasol Limited board share options were granted on 19 October 2005.

The share options indicated were granted to Mr. Cox when he was still an executive director.

Share options granted – group executive committee

Balance at

Granted

Average

Granted on

Average

Share

Balance

beginning

on 8 July

offer price 14 September offer price

options

at end

of year

2005

per share

2005

per share

exercised*

of year

(number)

(Rand)

(number)

(Rand)

(number)

Group executive

committee

1 & 2

768,900

218,000

213.16

73,500

232.38

177,300

883,100

Exercise in the context of this table means the implementation of the share option.

Excluding the executive directors disclosed separately in the table above.

Includes share options issued to individuals during the years before they became members of the group executive
committee.

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Share options exercised * – directors

This table presents information regarding share options exercised during the period 1 July 2005 through

29 September 2006

Average

Gain on exercise of

Share

offer

Market

share options

options

price per

Exercise dates

exercised

share

2006

2005

(number)

(Rand)

R’000

R’000

Executive directors

Pat Davies

7,670

2,717

4 April 2006

14,000

78.70

235.00

2,188

4 April 2006

7,200

89.50

235.00

1,048

18 April 2006

11,000

57.50

251.50

2,134

28 September 2005

13,700

117.00

240.82

1,696

28 September 2005

4,000

89.50

240.55

604

Trevor Munday

8,069

2,413

19 April 2006

8,400

50.90

253.00

1,698

15 September 2005

22,000

50.90

226.45

3,862

27 September 2005

6,200

50.90

245.01

1,203

19 December 2005

7,300

50.90

229.78

1,306

Non-executive directors

Elisabeth Bradley

–

766

Brian Connellan

–

2,640

Pieter Cox

64,272

6,430

14 September 2005

96,000

78.70

220.11

13,575

3 October 2005

20,000

57.50

250.40

3,858

3 October 2005

40,300

25.10

250.40

9,080

3 October 2005

31,100

42.30

250.40

6,472

3 October 2005

84,100

54.00

250.40

16,517

6 April 2006

48,100

78.70

232.00

7,374

6 April 2006

51,900

89.50

232.00

7,396

Jan Fourie

–

12,618

Paul Kruger

–

1,166

Sam Montsi

22 September 2005

25,000

53.80

230.15

4,409

–

Jürgen Schrempp

–

1,505

Conrad Strauss

–

2,333

Total

490,300

84,420

32,588

Exercise in the context of this table means the implementation of the share option.

The share options implemented were granted to Mr. Cox when he was an executive director.

The shares were retained by the director after the implementation of the share option. The gain on the implementation
of these shares options was determined using the closing share price on the date of implementation. These holdings
have been disclosed in the beneficial shareholding table.

192

Share options exercised * – group executive committee

Gain on exercise

of share options

Share options

exercised

2006

2005

(number)

R’000

R’000

Group executive committee

1 & 2

177,300

29,223

14,120

Exercise in the context of this table means the implementation of the share option.

Excluding the executive directors disclosed separately in the table above.

Included in the total share options implemented are the gains on the implementation of 35,800 share options on which
the shares have been retained by the member. A gain of R5,782,467 on the implementation of these share options was
determined using the closing share price on the date of implementation.

Share options outstanding at the end of the year vest during the following periods:

More

Already

Within

1 to 2

2 to 5

than

vested

1 year

years

5 years

Total

(number)

Executive directors
Pat Davies

111,100

61,300

160,700

181,300

130,000

644,400

Nolitha Fakude

–

40,600

40,700

121,900

Trevor Munday

127,000

50,200

102,900

138,700

93,400

512,200

Non-executive directors
Warren Clewlow

25,000

–

25,000

Pieter Cox

202,700

–

202,700

Total

465,800

111,500

304,200

360,600

264,100

1,506,200

The share options were granted to Mr. P V Cox when he was an executive director.

More

Already

Within

1 to 2

2 to 5

than

vested

1 year

years

5 years

Total

(number)

Group executive committee

160,600

257,200

137,300

197,300

72,400

824,800

Excluding the executive directors disclosed separately in the table above.

193

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A

Major shareholders

As of 25 August 2006 the issued share capital of Sasol Limited consisted of 683,065,125 ordinary shares

including treasury shares of 60,111,477 with no par value. At a general meeting held on 3 October 2006,
shareholders approved that we acquire 60,111,477 Sasol Limited shares held by our subsidiary, Sasol Investment
Company (Pty) Limited. These shares were cancelled on 10 October 2006. Except for the related transaction
costs, the repurchase and cancellation of these shares had no effect on the consolidated financial position of the
group. To the best of our knowledge, Sasol Limited is not directly or indirectly owned or controlled by another
corporation or the government of South Africa or any other government. Our management believes that no single
person or entity holds a controlling interest in our share capital.

In accordance with the requirements of the Companies Act of South Africa, the following beneficial

shareholdings exceeding 5% in the aggregate were disclosed or established from inquiries as of 25 August 2006:

Number of shares

% of shares

Public Investment Corporation Limited

94,158,063

13.8

Sasol Investment Company (Pty) Limited

60,111,477

8.8

Industrial Development Corporation of South Africa

53,266,887

7.8

A wholly owned subsidiary of Sasol Limited. As a result of our share repurchase program, Sasol Investment Company
(Pty) Limited held the shares as treasury stock on which no dividends are paid outside the group and no voting rights
are exercised. These shares were repurchased by Sasol Limited and cancelled on 10 October 2006.

Furthermore the directors have ascertained that some of the shares registered in the names of the nominee

holders are managed by various fund managers and that, as at 25 August 2006, the following funds managers
were responsible for managing 2% or more of the share capital of Sasol Limited.

Number of shares

% of shares

PIC Equities

73,863,090

10.8

Old Mutual Asset Managers

55,240,823

8.1

Stanlib Limited

30,254,886

4.4

Capital International Inc

29,307,800

4.3

Investec Asset Management

22,069,854

3.2

Allan Gray Investment Council

19,662,255

2.9

Coronation Fund Managers

16,478,199

2.4

RMB Asset Management

13,749,745

2.0

The Public Investment Corporation Limited is the beneficial owner of the shares held by PIC Equities and this nominee
shareholding is included in the 94,158,063 shares held by the Public Investment Corporation Limited reflected in the
table of beneficial shareholdings in excess of 5%.

The voting rights of major shareholders do not differ from the voting rights of other shareholders.

As of 25 August 2006, 59,169,349 shares, or approximately 8,7% of our share capital, were held in the

form of ADRs. On the same date, 378 record holders in the United States held approximately 22% of our issued
share capital in the form of either shares or ADRs.

7.B

Related party transactions

There have been no material transactions during the most recent three years, other than as described below,

nor are there proposed to be any material transactions at present to which we or any of our subsidiaries are or
were a party and in which any executive or independent director, or 10% shareholder, or any relative or spouse
thereof or any relative of such spouse, who shared a home with this person, or who is a director or executive
officer of any parent or subsidiary of ours, had or is to have a direct or indirect material interest. Furthermore,

194

during our three most recent years, there has been no, and at 30 June 2006 there was no, outstanding
indebtedness to us or any of our subsidiaries owed by any of our executive or independent directors or any
associate thereof.

During the year group companies, in the ordinary course of business, entered into various purchases and

sale transactions with associates, joint ventures and certain other related parties. 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, stated on a management reporting basis, were as follows:

30 June 2006

30 June 2005

30 June 2004

(Rand in millions)

Sales and services rendered to related parties
– Third parties

250

204

– Joint ventures

1,446

1,067

419

– Associates

424

379

453

Total

2,120

1,650

932

Purchases from related parties
– Third parties

600

282

266

– Joint ventures

131

240

137

– Associates

360

530

752

Total

1,091

1,052

1,155

Amounts due to and from related parties are disclosed in the respective notes to the financial statements for

the respective balance sheet line items. See “Item 18 – Financial statements”.

7.C

Interests of experts and counsel

Not applicable.

195

ITEM 8.

FINANCIAL INFORMATION

8.A

Consolidated statements and other financial information

See “Item—18. Financial statements” for a list of our financial statements, related notes and other financial

information filed with this annual report on Form 20-F.

Our total export and foreign sales, being sales exported from South Africa or made outside South Africa in

2006 amounted to R37.8 billion, representing 47% of our total group turnover, compared to R33.1 billion or
49% and R30.1 billion or 51% in 2005 and 2004, respectively.

Our dividend distribution policy is to distribute increased dividends on a regular basis to the extent

permitted by our earnings. More specifically, we intend to distribute dividends, provided our annual attributable
earnings represent a range of 2.5 to 3.5 times the amount distributed in the form of dividends. The average rate
of earnings to dividend distributions in the past five years was approximately 2.7 times. Our dividend cover for
2006 of 2.3 is outside the target range; however, when measured against earnings from continuing operations,
our dividend cover is 3.1 times, which is within the target range. We distribute dividends twice a year. On the
declaration of a dividend, the company includes the 12.5% in respect of secondary tax on companies on this
dividend in its computation of the income tax expense for the corresponding period.

For information regarding our legal proceedings see “Item 4.B – Business overview – Legal proceedings”.

8.B

Significant changes

The following developments have occurred subsequent to 30 June 2006:

On 30 June 2006, we announced that the R1.45 billion Tshwarisano broad-based BEE transaction was

successfully concluded. Pursuant to our agreement, Tshwarisano has, with effect from 1 July 2006, acquired a
25% shareholding in Sasol Oil (Pty) Limited. We are providing considerable facilitation and support for
Tshwarisano’s approximately R1.1 billion financing requirements, which will significantly lower Tshwarisano’s
cost of borrowing.

The disposal of DPI Holdings (Pty) Limited was approved, and an agreement was signed for the sale of our

50% share to Dawn Limited for a consideration of R51 million. The transaction was approved by the South
African Competition Tribunal and became effective during October 2006.

Our acquisition of the remaining 40% shareholding of Sasol Dyno Nobel (Pty) Limited not owned by us

was approved, and an agreement for the acquisition has been signed for a consideration of US$ 31 million.
Approval from the South African Competition Tribunal was obtained on 30 August 2006. The transaction
became effective from 7 September 2006.

A discussion document was released during July 2006 by a task team appointed by the South African

Minister of Finance to assess possible reforms to the fiscal regime applicable to windfall profits in South
Africa’s Liquid Fuel Energy Sector, with particular reference to the synthetic fuel industry. We submitted to the
task team a written response to its document on 10 August 2006 assessing possible reforms to the fiscal regime.
We participated in the task team’s public hearings held during August 2006. The task team handed their report
containing its recommendations to the Minister of Finance on 26 September 2006. It is expected that an
announcement on the decision made by the Minister of Finance will be made during 2007.

At the general meeting held on 3 October 2006, shareholders approved that Sasol Limited acquire

60,111,477 Sasol Limited shares held by its subsidiary, Sasol Investment Company (Pty) Limited. Once
repurchased, these shares will be cancelled. Except for the related transaction costs, the repurchase and
cancellation of these shares will have no effect on the consolidated financial position of the group. At the
meeting of 3 October 2006, shareholders also approved that Sasol be granted the authority to acquire Sasol
Limited shares by way of a general repurchase. Both of these special resolutions were registered by the South
African Registrar of Companies on 5 October 2005.

On 26 September 2006, the South African Financial Services Board approved the Sasol Pension Fund

Surplus Apportionment Scheme. Had this approval been obtained prior to year end, the prepaid pension asset
would have increased by R130 million.

196

ITEM 9.

THE OFFER AND LISTING

9.A

Offer and listing details

The following table sets forth, for the years indicated, the reported high and low quoted prices for the

ordinary shares on the JSE and of our ADRs on the NYSE from 9 April 2003 and of the ADRs on the NASDAQ
prior to the delisting of our ADRs on 8 April 2003 from NASDAQ.

Shares

ADRs

(Price per

share in rand)

ADR in US$)

Period

High

Low

High

Low

2002

135.20

62.50

12.00

7.95

2003

121.55

75.50

12.78

8.34

2004

111.50

75.10

16.50

10.40

2005

192.12

66.23

28.96

15.61

First quarter

125.90

66.23

19.40

15.61

Second quarter

131.50

107.40

22.00

18.70

Third quarter

155.00

116.50

26.10

19.95

Fourth quarter

192.12

138.95

28.96

22.55

2006

283.00

180.00

46.31

26.99

First quarter

248.00

180.00

38.99

26.99

Second quarter

258.00

201.25

39.37

30.70

Third quarter

269.00

193.00

43.33

31.43

Fourth quarter

283.00

217.21

46.31

31.17

April

257.99

225.00

42.74

37.68

May

283.00

238.00

46.31

36.13

June

283.00

217.21

39.50

31.17

July

280.00

242.01

39.25

34.05

August

263.00

246.55

38.86

34.84

September

260.00

228.80

35.66

29.54

9.B

Plan of distribution

Not applicable.

9.C

Markets

The principal trading market for our shares is currently the JSE. Our American Depositary Shares, or

ADSs, have been listed on the New York Stock Exchange since 9 April 2003, each representing one common
ordinary share of no par value, under the symbol “SSL”. The Bank of New York is acting as the Depositary for
our ADSs and issues our ADRs in respect of our ADSs.

9.D

Selling shareholders

Not applicable.

9.E

Dilution

Not applicable.

9.F

Expenses of the issue

Not applicable.

197

ITEM 10.

ADDITIONAL INFORMATION

10.A

Share capital

Not applicable.

10.B

Memorandum and articles of association

Sasol Limited is incorporated in South Africa as a public company under the Companies Act of South

Africa and is registered with the South African Registrar of Companies under registration number
1979/003231/06. Our corporate seat is in Johannesburg, South Africa. According to our Memorandum, our
company’s main business includes, among other things, to act as an investment holding company, an investment
company and a management company and, whether on its own and/or in collaboration with other agencies:

• to prospect for coal, oil, petroleum and related substances;

• to acquire mineral and other rights;

• to acquire, exploit and mine coal, oil, petroleum and related substances and beneficiate and refine them

into gaseous, liquid and solid fuels, petrochemicals and other products;

• to convert, process and beneficiate any product with or without the addition of other products in any

other way whatsoever; and

• to market these products.

Our board of directors

Appointment, retirement and re-election of directors.

Our directors are elected by our shareholders at the

annual general meeting. The board of directors may appoint any person qualifying as a director in terms of the
South African Companies Act, either to fill a vacancy or as an addition to the board, provided that the total
number of directors does not at any time exceed the maximum of 16 directors. Directors appointed by the board
in this manner are required to retire at the next annual general meeting following their appointment, but are
eligible for re-election. There is no requirement in our Articles of Association that directors must hold qualifying
shares. If the number of persons nominated as directors does not exceed the number of vacancies available, then
the nominated directors are deemed to have been duly elected.

At the annual general meeting of the company, one-third of the serving directors shall retire or if the total

number of serving directors who shall retire does not constitute a multiple of three, the number of directors who
shall retire shall be the number, adjusted upwards, that is the closest to one-third.

A director who has been appointed for the first time at an annual general meeting or by the board of

directors after 27 October 1997 shall retire five years after his initial appointment. Directors who have retired in
this manner are eligible for automatic re-election by the shareholders, if they have been nominated for re-
appointment after retirement by either the board or the shareholders.

Any director reaching 70 years of age shall retire at the end of that year, provided that, subject to the

Articles of Association, the board may, by unanimous resolution on a year-to-year basis, extend a director’s term
of office until the end of the year in which the director turns 73.

Remuneration.

In accordance with our Articles of Association, the board of directors has the authority to

determine directors’ remuneration and has delegated this authority to the Compensation Committee. The South
African Code furthermore requires that proposed fees as recommended by the board should be submitted to the
shareholders in general meeting for approval prior to implementation and payment. The Companies Act prohibits
loans or any form of credit or guarantee to be provided by us to any member of our board. Our Compensation
Committee determines the Group’s human resources policy and the remuneration of directors and senior
management. See “Item 6.C Board Practices – Board committees – The compensation committee”.

198

Interested transactions.

A director in his capacity as a member of the board or one of its committees can

participate in and vote on all decisions put before a meeting of the board or the respective committee. Nothing
contained in our Articles of Association prohibits a director from voting on any decisions put before a meeting
of the board or one of its committees, whether or not a director has a personal interest or is in any manner
involved in the matter. However, directors are required to declare in the manner prescribed by the Companies
Act any interest, whether direct or indirect, material or otherwise, in any other company, partnership or corporate
body, of which a director of ours is a director or shareholder, or any contract or transaction in which they have
an interest in any manner.

Managing Director

Under our Articles of Association, the directors may appoint one or more of their

number to the office of managing director or managing directors, or may appoint employees of the company in
any other capacity, and may remove or dismiss them from office and appoint others in their place. Such an
appointment is made by an independent quorum of directors and for a period not exceeding five years per
appointment.

Disclosure of interests in shares

The Companies Act requires disclosure of beneficial ownership interests in a company’s securities.

Pursuant to Section 140A of the Companies Act, where the securities of an issuer are registered in the name of a
person and that person is not the holder of the beneficial interests in all of the securities held by the registered
shareholder, the registered shareholder is obliged, at the end of every three-month period, to disclose to the
issuer the identity of each person on whose behalf the registered holder holds securities and the number and
class of securities issued by that issuer held on behalf of each such person. Moreover, the issuer of securities
may, by notice in writing, require a person who is a registered shareholder and whom the issuer knows, or has
reasonable cause to believe, to have a beneficial interest in a security issued by the issuer, to confirm or deny
whether it holds that beneficial interest and, if the security is held for another person, to disclose the identity of
the person on whose behalf a security is held.

The addressee of the notice will also be required to give particulars of the extent of the beneficial interest

held during the three years preceding the date of the notice. All issuers of securities are obliged to establish and
maintain a register of disclosures of interests in their securities as described above and to publish in their annual
financial statements a list of the persons who hold beneficial interests equal to or in excess of 5% of the total
number of securities of that class issued by the issuer, together with the extent of those beneficial interests.

Rights of holders of our securities

Dividend rights.

The board may declare a dividend to be paid to the registered holders of shares. All

shares have equal rights to dividends. The directors may also pay to the shareholders such interim dividend as
they consider justified from the profit of the company. No dividends shall be paid except out of the profits or
accumulated distributable reserves of the company and no dividends bear interest against the company.

Dividends may be declared, either free of, or subject to, the deduction of any income tax and any other tax

or duty which may be chargeable. Dividends are declared payable to shareholders registered at a date subsequent
to the date of the declaration of the dividend as determined by the rules of the JSE Limited (the JSE). The dates
applicable to the dividend payment are determined in accordance with the JSE listing requirements.

Dividends which remain unclaimed after a period of 12 years may be declared forfeited by the board and

revert to our company. All unclaimed dividends may be invested or otherwise utilized by the directors for the
benefit of the company until claimed.

Any dividend may be paid and satisfied, either in whole or in part, by the distribution of specific assets and, in

particular, of shares or debentures of any other company, or in cash or in any one or more of such ways as the
directors may, at the time of the declaration of the dividend, determine and direct. Any dividend or other sum
payable in cash to a shareholder may be paid by check, warrant, coupon or otherwise as the directors may decide.

199

It is our policy to declare dividends in rand and the board may at the time of declaring a dividend make

such regulations as they may deem appropriate with regard to the payment in any currency and the rate of
exchange, subject to the approval of the SARB. For further information on our dividend policy, see “Item 8.A
Consolidated Statements and Other Financial Information”.

Holders of ADRs on the relevant record date will be entitled to receive any dividends payable in respect of

the shares underlying the ADRs, subject to the terms of the Deposit Agreement. Cash dividends will be paid by
the Depositary to holders of ADRs in accordance with the Deposit Agreement.

Voting rights.

Every shareholder, or representative of a shareholder, who is present at a shareholders’

meeting has one vote on a show of hands, regardless of the number of shares he holds or represents, unless a
poll is demanded. On a poll, a shareholder is entitled to one vote per ordinary share held.

Shareholders are entitled to appoint a proxy to attend, speak and vote on a poll at any meeting on their

behalf. Proxies need not be shareholders. Cumulative voting is not permitted.

Rights of non-South African shareholders. There are no limitations imposed by South African law or our

Articles of Association on the rights of non-South African shareholders to hold or vote our shares. Acquisitions
of shares in South African companies are not generally subject to review by the SARB. However, its approval
may be required in certain cases where share acquisition is financed by South African lenders.

Rights of minority shareholders. Majority shareholders of South African companies have no fiduciary

duties under South African common law to minority shareholders. However, shareholders may, under the
Companies Act, seek court relief upon establishing that they have been unfairly prejudiced by the company.

General meeting of shareholders

In accordance with our Articles of Association, our annual general meeting is required to be held each year

within six months from the end of our financial year, and within 15 months after the date of our last preceding
annual general meeting.

Notices.

We are required by law and our Articles of Association to provide at least 21 days’ notice of any

annual general meeting and any meeting at which special resolutions are proposed, and at least 14 days’ notice
of all other meetings. Meetings of shareholders may be attended by shareholders on record in our share register
or by their proxies who need not be registered shareholders. Annual general meetings shall be described as such
in the notice convening the meeting. All other meetings shall be called general meetings and shall also be
described as such in the respective notice.

Notice under our Articles of Association must be in writing and must be given or served on any

shareholder, either by delivery or by post, properly addressed, to a shareholder at his or her address shown in the
register of shareholders. Any notice to shareholders must simultaneously be communicated to the JSE.

We are required, upon request by at least 100 shareholders or shareholders holding not less that 5% of our

total share capital, to give notice to our shareholders of any resolution that may be duly proposed and any
resolution intended to be proposed at a general meeting or annual general meeting.

Attendance at meetings.

Beneficial shareholders whose shares are not registered in their own name, or

beneficial owners who have dematerialized their shares, are required to contact the registered shareholder or
their Central Securities Depository Participant (CSDP), as the case may be, for assistance to attend and vote at
meetings.

Quorum.

No business may be transacted at any general meeting unless the requisite quorum is present at

the commencement of proceedings. The quorum for the approval of special resolutions is shareholders holding
in the aggregate not less than one-fourth of the total votes of all shareholders entitled to vote at the meeting,
present in person or by proxy. In all other cases, the quorum is three shareholders present in person or by proxy
and entitled to vote or, if a shareholder is a corporate body, represented by a proxy.

200

In case the required quorum of shareholders is not present within ten minutes from the time appointed for

the meeting, the meeting will stand adjourned to take place on a day determined by the shareholders present,
which may be no earlier than seven days and no later than 21 days after the date of the meeting, at the same time
and venue, or if such venue is not available, another venue appointed by the directors present. If no shareholders
are present, the day and the venue of the adjourned meeting shall be determined by the directors. If no quorum is
present within ten minutes from the time appointed for the adjourned meeting, those shareholders who are
present in person shall form a quorum. If the meeting at which a quorum is not present is convened upon the
request of shareholders, this meeting will be dissolved.

There is no quorum requirement when an ordinary general meeting is reconvened, but only those topics

which were on the agenda of the adjourned general meeting may be discussed and voted upon.

Manner of voting.

At a general meeting, a resolution put to vote will be decided by a show of hands,

unless a poll is demanded by:

• the chairman;

• not less than five shareholders having the right to vote at such meeting;

• a shareholder or shareholders representing not less than one-tenth of the total voting rights of all

shareholders having the right to vote at the meeting; or

• shareholders entitled to vote at the meeting and holding in total not less than one-tenth of the issued

share capital of the company.

A special resolution is required in connection with the following, amongst other matters:

• liquidation or winding up of the company;

• all increases or decreases in our share capital and shares;

• change of company name or conversion from one company type into another;

• amendments to our Memorandum and Articles of Association;

• acquisitions of our own shares; and

• amendment of any rights attached to our shares.

For the approval of special resolutions, three-quarters of shareholders present in person or by proxy must

vote in favor of the resolution on a show of hands or on a poll.

Unless otherwise specified by applicable law or in our Articles of Association, resolutions will be approved

by a majority of the votes recorded at the meeting either by show of hands or by proxy. In the event of a tie, the
chairman will have a casting vote.

Changes in share capital and preemptive rights

We may, by special resolution in general meeting, increase our share capital by a sum divided into shares of

a number, or increase our shares without par value to a number, as we may deem appropriate. We may also
increase our share capital consisting of shares without par value by transferring reserves or profits to our stated
capital, with or without a distribution of shares. New shares are issued to persons, on terms and conditions and
with the rights and privileges attached thereto, as may be determined in general meeting.

Subject to any authority given to our directors in our Articles of Association, we may, prior to the issue of

new shares, direct that they be offered in the first instance, either at par or at a premium or at a stated value in
the case of shares without par value, to all our shareholders in proportion to the amount of capital held by them,
or take any other measure with regard to the issue and allotment of the new shares.

201

We may also, by special resolution, cancel, vary or amend shares or any rights attached to shares which, at

the time of the passing of the relevant resolution, have not been taken up by any person or which no person has
agreed to take up, and we may reduce the amount of our share capital by the amount of the shares so cancelled.

Unissued shares placed under the control of directors. Subject to the provisions of the Companies Act

and the listing requirements of the JSE, we may, in a general meeting, place the balance of the ordinary shares
not allotted under the control of the directors with general authorization to allot, and issue such shares at such
prices and upon such terms and conditions as they deem fit, provided that no such issue of such shares will be
made which could effectively transfer the control of the company without prior approval of the shareholders in a
general meeting.

Trading in our own shares

We may resolve by special resolution to buy back any of our issued shares in accordance with the

provisions of the Company laws of South Africa and any other applicable rule of law or regulation. Such
resolution may grant a general approval or a specific approval for a particular acquisition.

Regulation of repurchases of own shares. The South African Companies Act authorizes a company to

repurchase its own issued shares, provided its articles of association permit doing so. The approval must be in
the form of a special resolution, either as a general or a specific approval for a specific repurchase. If the
approval is a general approval, it only remains valid until the next general meeting of the company following the
grant of such general approval. A company may only repurchase its own shares provided that certain solvency
and liquidity requirements are met immediately subsequent to the repurchase. A company may not repurchase its
own shares if this would result in there being no shares left in issue other than convertible or redeemable shares.
Any shares repurchased by the company will be cancelled as issued shares and treated as authorized shares.

Subsidiary companies may, in accordance with the principles stated above, acquire shares in their holding

company up to a total maximum of 10% of the issued shares of the holding company. A subsidiary may not
exercise voting rights in respect of its shares in its holding company, unless the subsidiary is acting in a
representative capacity or as a trustee.

The JSE listing requirements provide that a company may only conduct a specific repurchase subject to the

following conditions, among others:

• in the case of an offer to all shareholders, that the offer be pro rata to their existing holdings, or from

shareholders specifically named; and

• that authorization be given in terms of a special resolution of the company by the shareholders,

excluding controlling shareholders, their associates, any party acting in concert and any shareholder that
is participating in the repurchase and is not regarded as being public.

In accordance with the JSE listing requirements, the repurchase by a company of its own shares may not

exceed 20% of the company’s issued share capital of that class in any one financial year. Companies may only
conduct a general repurchase of their securities on the JSE and the repurchase price may not be greater than 10%
above the weighted average of the market value for the securities for the five business days immediately
preceding the date on which the transaction was effected.

Rights on liquidation

Should the company be wound up, the assets remaining after payment of the debts and liabilities of the

company and the costs of liquidation shall be distributed among the shareholders in proportion to the number of
shares respectively held by each of them.

202

Upon winding up, any part of our assets, including any shares or securities of other companies, may, with

the sanction of a special resolution of our shareholders, be divided in specie among our shareholders or may,
with the same sanction, be vested in trustees for the benefit of such shareholders, and the liquidation of the
company may be finalized and the company dissolved.

Form and transfer of shares

In accordance with the Share Transactions Totally Electronic (STRATE) settlement system of the JSE,

Sasol ordinary shares were dematerialized as of 19 November 2001. STRATE introduced the dematerialization
of share certificates in a central securities depository and contractual rolling and electronic settlement. Shares
traded electronically in STRATE are settled five days after trade.

The dematerialization of shares has not been mandatory and, although the majority of our share capital has

been dematerialized, shareholders who have elected to do so have still retained their share certificates. Transfer
of shares in certificated form is effected by means of a deed.

10.C

Material contracts

Not applicable.

10.D

Exchange controls

The following is a general outline of South African exchange controls. This outline may not apply to

former residents of South Africa. Investors should consult a professional advisor as to the exchange control
implications of their particular investments.

South African law provides for exchange control regulations, which restrict the export of capital from the

Common Monetary Area, which comprises South Africa, the Kingdoms of Lesotho and Swaziland and the
Republic of Namibia. The exchange control regulations, which are administered by the Exchange Control
Department of the SARB, are applied throughout the Common Monetary Area and regulate transactions
involving South African residents, including natural persons and legal entities.

The Government has from time to time stated its intention to relax South Africa’s exchange control

regulations when economic conditions permit such action. In recent years, the Government has incrementally
relaxed aspects of exchange control for financial institutions and individuals. In October 2004 the SARB
announced further relaxation of the exchange control regulations, which include the following:

• abolition of exchange control limits on new foreign investments by a South African companies, although

it is still required to submit an application to the SARB and comply with certain criteria as determined
by SARB; and

• a South African company is allowed to retain foreign dividend income abroad without the permission of

the SARB and profits earned abroad may be used abroad for any lawful purpose. Any foreign dividends
repatriated to South Africa after 26 October 2004 may be transferred abroad at any time for any purpose
without specific application to SARB.

It is, however, impossible to predict with any certainty when the government will remove exchange controls

in their entirety.

The comments below relate to exchange controls in force at the date of this annual report. These controls

are subject to change at any time without notice.

Overseas financing and investments

Overseas debt.

We, and our South African subsidiaries, need SARB approval to receive debt from and

repay debt to non-residents of the Common Monetary Area, mainly in respect of the interest rate and terms of

203

repayment applicable to such loans. Repayment of principal and interest on these loans is usually approved and
is limited to the amount borrowed and a market-related rate of interest.

Funds raised outside the Common Monetary Area by our non-South African subsidiaries are not restricted

under South African exchange control regulations and can be used for overseas investment, subject to any
conditions imposed by the SARB in connection with such overseas investment. We, and our South African
subsidiaries, would, however, require SARB approval in order to provide guarantees for the obligations of any of
our subsidiaries with regard to funds obtained from non-residents of the Common Monetary Area.

Debt raised outside the Common Monetary Area by our non-South African subsidiaries must be repaid or

serviced by those foreign subsidiaries. Without SARB approval, we cannot use cash we earn in South Africa to
repay or service such foreign debts. As a result of the recent amendments to the exchange control regulations set
out above, we are permitted to use foreign dividend income to finance the operations of another foreign
subsidiary without specific SARB approval.

Raising capital overseas.

A listing by a South African company on any stock exchange other than the JSE

in connection with raising capital requires permission from the SARB. If a foreign listing were to result in a
South African company being redomiciled, it would also need the approval of the Minister of Finance.

Under South African exchange control regulations, we must obtain approval from the SARB regarding any

capital raising activity involving a currency other than the rand. In granting its approval, the SARB may impose
conditions on our use of the proceeds of the capital raising activity outside South Africa, including limits on our
ability to retain the proceeds of this capital raising activity outside South Africa or a requirement that we seek
further SARB approval prior to applying any of these funds to any specific use. Any limitations imposed by the
SARB on our use of the proceeds of a capital raising activity could adversely affect our flexibility in financing
our investments.

Overseas investments.

Under current exchange control regulations, we, and our South African

subsidiaries, can invest overseas only if the investment meets certain criteria including one of national interest,
as determined by the SARB. In accordance with the latest amendments to the South African exchange control
regulations there is no limitation placed on us with regard to the amount of funds that we can transfer from
South Africa for the purchase of shares in offshore entities or for the purchase of foreign assets subject to
meeting these criteria. The SARB may, however, request us to stagger the capital outflows relating to large
foreign investments in order to limit the impact of such outflows on the South African economy and the foreign
exchange market.

The SARB also requires us to provide annual financial statements of our foreign subsidiaries.

Investment in South African companies

Inward investment.

A foreign investor may invest freely in shares in a South African company. Foreign

investors may also sell shares in a South African company and transfer the proceeds out of South Africa without
restriction. Acquisitions of shares or assets of South African companies by non-South African purchasers are not
generally subject to review by the SARB when the consideration is in cash, but may require SARB review in
certain circumstances, including when the consideration is equity in a non South African company or when the
acquisition is financed by a loan from a South African lender.

Dividends.

There are no exchange control restrictions on the remittance in full of dividends declared out

of trading profits to non-residents of the Common Monetary Area.

Transfer of shares and ADSs. Under South African exchange control regulations, our shares and ADSs are

freely transferable outside South Africa among persons who are not residents of the Common Monetary Area.
Additionally, where shares are sold on the JSE on behalf of our shareholders who are not residents of the
Common Monetary Area, the proceeds of such sales will be freely exchangeable into foreign currency and
remittable to them. SARB may also require review to establish that the shares have been sold at market value

204

and arm’s length. Any share certificates held by non-resident shareholders will be endorsed with the words “non-
resident”. The same endorsement, however, will not be applicable to ADSs held by non-resident shareholders.

10.E

Taxation

South African taxation

The following discussion summarizes South African tax consequences of the ownership and disposition of

shares or ADSs by a US holder (as defined below). This summary is based upon current South African tax law
and the convention between the governments of the United States and the Republic of South Africa for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital
gains, signed 17 February 1997 (“the Treaty”). In addition, this summary is based in part upon representations of
the Depositary, and assumes that each obligation provided for in, or otherwise contemplated by the Deposit
Agreement and any related agreement, will be performed in accordance with its respective terms.

The following summary of the South African tax considerations does not address the tax consequences to a

US holder that is resident in South Africa for South African tax purposes or whose holding of shares or ADSs is
effectively connected with a permanent establishment in South Africa through which such US holder carries on
business activities or who is not the beneficial recipient of the dividends or returns or, in the case of an
individual who performs independent personal services, who has a fixed base situated therein or the source of
the transaction is deemed to be in South Africa, or who is otherwise not entitled to full benefits under the Treaty.

The statements of law set forth below are subject to any changes (which may be applied retroactively) in

South African law or in the interpretation thereof by the South African tax authorities, or in the Treaty, occurring
after the date hereof. For the purposes of the Treaty and South African tax law, a United States resident that
owns Sasol ADSs will be treated as the owner of Sasol shares represented by such ADSs. Holders are strongly
urged to consult their own tax advisors as to the consequences under South African, US federal, state and local,
and other applicable laws, of the ownership and disposition of shares or ADSs.

Taxation of dividends

South Africa imposes a corporate tax known as Secondary Tax on Companies (“STC”) at the rate of 12.5% on

the distribution of earnings in the form of dividends on the company declaring the dividend. STC is a recognized
form of tax in terms of the Treaty, but is not a withholding tax on dividends. South Africa does not impose any
withholding tax or any other form of tax on dividends paid to US holders with respect to shares or ADSs.

Should South Africa decide in the future to impose a withholding tax on dividends paid to a US holder with

respect to shares or ADSs, the Treaty would limit the rate of this tax to 5% of the gross amount of the dividends,
if a US corporate holder holds directly at least 10% of the voting stock of Sasol and 15% of the gross amount of
the dividends in all other cases.

Taxation of gains on sale or other disposition

Prior to 1 October 2001, in the absence of a capital gains tax, gains realized on the sale or other

disposition of shares held by a US holder as a capital asset were not subject to taxation in South Africa.
From 1 October 2001, South Africa has introduced a tax on capital gains, which only applies to South African
residents and to non-residents if the sale is attributable to a permanent establishment of the non-resident. The
meaning of the word “resident” is different for individuals and corporations and is governed by the South
African Income Tax Act of 1962 (“the Act”) and by the Treaty. In the event of conflict the Treaty would prevail.
In terms of the Act and the Treaty, a US holder of shares or ADSs will not be subject to capital gains tax on the
disposal of securities held as capital assets unless such securities constitute the assets linked to a permanent
establishment in South Africa. In contrast, gains on the disposal of securities which are not capital in nature are
usually subject to income tax. However, even in the latter case, a US holder will not be subject to income tax
unless the US holder carries on business in South Africa through a permanent establishment situated therein. In

205

such a case, this gain may be subject to tax in South Africa, but only so much as is attributable generally to that
permanent establishment for so long as it does not constitute a share repurchase resulting in the purchase price
being seen to be a dividend.

Stamp duty and uncertified securities tax

Stamp duty and uncertificated securities tax on the issue of securities was abolished with effect from

1 January 2006.

On a subsequent registration or transfer of shares, stamp duty is generally payable for shares not sold

through the JSE, the exchange conducted by JSE and uncertificated securities tax, or UST, is generally payable
for on-market transactions (shares sold through the JSE in dematerialized form), each at 0.25% of the market
value of the shares concerned. Stamp duty is payable in South Africa regardless of whether the transfer is
executed within or outside South Africa. A transfer of a dematerialized share can only occur in South Africa.

There are certain exceptions to the payment of stamp duty where, for example, the instrument of transfer is

executed outside of South Africa and registration of transfer is effected in any branch register kept by the
relevant company, subject to certain provisions set forth in the South African Stamp Duties Act of 1968.
Although technically under the terms of current legislation it could be interpreted that transfers of ADSs between
non-residents of South Africa could attract either stamp duty or UST, such transfers have not to date attracted
either stamp duty or UST. However, if securities are withdrawn from the deposit facility or the relevant deposit
agreement is terminated, either stamp duty or UST will be payable on the subsequent transfer of the shares. An
acquisition of shares from the Depositary in exchange for ADSs representing the relevant underlying securities
will also render an investor liable to pay South African stamp duty or UST in South Africa at the same rate as
stamp duty or UST on a subsequent transfer of shares, upon the registration of the investor as the holder of the
applicable shares on the company’s register.

Investigation of possible reforms to the fiscal regime applicable to windfall profits in South Africa’s liquid
fuel energy sector

A discussion document was released during July 2006 by the task team appointed by the Minister of

Finance to assess possible reforms to the fiscal regime applicable to windfall profits in South Africa’s Liquid
Fuel Energy Sector, with particular reference to the synthetic fuel industry.

During August 2006, we publicly released a comprehensive written submission in response to the

discussion document and also presented our views in an oral presentation to the members of the task team.

We believe that we do not meet the criteria formulated by the task team for the imposition of a windfall

profits tax and do not believe that such a tax would support government’s policy objectives of rewarding
beneficiation and providing energy security. Further, we do not believe that a windfall tax would benefit the
consumer by achieving lower fuel prices. The task team handed their report containing its recommendations to
the Minister of Finance on 26 September 2006. It is expected that an announcement on the decision will be
made by the Minister of Finance during 2007.

United States Federal Income Taxation

The following is a general summary of certain material US federal income tax consequences of the

ownership and disposition of shares or ADSs to a US holder (as defined below) that holds its shares or ADSs as
capital assets. This summary is based on US tax laws, including the Internal Revenue Code of 1986, as amended
(“the Code”), Treasury regulations, rulings, judicial decisions, administrative pronouncements, South African tax
laws, and the Treaty, all as currently in effect as of the date of this annual report, and all of which are subject to
change or changes in interpretation, possibly with retroactive effect. In addition, this summary is based in part
upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement
relating to the ADSs and any related agreement will be performed in accordance with its terms.

206

This summary does not address all aspects of US federal income taxation that may apply to holders that are

subject to special tax rules, including US expatriates, insurance companies, tax-exempt organizations, banks,
financial institutions, regulated investment companies, persons subject to the alternative minimum tax,
securities-broker dealers, traders in securities who elect to apply a mark-to-market method of accounting,
investors that actually or constructively own 10% or more of the share capital or voting stock of Sasol, persons
holding their shares or ADSs as part of a straddle, hedging transaction or conversion transaction, persons who
acquired their shares or ADSs pursuant to the exercise of employee stock options or similar derivative securities
or otherwise as compensation, or persons whose functional currency is not the US dollar. Such holders may be
subject to US federal income tax consequences different from those set forth below.

As used herein, the term “US holder” means a beneficial owner of shares or ADSs that is

(a) a citizen or individual resident of the United States for US federal income tax purposes;

(b) a corporation (or other entity taxable as a corporation for US federal income tax purposes) created or

organized in or under the laws of the United States or any state thereof;

(d) a trust if a court within the United States can exercise primary supervision over the administration of

the trust and one or more US persons are authorized to control all substantial decisions of the trust.

If a partnership (or other entity treated as a partnership for US federal income tax purposes) holds shares or

ADSs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the
partnership. A partner in a partnership that holds shares or ADS is urged to consult its own tax advisor regarding
the specific tax consequences of the ownership and disposition of the shares or ADSs.

US holders should consult their own tax advisors regarding the specific South African and US federal, state

and local tax consequences of owning and disposing of shares or ADSs in light of their particular circumstances
as well as any consequences arising under the laws of any other taxing jurisdiction. In particular, US holders are
urged to consult their own tax advisors regarding whether they are eligible for benefits under the Treaty.

For US federal income tax purposes, a US holder of ADSs should be treated as owning the underlying shares

represented by those ADSs. The following discussion (except where otherwise expressly noted) applies equally to
US holders of shares and US holders of ADSs. Furthermore, deposits or withdrawals of shares by a US holder for
ADSs or ADSs for shares will not be subject to US federal income tax or South African income tax.

Taxation of dividends

The gross amount of any distributions, including the amount of any withholding tax thereon, paid to a

US holder by Sasol will be taxable as dividend income to the US holder for US federal income tax purposes,
based on the US dollar value of the distribution calculated by reference to the spot rate in effect on the date the
distribution is actually or constructively received by the US holder, in the case of shares, or by the Depositary, in
the case of ADSs. For foreign tax credit limitation purposes, dividends paid by Sasol generally will constitute
foreign source “passive income” or, for some holders, foreign source “financial services income”. Dividends
paid by Sasol will not be eligible for the dividends-received deduction generally allowed to US corporations in
respect of dividends received from other US corporations. At present, South Africa does not impose a
withholding tax on dividends.

The amount of any distribution paid in foreign currency will be included in the gross income of a

US holder of shares in an amount equal to the US dollar value of the foreign currency calculated by reference
to the spot rate in effect on the date of receipt, regardless of whether the foreign currency is converted into
US dollars. If the foreign currency is converted into US dollars on the date of receipt, a US holder of shares
generally should not be required to recognize foreign currency gain or loss in respect of the dividend. If the
foreign currency received in the distribution is not converted into US dollars on the date of receipt, a US holder
of shares will have a basis in the foreign currency equal to its US dollar value on the date of receipt.

207

Any gain or loss recognized upon a subsequent conversion or other disposition of the foreign currency will

be treated as US source ordinary income or loss. In the case of a US holder of ADSs, the amount of any
distribution paid in a foreign currency ordinarily will be converted into US dollars by the Depositary upon its
receipt. Accordingly, a US holder of ADSs generally will not be required to recognized foreign currency gain or
loss in respect of the distribution.

Certain US holders (including individuals) are eligible for reduced rates of US federal income tax (at a

maximum rate of 15%) in respect of “qualified dividend income” received in taxable years beginning before
1 January 2011. For this purpose, qualified dividend income generally includes dividends paid by a
non-US corporation if, among other things, the US holders meet certain minimum holding periods and
the non-US corporation satisfies certain requirements, including that either:

(i) the shares or the ADSs with respect to which the dividend has been paid are readily tradable on an

established securities market in the United States; or

(ii) the non-US corporation is eligible for the benefits of a comprehensive US income tax treaty (such as

the Treaty) which provides for the exchange of information.

Sasol currently believes that dividends paid with respect to its shares and ADSs should constitute qualified

dividend income for US federal income tax purposes and Sasol anticipates that its dividends will be reported as
qualified dividends on Form 1099-DIV delivered to US holders. Each individual US holder of shares or ADSs is
urged to consult his own tax advisor regarding the availability to him of the reduced dividend tax rate in light of
his own particular situation and regarding the computations of his foreign tax credit limitations with respect to
any qualified dividend income paid by Sasol to him, as applicable.

The US Treasury has expressed concern that parties to whom ADSs are released may be taking actions that

are inconsistent with the claiming of reduced tax rates in respect of qualified dividends by US holders of ADSs.
Accordingly, the analysis of the availability of qualified dividend treatment could be affected by future actions
that may be taken by the US Treasury with respect to ADSs.

Taxation of capital gains

If a US holder is a resident of the United States for purposes of the Treaty, such holder generally will not

be subject to South African tax on any capital gain or loss if it sells or exchanges its shares or ADSs. Special
rules apply to individuals who are potentially residents of more than one country. Refer to “South African
Taxation – Taxation of gains on sale or other disposition” above.

Upon a sale, exchange or other disposition of shares or ADSs, a US holder generally will recognize capital

gain or loss for US federal income tax purposes in an amount equal to the difference between the US dollar
value of the amount realized on the disposition and the US holder’s adjusted tax basis, determined in US dollars,
in the shares or ADSs. Such gain or loss generally will be US source gain or loss, and generally will be treated
as a long-term capital gain or loss if the holder’s holding period in the shares or ADSs exceeds 1 year at the time
of disposition. The deductibility of capital losses is subject to significant limitations. If the US holder is an
individual, any capital gain generally will be subject to US federal income tax at preferential rates if specified
minimum holding periods are met.

Passive foreign investment company considerations

Sasol believes that it will not be classified as a Passive Foreign Investment Company (“PFIC”) for

US federal income tax purposes for the taxable year ended 30 June 2006. US holders are advised, however, that
this conclusion is a factual determination that must be made annually and thus may be subject to change. If
Sasol were to be classified as a PFIC, the tax on distributions on its shares or ADSs and on any gains realized
upon the disposition of its shares or ADSs may be less favourable than as described herein. Furthermore,
dividends paid by a PFIC are not “qualified dividend income” and are not eligible for the reduced rates of
taxation for certain dividends. US holders should consult their own tax advisors regarding the application of the
PFIC rules to their ownership of the shares or ADSs.

208

US information reporting and backup withholding

Dividend payments made to a holder and proceeds paid from the sale, exchange, or other disposition of

shares or ADSs may be subject to information reporting to the IRS. US federal backup withholding generally is
imposed at a current rate of 28% on specified payments to persons who fail to furnish required information.
Backup withholding will not apply to a holder who furnishes a correct taxpayer identification number or
certificate of foreign status and makes any other required certification, or who is otherwise exempt from backup
withholding. US persons who are required to establish their exempt status generally must provide IRS Form W-9
(Request for Taxpayer Identification Number and Certification). Non-US holders generally will not be subject to
US information reporting or backup withholding. However, these holders may be required to provide
certification of non-US status (generally on IRS Form W-8BEN) in connection with payments received in the
United States or through certain US-related financial intermediaries.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited

against a holder’s US federal income tax liability. A holder may obtain a refund of any excess amounts withheld
under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any
required information.

10.F

Dividends and Paying Agents

Not applicable.

10.G

Statement by Experts

Not applicable.

10.H

Documents on Display

All reports and other information that we file with the SEC may be obtained, upon written request, from

the Bank of New York, as Depositary for our ADSs at its Corporate Trust office, located at 101 Barclay Street,
New York, New York 10286. These reports and other information can also be inspected without charge
and copied at prescribed rates at the public reference facilities maintained by the SEC in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. These reports may also be accessed via the SEC’s website
(www.sec.gov). Also, certain reports and other information concerning us will be available for inspection at the
offices of the NYSE. In addition, all the statutory records of the company and its subsidiaries may be viewed at
the registered address of the company in South Africa.

10.I

Subsidiary Information

Not applicable. For a list of our subsidiaries see Exhibit 8.1 to this annual report on Form 20-F.

209

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a group, we are exposed to various market risks associated with our underlying assets, liabilities and

anticipated transactions. We continuously monitor these exposures and enter into derivative financial instruments
to reduce these risks. We do not enter into derivative transactions on a speculative basis. All fair values, with the
exception of the sensitivity analysis, have been determined using current market pricing models.

The principal market risks (i.e. the risk of losses arising from adverse movements in market rates and

prices) to which we are exposed are:

• foreign exchange rates applicable on conversion of foreign currency transactions as well as on

conversion of assets and liabilities to rand;

• commodity prices, mainly crude oil prices; and

• interest rates on debt and cash deposits.

Foreign exchange risk

Our operations are denominated in various foreign currencies and consequently, we are exposed to

exchange rate fluctuations that have an impact on our cash flows and financing activities. We manage our
foreign exchange risks through our group financing policies and the selective use of forward exchange contracts,
cross currency swaps and cross currency options. We use foreign exchange contracts to reduce foreign currency
exposures arising from imports into South Africa. Hedging of local exports is evaluated on a case-by-case basis.

All forward exchange contracts and cross currency swaps are supported by underlying commitments or

receivables.

The following tables present maturity analysis of our forward exchange contracts, cross currency options

and cross currency swaps at 30 June 2006 for continuing operations:

Forward Exchange Contracts

Fair value loss at

Expected maturity date

30 June 30 June

2007

2008

2009

2010

2011

Thereafter

Total

2006

2005

(Rand equivalent in millions)

US$ – contract amount

2,062

–

2,063

(3)

Average contractual
exchange rate

7.04

Euro–contract amount

362

–

362

(14)

Average contractual
exchange rate

9.13

GBP–contract amount

–

(1)

Average contractual
exchange rate

13.21

Other currencies–contract
amount

–

(1)

2,492

–

2,493

137

(19)

Discontinued operations

465

–

465

–

Total

2,957

–

2,956

137

(19)

210

Cross-currency swaps

Fair value

loss at

Expected maturity date

30 June 30 June

2007

2008

2009

2010

2011

Thereafter

Total

2006

2005

(Rand equivalent in millions – notional amounts)

Euro to US$ swaps

5,099

–

5,099

(385) (609)

Euro to Rand swaps

1,371

– 1,209

–

2,580

143

–

Other

–

375

Commodity price risk

We make use of derivative instruments, including commodity swaps, options and futures contracts of short

duration as a means of mitigating price and timing risks on crude oil and other energy-related product purchases
and sales. In effecting these transactions, the group entities concerned operate within procedures and policies
designed to ensure that risks including those relating to the default of counter parties are minimized.

The hedging transactions are linked to underlying current and future physical transactions and there are no

significant losses or profits on these transactions, except for a loss of R93 million accounted for at 30 June 2006
regarding the zero cost collar held at that date.

The following hedging instruments were in place in respect of crude oil futures and other raw materials at

30 June 2006 for continuing operations:

Fair value

gain/(loss) at

Expected maturity date

30 June 30 June

2007

2008

2009

2010

2011

Thereafter

Total

2006

2005

(Rand equivalent in millions)

Future contracts
Oil futures (US$)

428

–

428

(3)

(2)

Swaps
Fuel oil (US$)

–

Zero cost collar

(93)

Call options sold (US$)

10,024

–

10,024

Put options bought (US$)

7,552

–

7,552

Options sold
Call options sold (US$)

–

(2)

Put options sold (US$)

–

Other

–

Interest rate risk

We monitor exposure to interest rate risk on borrowings and cash deposits on a continuous basis.

At 30 June 2006, we had approximately R13.3 billion of total debt arrangements outstanding.

211

The following is a breakdown of our debt arrangements and a summary of fixed versus floating interest rate

exposures for continuing operations.

Liabilities–notional

2007

2008

2009

2010

2011

Thereafter

Total

(Rand in millions)

Fixed rate (Rand)

1,147

2,073

542

3,981

Average interest rate

10.6%

10.9%

10.8%

10.6%

10.4%

10.7%

Variable rate (Rand)

492

417

502

506

2,314

4,737

Average interest rate

9.8%

9.9%

10.9%

Variable rate (US$)

–

420

492

Average interest rate

5.6%

–

5.6%

–

5.6%

Fixed rate (euro)

2,751

–

2,839

Average interest rate

3.4%

–

Variable rate (euro)

844

113

1,064

Average interest rate

5.6%

6.1%

Variable rate (other currencies)

–

146

–

146

Average interest rate

–

10.0%

–

2,619

2,682

613

3,354

602

3,389 13,259

Discontinued operations

–

Total

2,635

2,689

619

3,354

602

3,389 13,288

We enter into interest rate derivatives, particularly “interest rate swaps” to mitigate interest rate exposures

and to achieve improved predictability of cash flows on a project-by-project basis.

The following interest rate derivative contracts were outstanding at 30 June 2006 for continuing operations:

Fair value

gain/(loss) at

Expected maturity date

30 June

2007

2008

2009

2010

2011

Thereafter

Total

2006

(Rand equivalent, in millions – notional amounts)

Fixed to receive floating (Rand)

125

625

812

–

1,562

Cap

500

–

500

(4)

Total

625

812

–

2,062

Our South African operations are vulnerable to adverse changes in short-term domestic interest rates, as a

result of the emerging market status of the South African financial markets.

At 30 June 2006, we were exposed to changes in interest rates on R4,877 million. A change in interest rates

of 100 basis points per annum would therefore have an effect of R48.8 million on our incurred interest expense.

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ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

213

PART II

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

214

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS

Not applicable.

215

ITEM 15.

CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

The Company’s Chief Executive and Chief Financial Officer, based on the evaluation of the effectiveness of

the group’s disclosure controls and procedures (required by paragraph (b) of 17 CFR 240.13a-15) as of the end
of the period covered by this annual report on Form 20-F, have concluded that, as of such date, the Company’s
disclosure controls and procedures were effective.

(b) Not applicable.

(d) Changes in internal control over financial reporting.

There were no significant changes in the group’s internal controls over financial reporting that occurred in

the year ended 30 June 2006 that have materially affected, or are reasonably likely to affect, the group’s internal
control over financial reporting.

216

ITEM 16.

Item 16A.

Audit committee financial expert

Mr. Warren Clewlow, an independent member of the audit committee, has been determined by our board to

be an audit committee financial expert within the meaning of the Sarbanes-Oxley Act, in accordance with the
Rules of the NYSE and the SEC.

Item 16B.

Code of ethics

Our code of ethics consists of four fundamental ethical principles – responsibility, honesty, fairness and

respect – and 15 ethical standards. These ethical standards cover such issues as bribery and corruption, fraud,
insider trading, human rights and discrimination and include a commitment to conduct our business with due
regard for the interests of all our stakeholders and the environment. The code embodies the highest standards of
compliance with all applicable laws and regulations. An ethics forum has been established to monitor and report
on ethics, best practice and compliance requirements, and to recommend amendments to the code as required.
Employee performance compared against our values, which incorporate the code of ethics, is assessed as part of
our performance appraisal system. Any amendment or waiver of the code as it relates to our chief executive or
chief financial officer will be posted on our website within five business days following such amendment or
waiver. No such amendments or waivers are anticipated.

The principles contained in the code have been communicated throughout the group and are available on

our internet website. Our website address is www.sasol.com and the code is located on the investor relations sub-
directory.

An ethics hotline operated by an independent service provider has been in operation since 2002. The

hotline provides an independent facility for stakeholders of our company, including our employees, suppliers and
customers, to report anonymously fraud, statutory malpractice and other crimes, deviations from the
procurement policy, financial and accounting reporting irregularities and other irregularities.

Item 16C.

Principal accountant fees and services

The following table sets forth the aggregate audit and audit-related fees, tax fees and all other fees billed by

our principal accountants (KPMG Inc.) for each of the 2006 and 2005 years:

Audit-related

All other

Audit fees

fees

Tax fees

fees

Total

(rand millions)

2006

2005

In respect of our audit committee approval process, all of the non-audit and audit fees paid to KPMG Inc. have been
approved by the audit committee.

Audit fees consist of fees billed for the annual audit of the company’s consolidated financial statements and

the statutory financial statements of the company’s subsidiaries, including fees billed for assurance and related
services that are reasonably related to the performance of the audit or reviews of the company’s financial
statements that are services that only an external auditor can reasonably provide.

Audit-related fees consist of the review of documents filed with regulatory authorities, consultations

concerning financial accounting and reporting standards, review of security controls and operational
effectiveness of systems, due diligence related to acquisitions and employee benefit plan audits. Audit-related
fees include fees billed by KPMG Inc. in respect of the assistance provided on our Sarbanes-Oxley Act
Section 404 readiness project of approximately R2 million and R22 million for 2006 and 2005, respectively.
This project includes assistance relating to the documentation of internal control policies and procedures.

217

Tax fees include fees billed for tax compliance services, including assistance in the preparation of original

and amended tax returns; tax consultations, such as assistance in connection with tax audits and appeals; tax
advice relating to acquisitions, transfer pricing, and requests for rulings or technical advice from tax authorities;
and tax planning services and expatriate tax compliance, consultation and planning services.

All other fees consist of all fees billed which are not included under audit fees, audit related fees or tax

fees. Specifically included in other fees for 2006 is R23 million in respect of the vendor due diligence performed
for the proposed divestiture of the Sasol Olefins & Surfactants business.

Audit committee approval policy

In accordance with our audit committee approval policy, all audit and non-audit services performed for us

by our independent accountants have been approved by the audit committee of our board of directors, which
concluded that the provision of such services by the independent accountants was compatible with the
maintenance of that firm’s independence in the conduct of its auditing functions.

The approval policy provides for categorical approval of permissible non-audit services and requires the

specific pre-approval by the audit committee, prior to engagement, of such services, other than audit services
covered by the annual audit engagement letter, provided that all such fees must be less than 20% of the total
audit fees for Sasol’s annual audit engagement, unless otherwise directed by the audit committee. During the
current year this 20% was exceeded due to the fees relating to the vendor due diligence performed for the
proposed divestiture of the Sasol Olefins & Surfactants business and in 2005 due to the Sarbanes-Oxley Act
Section 404 readiness project. In addition, services to be provided by the independent accountants that are not
within the category of approved services must be approved by the audit committee prior to engagement,
regardless of the service being requested and the amount, but subject to the restriction above.

Requests or applications for services that require specific separate approval by the audit committee are

required to be submitted to the audit committee by both management and the independent accountants and must
include a detailed description of the services to be provided and a joint statement confirming that the provision
of the proposed services does not impair the independence of the independent accountants.

The audit committee has delegated the approval authority to the chairman of the Audit Committee,

Mr. Brian Connellan (and if he is unavailable, any audit committee member), provided the fee so approved is
less than R1 million per service and the cumulative amount approved per annum does not exceed the guideline
of 20% of the budgeted audit fees for the year. Mr. Connellan shall notify the Audit Committee of any such
approvals at its next scheduled meeting. The audit committee does not delegate to management its
responsibilities to approve services to be performed by the independent accountants.

No work was performed by persons other than the principal accountant’s employees on the principal

accountant’s engagement to audit Sasol Limited’s financial statements for 2006.

Item 16D.

Exemptions from the listing standard for audit committees

Not applicable.

218

Item 16E.

Purchases of equity securities by the issuer and affiliated purchases

Total

Total number of

Maximum number

number

Average

shares purchased as

of shares that may

of shares

price paid

part of publicly

yet be purchased

Period

purchased

per share

announced programs

under the programs

For the year ended 30 June 2006
2005-07-01 to 2005-07-31

–

60,111,477

7,263,266

2005-08-01 to 2005-08-31

–

60,111,477

7,263,266

2005-09-01 to 2005-09-30

–

60,111,477

7,263,266

2005-10-01 to 2005-10-31

–

60,111,477

7,263,266

2005-11-01 to 2005-11-30

–

60,111,477

7,263,266

2005-12-01 to 2005-12-05

–

60,111,477

7,263,266

2005-12-06 to 2005-12-31

–

60,111,477

–

2006-01-01 to 2006-01-31

–

60,111,477

–

2006-02-01 to 2006-02-28

–

60,111,477

–

2006-03-01 to 2006-03-31

–

60,111,477

–

2006-04-01 to 2006-04-30

–

60,111,477

–

2006-05-01 to 2006-05-31

–

60,111,477

–

2006-06-01 to 2006-06-30

–

60,111,477

–

At each annual general meeting since 25 October 1999 until the meeting on 24 November 2004 the
shareholders have authorized the directors to undertake a repurchase of issued securities limited to a
maximum of 10% of the company’s issued securities at the time that the authority was granted. For more
information on the general requirements for trading in own shares refer to “Item 10.B – Memorandum and
Articles of Association”.

Any acquisition must not be made at a price more than 10% above the weighted average of the market
value of the securities for the 5 business days immediately preceding the date of such acquisition.

The authority granted to the directors to acquire the company’s issued securities was valid only until the
company’s next annual general meeting which was held on 2 December 2005.

The authorization given to the directors to undertake a repurchase of issued securities on 24 November
2004 limited to a maximum of 10% of the company’s issued securities at the time that the authority was
granted, expired on 2 December 2005. In terms of the South African Companies Act, 1973, the
authorization is only valid until the next annual general meeting following the grant of such a general
approval.

No program was terminated prior to the expiration date.

219

PART III

ITEM 17.

FINANCIAL STATEMENTS

Sasol is furnishing financial statements pursuant to the instructions of Item 18 of Form 20-F.

220

ITEM 18.

FINANCIAL STATEMENTS

The following consolidated financial statements, together with the auditor’s report of KPMG Inc. are filed

as part of this annual report on Form 20-F:

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2006,
30 JUNE 2005 AND 30 JUNE 2004

Report of the Independent Registered Public Accounting Firm

F–1

Consolidated Financial Statements

Income Statements

F–2

Balance Sheets

F–3

Statement of Changes in Shareholders’ Equity

F–4

Statements of Cash Flows

F–5

Statements of Comprehensive Income

F–6

Notes to the Consolidated Financial Statements

F–7

SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)

G–1

F–1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Sasol Limited:

We have audited the accompanying consolidated balance sheets of Sasol Limited and its subsidiaries

(Group) as of 30 June 2006 and 30 June 2005, and the related consolidated income statements, statements of
comprehensive income and changes in shareholders’ equity and cash flows for each of the years in the three-year
period ended 30 June 2006. These consolidated financial statements are the responsibility of the Group’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in

all material respects, the financial position of Sasol Limited and its subsidiaries as of 30 June 2006 and 30 June
2005, and the results of their operations and their cash flows for each of the years in the three-year period ended
30 June 2006, in conformity with US generally accepted accounting principles.

As discussed in note 2 to the consolidated financial statements, Sasol Limited changed its method of

accounting for share-based payments.

/s/KPMG Inc.
Registered Accountants and Auditors

Johannesburg, South Africa

27 October 2006

F–2

Sasol Limited and its subsidiaries

Consolidated Income Statements

for the years ended

30 June

2006

2005

2004

(US$ in

millions)*

(Rand in millions)

Note

(Unaudited)

Restated

]

Continuing operations
Sale of products

7,816

60,639

49,830

42,823

Services rendered

100

776

533

505

Commission and marketing income

442

324

278

Turnover

7,973

61,857

50,687

43,606

Other operating income

205

223

166

Net foreign exchange gains/(losses)

189

148

(1,260)

Cost of sales

(3,734)

(28,970)

(25,112)

(23,282)

Cost of services rendered

(86)

(666)

(524)

(495)

Selling and distribution costs

(502)

(3,895)

(3,840)

(3,824)

Administrative expenses

(522)

(4,051)

(3,811)

(3,541)

Other operating expenses

(513)

(3,981)

(3,394)

(2,824)

Operating costs and expenses

(5,357)

(41,563)

(36,681)

(33,966)

Operating profit

2,666

20,688

14,377

8,546

Other income/(expenses)
Dividends received

Interest received

261

142

Finance costs

(26)

(203)

(180)

(164)

Gain arising from issuance of subsidiary’s shares

–

108

Income before tax, earnings/(losses) of equity accounted investees and
minority interests

2,675

20,755

14,292

8,638

Income tax

(832)

(6,452)

(4,886)

(3,122)

Income before earnings/(losses) of equity accounted investees and
minority interests

1,843

14,303

9,406

5,516

Earnings/(losses) of equity accounted investees

308

(48)

Minority interest

(20)

(157)

(103)

(92)

Income from continuing operations

1,825

14,159

9,611

5,376

Discontinued operations
Net (loss)/income from discontinued operations (including fair value
write-down), net of tax

(369)

(2,860)

108

(139)

Earnings attributable to shareholders

1,456

11,299

9,719

5,237

US$

Rand

Basic earnings/(loss) per share

2.35

18.22

15.83

8.58

from continuing operations

2.94

22.83

15.66

8.81

from discontinued operations

(0.59)

(4.61)

0.17

(0.23)

Diluted earnings/(loss) per share

2.31

17.93

15.65

8.54

from continuing operations

2.90

22.47

15.48

8.77

from discontinued operations

(0.59)

(4.54)

0.17

(0.23)

US dollar information has been presented for the year ended 30 June 2006 on an unaudited basis solely for the convenience
of the reader and is computed at the noon buying rate for customs purposes of R7.76/US dollar, as reported by the
Federal Reserve Bank of New York on 29 September 2006.

Sasol Limited and its subsidiaries

Consolidated Balance Sheets

30 June

2006

2005

(US$ in millions)*

(Rand in millions)

Note

(Unaudited)

Restated

Assets
Current assets
Cash and cash equivalents

362

2,808

2,350

Cash restricted for use

271

331

Trade receivables, other receivables and prepaid expenses

1,451

11,260

11,763

Short-term investment

–

Inventories

990

7,678

9,650

Assets held for sale

1,505

11,679

–

Deferred tax

267

154

Total current assets

4,386

34,035

24,248

Non-current assets
Investment in securities

392

395

Investments in equity accounted investees

1,058

8,207

5,431

Prepaid pension asset

485

618

Long-term receivables

100

773

616

Long-term prepaid expenses

107

Long-term financial assets

234

–

Goodwill and intangible assets

113

881

1,126

Property, plant and equipment

6,180

47,954

47,463

Deferred tax

112

869

424

Total non-current assets

7,713

59,853

56,180

Total assets

12,099

93,888

80,428

Liabilities and shareholders’ equity
Current liabilities
Bank overdraft

442

266

Trade payables

604

4,685

5,181

Accrued expenses and other obligations

695

5,391

5,216

Short-term debt

281

2,177

5,355

Income tax payable

238

1,844

686

Liabilities in disposal group held for sale

691

5,364

–

Deferred tax

270

196

Total current liabilities

2,600

20,173

16,900

Non-current liabilities
Long-term obligations, net of current portion

329

2,556

2,452

Long-term debt, net of current portion

1,371

10,640

9,938

Post-retirement healthcare benefits

369

2,862

2,771

Pension liability

111

863

1,262

Deferred tax

752

5,829

5,923

Total non-current liabilities

2,932

22,750

22,346

Total liabilities

5,532

42,923

39,246

Minority interests in consolidated subsidiaries

297

237

Shareholders’ equity
Stated share capital – 1,175,000,000 authorised ordinary shares of no par value.
682,978,425 shares (2005 – 676,877,125 shares) in issue and outstanding

569

4,414

3,814

Treasury shares – 60,111,477 shares (2005 – 60,111,477 shares)

(470)

(3,647)

(3,647)

Retained earnings

6,597

51,192

43,553

Accumulated other comprehensive loss

(167)

(1,291)

(2,775)

Total shareholders’ equity

6,529

50,668

40,945

Total liabilities and shareholders’ equity

12,099

93,888

80,428

Commitments and contingencies – refer note 22

The accompanying notes form an integral part of these consolidated financial statements.

F–3

F–4

Sasol Limited and its subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

for the years ended 30 June 2006, 30 June 2005 and 30 June 2004

Common Stock

Number of

Accumulated

ordinary

Stated

other

Total

shares

share

Treasury

Retained

comprehensive

shareholders’

issued

capital

shares

earnings

(loss)/income

equity

(Rand in millions)

(US$ in millions)*

(Unaudited)

Balance as of 30 June 2003

668,798,425

2,842

(3,614)

34,470

(905)

32,793

Share-based payments – prior year adjustment

–

269

–

(269)

–

Balance as of 30 June 2003, as restated

668,798,425

3,111

(3,614)

34,201

(905)

32,793

Earnings attributable to shareholders

–

5,237

–

5,237

Foreign currency translation adjustments, net of tax

–

(1,084)

Realized and unrealized holding losses from cash flow hedging

activities, net of tax

–

(1,086)

Minimum pension liability adjustment, net of tax

–

335

Cash dividend payments

–

(2,748)

–

(2,748)

Share options exercised

2,473,000

109

–

109

Share-based payments

–

146

–

146

Acquisition of treasury shares

–

(33)

–

(33)

Balance as of 30 June 2004, as restated

671,271,425

3,366

(3,647)

36,690

(2,740)

33,669

Earnings attributable to shareholders

–

9,719

–

9,719

Foreign currency translation adjustments, net of tax

–

Realized and unrealized holding losses from cash flow hedging

activities, net of tax

–

Minimum pension liability adjustment, net of tax

–

(64)

Cash dividend payments

–

(2,856)

–

(2,856)

Share options exercised

5,605,700

311

–

311

Share-based payments

–

137

–

137

Balance as of 30 June 2005, as restated

676,877,125

3,814

(3,647)

43,553

(2,775)

40,945

5,276

Earnings attributable to shareholders

–

11,299

–

11,299

1,456

Foreign currency translation adjustments, net of tax

–

1,392

179

Realized and unrealized holding losses from cash flow hedging

activities, net of tax

–

Minimum pension liability adjustment, net of tax

–

Cash dividend payments

–

(3,660)

–

(3,660)

(472)

Share options exercised

6,101,300

431

–

431

Share-based payments

–

169

–

169

Balance as of 30 June 2006

682,978,425

4,414

(3,647)

51,192

(1,291)

50,668

6,529

US dollar information has been presented for the year ended 30 June 2006 on an unaudited basis solely for the convenience of the reader and is computed at the noon
buying rate for customs purposes of R7.76/US dollar, as reported by the Federal Reserve Bank of New York on 29 September 2006.

The accompanying notes form an integral part of these consolidated financial statements.

Sasol Limited and its subsidiaries

Consolidated Statements of Cash Flows

for the years ended

30 June

2006

2005

2004

(US$ millions)*

(Rand in millions)

Note

(Unaudited)

Restated

Cash receipts from customers

10,093

78,324

66,597

58,382

Cash paid to suppliers and employees

(6,973)

(54,109)

(48,729)

(44,543)

Net cash flow from operations

3,120

24,215

17,868

13,839

Interest received

294

116

183

Dividends received

161

Finance costs paid

(40)

(311)

(332)

(368)

Income tax paid

(707)

(5,484)

(3,616)

(4,005)

Net cash generated by operating activities

2,432

18,875

14,097

9,686

Purchase of property, plant and equipment

(1,251)

(9,703)

(10,157)

(8,671)

Purchase of intangible assets

(10)

(79)

(83)

(208)

Investments in equity accounted investees

(236)

(1,831)

(768)

(376)

Interest capitalized

(122)

(949)

(1,038)

(1,082)

Non-current assets sold

629

418

747

Acquisition of businesses, net of cash acquired

28.1

(33)

(259)

–

(247)

Disposal of businesses, net of cash disposed

28.2

587

(46)

254

Proceeds from insurance

159

–

(Increase)/decrease in investments

(14)

(108)

(19)

Increase in long-term receivables

(12)

(93)

(198)

(101)

Net cash utilized in investing activities

(1,516)

(11,766)

(11,732)

(9,677)

Share capital issued on exercising of share options

431

311

109

Acquistion of treasury stock

–

(33)

Dividends paid to minority shareholders

(9)

(73)

(60)

(200)

Dividends paid to shareholders

(472)

(3,660)

(2,856)

(2,748)

Contributions from minority shareholders

–

Proceeds from borrowings

237

1,840

5,911

11,932

Repayment of debt

(649)

(5,035)

(4,957)

(10,789)

Movement in bank overdraft

283

186

(75)

Net cash utilized in financing activities

(801)

(6,214)

(1,465)

(1,729)

Translation effects on cash and cash equivalents

of foreign entities

(7)

(53)

(77)

Net increase/(decrease) in cash and cash

equivalents

108

842

940

(1,797)

Cash and cash equivalents at beginning of year

303

2,350

1,410

3,207

Cash in disposal group held for sale

(49)

(384)

–

Cash and cash equivalents at end of year

362

2,808

2,350

1,410

US dollar information has been presented for the year ended 30 June 2006 on an unaudited basis solely for the convenience of the reader
and is computed at the noon buying rate for customs purposes of R7.76/US dollar, as reported by the Federal Reserve Bank of New York
on 29 September 2006.

The accompanying notes form an integral part of these consolidated financial statements.

F–5

F–6

Sasol Limited and its subsidiaries

Consolidated Statements of Comprehensive Income

for the years ended

30 June

2006

2005

2004

(US$ in millions)*

(Rand in millions)

(Unaudited)

Comprehensive income

Earnings attributable to shareholders

1,456

11,299

9,719

5,237

Other comprehensive income/(loss) for the year
Translation of foreign operations with a functional

currency other than rand, net of tax of
negative R2 million (2005 – negative R1 million,
2004 – R5 million)

179

1,392

(1,084)

Realised and unrealised holding losses from

cash flow hedging activities, net of tax of
negative R70 million (2004 – negative
R38 million, 2004 – R164 million)

(1,086)

Minimum pension liability adjustment, net of

tax of negative R15 million (2005 – R38 million,
2004 – negative R168 million)

(64)

335

Net movement per statements of changes in

shareholders’ equity

191

1,484

(35)

(1,835)

Comprehensive income

1,647

12,783

9,684

3,402

US Dollar information has been presented for the year ended 30 June 2006 on an unaudited basis solely for the convenience of the reader
and is computed at the noon buying rate for customs purposes of R7.76/US dollar, as reported by the Federal Reserve Bank of New York
on 29 September 2006.

The accompanying notes form an integral part of these consolidated financial statements.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements

Nature of business and organisation

Sasol is an integrated oil and gas company with complementary interests in coal, chemicals and the

international development of synthetic-fuel ventures based on our proprietary Fischer-Tropsch (FT) technology.
We mine coal in South Africa and through Sasol Synfuels, we convert this coal, along with Mozambican natural
gas, into fuels and chemical feedstock through our FT technology.

We have significant chemical manufacturing and marketing operations in South Africa, Europe, the United

States and Asia. Our chemical portfolios include monomers, polymers, solvents, co-monomers, waxes,
phenolics, ammonia, fertilisers and commercial explosives.

In South Africa, we refine imported oil into liquid fuels and retail liquid fuels and lubricants produced in

We produce gas in Mozambique for supply to customers and as feedstock for some of our South African

fuel and chemical production.

Formed in 1950, we commenced FT-based production in 1955. We employ more than 31,000 people and

remain one of South Africa’s largest investors in capital projects and skills training.

In 2003, Sasol determined that it would continue to grow its chemical business conditional upon projects

leveraging its technology or securing integrated and highly cost-competitive feedstock positions. The Sasol
Olefins & Surfactants (O&S) business is only partially integrated upstream into feedstocks and has not
adequately provided the integration benefits required. On 1 August 2005, Sasol announced that it was
considering the divestment from its O&S business excluding its activities in comonomers subject to fair value
being obtained. At 30 June 2006, the sales process was sufficiently advanced such that management believe that
the business will be sold, as a going concern, within the next financial year.

With effect from 30 June 2006, the business has been classified as a disposal group held for sale and the

results reported as discontinued operations.

The income statement has been restated for all periods to exclude O&S from continuing operations and

report these results as a single line item. In the 2006 balance sheet the assets and liabilities of O&S have been
classified as held for sale. The cash flow statement and 2005 balance sheet include both continuing and
discontinued operations. On classification as held for sale, the net assets of the business were written down by
R3,1 billion to the estimated fair value less costs to sell.

Further detail is provided in note 12 of the financial statements.

Significant accounting policies

The following accounting policies were applied by the group in the preparation of its consolidated financial

statements at and for the financial years ended 30 June 2006, 30 June 2005 and 30 June 2004.

Basis of preparation

The consolidated financial statements have been prepared in accordance with accounting principles

generally accepted in the United States of America (US GAAP).

Basis of consolidation

The group’s consolidated financial statements include the financial statements of the company, its

subsidiaries and its investments in associates and joint ventures.

F–7

F–8

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Subsidiaries

Companies in which (i) the group is the primary beneficiary of a variable interest entity or (ii) owns more

than 50% of the voting rights in an entity that is not a variable interest entity, except where minority
shareholders retain substantive participating rights, are classified as subsidiaries. Entities, other than variable
interest entities, in which the group owns more than 50% of the voting rights, but minority shareholders retain
substantive participating rights, are accounted for according to the equity method of accounting. The results of
any subsidiary acquired or disposed of during the year are consolidated from the acquisition date or up to the
disposal date.

Inter-company transactions and balances are eliminated on consolidation.

Sasol Italy SpA, a wholly owned and consolidated subsidiary (forming part of the O&S divesture group),

has a statutory year end of 31 May and is included in the consolidated accounts up to that date. An adjustment to
the Sasol Italy SpA financial statements to 30 June, the group’s year end, would not result in a material effect on
reported balance sheets and income statements.

Investments in equity investees (associates and incorporated joint ventures)

Investments in associates

An associate is an entity other than a subsidiary in which the group has a material long-term interest and in

respect of which the group has the ability to exercise significant influence over operational and financial
policies, normally owning between 20% and 50% of the voting equity.

Investments in incorporated joint ventures

A joint venture is an entity in which the group holds a long-term interest and which is jointly controlled by

the group and one or more external joint venture partners in terms of a contractual arrangement.

Investments in associates and joint ventures are accounted for using the equity method. Subsequent to the

acquisition date, the group’s share of profits or losses of associates and joint ventures is recognized in the
income statement as equity accounted earnings and its share of movements in equity reserves is recognized
directly in the statement of changes in shareholders’ equity. All cumulative post-acquisition movements in the
equity of associates and joint ventures are adjusted against the cost of the investment.

Goodwill relating to associates and joint ventures is included in the carrying value of the group’s

investment in those entities. The total carrying value of equity accounted investments in associates and joint
ventures, including goodwill, is evaluated for impairment when conditions indicate that a decline in fair value
below the carrying amount is other than temporary or at least annually on 31 March. When impaired, the
carrying value of the group’s investment in those entities is written down to its fair value. The group’s share of
results of equity accounted investees, that have financial years within three months of the fiscal year-end of the
group, is included in the consolidated financial statements based on the results reported by those investees for
their financial years. There were no significant adjustments required to be made in respect of equity accounted
investees which have financial years that are different to those of the group.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Foreign currency

The reporting currency of the group is rand.

The exchange rates used in preparation of the consolidated financial statements were as follows:

Rate

30 June 2006

30 June 2005

30 June 2004

Rand/US dollar exchange rate

Closing

7.17

6.67

6.21

Average

6.41

6.21

6.88

Rand/euro exchange rate

Closing

9.17

8.06

7.57

Average

7.80

7.89

8.19

Foreign currency translation

Foreign operations with a functional currency other than rand

In respect of foreign operations with a functional currency other than rand, assets and liabilities, which

include fair value adjustments arising on acquisition, are translated into rand at the closing rate of exchange
ruling at the balance sheet date. Results of operations are translated at the average rate of exchange for the year.
Exchange differences arising on translation are classified as foreign currency translation adjustments in
shareholders’ equity and included in determining other comprehensive income.

On sale or partial disposal of an investment in a foreign operation, the related cumulative foreign currency

translation included in other comprehensive income is recognized in the income statement.

Translation of foreign currency transactions

Transactions in foreign currencies are translated into the functional currency of the entity at the rate of

exchange ruling at the transaction date.

Monetary assets and liabilities in foreign currencies are translated into the functional currency of the entity

at the closing rate of exchange ruling at the balance sheet date.

Foreign exchange differences arising from the translation of monetary assets and liabilities are recognized

in the income statement in the year in which they arise.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term liquid investments with

a maturity period of three months or less at the date of purchase. Cash and cash equivalents are stated at cost,
which approximates fair value. Cash subject to restrictions has been classified separately on the face of the
balance sheet.

Property, plant and equipment

Property, plant and equipment is stated at cost, less accumulated depreciation and impairment. Land is not

depreciated.

Property, plant and equipment other than mineral and exploration assets is depreciated on the straight-line

method over their estimated useful lives. A review of the useful lives of property, plant and equipment is
performed at least annually. The depreciation rates applied are described in Note 16.

F–9

F–10

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

The cost of self-constructed assets includes expenditure on materials, direct labor and an appropriate

portion of project overheads. Expenditure incurred to replace or modify a significant component of plant is
capitalized and any remaining book value of the component replaced is written off immediately. All other
expenditure on plant renewal is expensed as incurred.

Asset retirement expenditure are recognized as liabilities and a corresponding amount is added to the

carrying value of the asset and depreciated on a straight-line basis over the estimated useful lives of the assets.
Where asset retirement costs relate to mineral or exploration assets, the carrying amount is depreciated using the
units-of-production method.

Assets leased under capital lease agreements are capitalized as property, plant and equipment with the

equivalent amount being shown as a capital lease liability. The amount capitalized is the lower of the fair value
of the leased asset and the present value of the minimum lease payments at the inception of the lease. Lease
payments are allocated between capital repayments and interest payments. Interest is recognized in the income
statement using the effective interest rate method. Capitalized leased assets are depreciated over the shorter of
the lease period or the estimated useful life of the leased asset.

Mineral and exploration assets

Coal mining:

Coal mining exploration expenditure is expensed as incurred until completion of a

feasibility study that has determined that a commercially minable deposit exists. Mining exploration expenditure
incurred subsequent to proved and probable reserves being identified are capitalized.

Exploration and development expenditure in respect of producing mines or development properties is

capitalized only when excavation or drilling has occurred to extend reserves or further delineate a reserve
formation that has already been the subject of a feasibility study that has determined that a commercially
minable deposit exists prior to these exploration expenditure being incurred. Exploration expenditure incurred to
explore outside or around the commercially minable deposit for additional reserves are expensed.

Amortization of capitalized exploration and development expenditure is based on the units-of-production

method using estimated proved and probable coal reserves. A unit is considered to be produced once it has been
removed from underground and taken to the surface, passed the bunker and been transported by conveyor over
the scale at the shaft head. Proved and probable reserves used for the amortization of life-of-mine assets are the
total proved and probable reserves assigned to that specific mine (accessible reserves) or complex which benefit
from the utilisation of those assets. Inaccessible reserves are excluded from the calculation.

Oil and gas:

The successful efforts method is used to account for oil and gas exploration activities.

Geological and geophysical expenditure relating to dry exploratory wells and the costs of carrying and

retaining undeveloped properties are recognized in the income statement as incurred.

On completion of drilling, the group will be able to determine if an exploratory well may have found oil

and gas reserves. The classification of these reserves as proved depends on whether major capital expenditure to
develop the property can be justified as a result of sufficient quantities of additional reserves being identified.

Oil and gas reserves are classified as proved when, upon analysis of geologic and engineering data, it

appears with reasonable certainty to be recoverable in the future from known oil and gas reservoirs under
existing economic and operating conditions.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

The cost of drilling exploratory wells is capitalized as an asset. The costs remain capitalized pending the

determination of whether proved reserves have been found. The following conditions should be met for these
costs to remain capitalized:

• sufficient quantity of reserves to justify the capital expenditure required for the completion of the well as

a producing well;

• drilling of additional exploratory wells is under way or firmly planned for the near future; and

• sufficient progress is being made in assessing the reserves and the economic and operating viability of

the project.

Progress in this regard is assessed to ensure sufficient justification for carrying these costs as an asset. If the

above conditions are not met or if information is obtained that raises doubt about the economic or operating
viability of the project, the costs would be recognized in the income statement.

Expenditure incurred to drill and equip development wells on proved properties are capitalized.

Amortization of capitalized exploration and development is based on the units-of-production method using

estimated proved developed oil and gas reserves, on a field-by-field basis. Depletion, depreciation and
amortization of property acquisition costs is determined using the units-of-production method over proved
reserves, on a field-by-field basis.

Capitalization of interest costs

Interest costs are capitalized during the construction period of qualifying assets (an asset that necessarily

takes a substantial period of time to get ready for its intended use or sale) and on the group’s investments in
equity accounted investee’s while the investee has activities in progress necessary to commence its planned
principal operations, provided that the equity accounted investee’s activities include the use of funds to construct
qualifying assets for its operations. All other interest costs are expensed as incurred.

Goodwill and intangible assets

Goodwill

Goodwill is stated at cost and is not subject to amortization. Goodwill is tested for impairment at the

reporting unit level on an annual basis on 31 March, or more frequently if the group believes indicators of
impairment exist. The performance of the test involves a two step process. The first step of the impairment test
involves comparing the fair value of the reporting unit with the reporting unit’s carrying amount, including
goodwill. The fair value of the reporting unit is determined based on estimated future discounted cash flows. If
the carrying amount of the reporting unit exceeds the reporting unit’s fair value, we perform the second step of
the goodwill impairment test to determine the amount of the impairment necessary. The second step of the
goodwill impairment test involves comparing the implied fair value of our reporting unit’s goodwill with the
carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied
fair value of that goodwill, an impairment loss is recognized in the income statement.

F–11

F–12

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Intangible assets

Amortizable intangible assets are stated at cost and are amortized over their respective estimated useful

lives on a straight-line basis. Amortization rates are described in Note 15.

Intangible assets with an indefinite life are reviewed for impairment at least annually on 31 March or

whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets
may not be recoverable. Recoverability of an asset or asset group is assessed by comparing the carrying amount
of an asset or group of assets to the estimated future undiscounted net cash flows of the asset or group of assets.
If an asset or asset group is considered to be impaired, the impairment recognized is measured as the amount by
which the carrying amount of the asset or group of assets exceeds the discounted future cash flows expected to
be derived from that asset or group of assets.

Further details relating to the impairment assessment of intangible assets are provided in the accounting

policy on impairment of long-lived assets.

Patents and trademarks

Purchased patents and trademarks are capitalized and amortized on a straight-line basis over their estimated

useful lives. Expenditure incurred to extend the life of patents or trademarks is capitalized and amortized over
the remaining estimated useful life of the assets. All other expenditure is recognized in the income statement as
incurred

Capitalized software

Purchased software and the direct costs associated with the customization and installation thereof are

capitalized and amortized on a straight-line basis from the date of commissioning over its expected useful life.

Software development costs not qualifying for capitalization are recognized in the income statement as

incurred.

Emission rights

Emission rights allowances granted by government or a government agency are recorded at fair value at the

time of issue. Purchased emission rights are recorded at acquisition cost. The emission rights allowances are
capitalized as indefinite life intangible assets.

Environmental and asset retirement obligations

An accrual for environmental remediation is recorded when it is probable that a liability has been incurred

and the amount of the liability can be reasonably estimated. Expenditure related to environmental contamination
treatment and cleanup is expensed.

Environmental expenditure is capitalized in recognition of legal asset retirement obligations resulting from

the acquisition, construction and/or normal operation of a long-lived asset, following Statement of Financial
Accounting Standards No. 143, Accounting for asset retirement obligations (SFAS 143). The fair value of
obligations relating to dismantling and restoring production sites, in accordance with regulatory requirements, is
accrued as the obligation arises, if estimable, concurrent with the recognition of an increase in the related asset’s
carrying value. The increase in the related asset’s carrying value is depreciated over the asset’s estimated useful
life. Fair value is determined by discounting estimated future cash flows at a discount rate at the time of initial

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

recognition, which reflects the terms of the obligation adjusted for the entity’s credit risk. The discount
associated with the liability is accreted as a charge to income over the period leading up to the expected timing
of the cash flow. The dismantling and restoration costs will be recognized in the income statement over the life
of the related assets and will be adjusted for changes resulting from the passage of time (accretion expense) and
revisions to either the timing or amount of the original present value estimate.

The environmental and asset retirement obligations are based on best estimates of future expenditure using

currently available technology and applying current regulations.

Business combinations

Acquisitions made by the group are accounted for using the purchase method, in terms of which assets

acquired and liabilities assumed are recorded at fair value, reflecting their condition at the acquisition date. The
excess of the cost of an acquisition over the fair value of the group’s interest in the net identifiable tangible and
intangible assets of an entity acquired at the acquisition date is recognized as goodwill.

Issue of shares by a subsidiary

When a subsidiary issues additional shares to external parties and the issue price per share is more or less

than the group’s average carrying amount per share, a gain or loss is recognized in the income statement in the
period that the change of interest transaction occurs, as long as the transaction does not form part of a broader
corporate re-organization of the group.

Investments in securities

Investments in marketable equity and debt securities are classified into one of three categories, namely

held-to-maturity, available-for-sale, or trading securities.

Investments in debt securities that the group has the positive intent and ability to hold to maturity are

classified as held-to-maturity securities and stated at amortized cost in the balance sheet.

Marketable equity or debt securities not classified as either held-to-maturity or trading securities are

classified as available-for-sale securities and stated at fair value, with changes in fair value, net of related taxes,
included in other comprehensive income. If the investment is disposed of, the cumulative change in fair value in
respect of that investment is recognized in the income statement. Unrealized losses, to the extent they arise from
a decline in fair value that is assessed to be other than temporary, are recognized in the income statement.

Unlisted investments that are classified as available-for-sale securities, other than those accounted for under

the equity method, are carried at cost.

The group had no trading securities at 30 June 2006 and 30 June 2005.

Purchases and sales of investments in securities are recorded on trade date. Realized gains and losses on

disposal of investments in securities, other than trading securities are recognized in the income statement as
incurred.

F–13

F–14

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Impairment of long-lived assets

Long-lived assets, other than goodwill and intangible assets, including capitalized software, are reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable. Recoverability of an asset or asset group is assessed by comparing the
carrying amount of the asset or group of assets to the estimated future undiscounted net cash flows of the asset
or asset group. If an asset or asset group is considered to be impaired, the impairment recognized is measured as
the amount by which the carrying amount of the asset or asset group exceeds the discounted future cash flows
expected to be derived from that asset or group of assets.

When the group decides to exit or sell a long-lived asset or group of assets and the asset or group of assets

meets the requirements to be classified as assets held-for-sale, the carrying value of these assets is adjusted
downward, if necessary, to the estimated sales price, less costs to sell and the long-lived asset or group of assets
are reclassified as held-for-sale.

Inventories

Inventories are valued at the lower of cost and market value. Cost includes expenditure incurred in

acquiring, manufacturing and transporting the inventory to its present location. Cost is determined as follows:

Crude oil and other raw materials

First-in-first-out valuation method (FIFO)

Process, maintenance and other materials

Weighted average purchase price

Work-in-progress

Material costs incurred and allocation of direct
labor and overheads

Manufactured products

Manufacturing cost using FIFO

Consignment inventory

Manufacturing cost using FIFO

Trade and other receivables

Trade and other receivables are stated at cost less provision for doubtful debts. Bad debts are recognized in

the income statement during the year in which they are identified.

Contingent obligations

An estimated loss arising from a contingent obligation is accrued as a liability when information available

prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a
liability had been incurred at the date of the financial statements and the amount of the loss can be reasonably
estimated.

Trade and other payables

Trade and other payables are stated at cost.

Comprehensive income

Comprehensive income represents changes in shareholders’ equity, net of tax, excluding investments by and

distributions to shareholders. The group’s comprehensive income comprises attributable earnings, foreign
currency translation adjustments, changes in the fair value of derivative instruments designated as cash flow
hedges and minimum pension liability adjustments.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Dividends payable

Dividends payable are recognized as a liability when declared.

Income tax

Deferred income taxes

Income taxes are determined by applying the asset and liability method. Deferred tax assets and liabilities

are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carry-
forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. Deferred tax assets are reduced by a valuation allowance to the amount that management
believes is more likely than not to be realized.

Secondary Taxation on Companies (STC)

STC is a tax levied by the South African Revenue Service on dividends declared and becomes payable on

declaration of a dividend by a South African entity. STC is recognized in the income statement when the related
dividends are declared.

When dividends received in the current year can be offset against future dividend payments to reduce the STC
liability, a deferred tax asset is recognized to the extent of the future reduction in STC.

Turnover

Turnover is realized and earned when title and the risks and rewards of ownership have been transferred to

the buyer and all of the following criteria have been met:

• persuasive evidence of an arrangement exists;

• delivery has occurred or services have been rendered;

• the seller’s price to the buyer is fixed or determinable; and

• collectibility is reasonably assured.

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. These transactions are combined and accounted
for as a single exchange transaction. The exchange is recognized at the carrying amount of the inventory
transferred.

Taxes assessed by a governmental authority that are directly imposed on our revenue-producing

transactions which are collected from customers and remitted to the governmental authority are presented on a
net basis (excluded from turnover) in the income statement.

Further descriptions of the recognition of turnover for the various reporting segments are included in

Note 3 – Segmental analysis.

F–15

F–16

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Shipping and handling fees

Shipping and handling fees are included in cost of sales and the related amounts charged to customers are

included in turnover.

Operating leases

Lease payments under an operating lease are expensed on a straight-line basis over the lease term.

Research and development expenditure

The costs of research and development expenditure are expensed as incurred.

Derivative instruments

All derivative instruments are stated as assets or liabilities on the balance sheet at fair value, regardless of

the purpose or intent for holding them.

Derivative instruments are financial instruments and other contracts:

• which have one or more underlying variable (i.e. a specified interest rate, commodity price, foreign

exchange rate or similar variable) and either one or more notional amounts (i.e. a number of currency
units, shares or other units) or payment provisions or both;

• that require little or no initial net investment; and

• whose payment terms require or permit net settlement.

The group uses derivative instruments to reduce its exposure to fluctuations in foreign currencies, interest

rates, and commodity prices. The group does not deal in speculative trading of derivative instruments. The group
designates certain foreign currency related derivative financial instruments which hedge exposure to variability
in cash flows that are either attributable to a particular risk associated with a recognized asset or liability or a
forecasted transaction, as cash flow hedges when such derivative instruments effectively meet pre-determined
criteria. In instances where a derivative instrument is designated as a cash flow hedge, the effective part of any
change in fair value of the derivative instrument is recognized in other comprehensive income in the statement of
changes in shareholders’ equity. It is subsequently recognized in the income statement over the same period as
the hedged item is recognized in the income statement. The ineffective part of any change in fair value is
immediately recognized in the income statement.

All other derivative instruments are measured at fair value at each reporting date with the resulting change

in fair value immediately recognized in the income statement. Further information on the group’s financial
instruments is included in Note 25.

Employee benefits

Pension plans

The group operates defined benefit and defined contribution pension plans for its employees.

Contributions to defined contribution pension plans and pension expenses are recognized in the income

statement as incurred.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Defined benefit plan pension expenses are calculated and recognized in the income statement in accordance

with Statement of Financial Accounting Standards (SFAS) No. 87, Employers’ accounting for pensions
(SFAS 87).

The projected unit credit method is used to determine the accrued benefit obligations based on completed

service and to value the plans’ assets at fair value.

Independent actuarial valuations are prepared annually using a market-related discount rate and an

individual best-estimate approach for the other assumptions that are pertinent to valuing the accrued obligations.
The actuarial gains and losses, that emerge when individual plans’ performance differs from the assumptions
made, are accumulated and amortized, over the future service lives of employees or the remaining life
expectancy of inactive participants, if they exceed 10% of the greater of the projected benefit obligation or the
market-related value of plan assets of the associated plan at the beginning of the year. Prior service costs or
credits that arise from plan amendments are amortized by assigning an equal amount to each future period of
service of each employee active at the date of the amendment who is expected to receive benefits under the plan.
Where all or almost all of the plans’ participants are inactive, the costs of retroactive plan amendments are
amortized based on the remaining life expectancy of those participants.

The amount recorded in the balance sheet is the accumulated difference between the pension expense and

the contributions paid in respect of that plan. The balance sheet provision or prepayment will differ from the
funded status of the plan to the extent that there are unamortized actuarial gains or losses or unamortized prior
service costs or credits.

The group records a non-cash charge to accumulated other comprehensive income to recognize any

additional minimum pension liability in accordance with SFAS 87, which requires that a liability be recognized
at year end in an amount equal to the amount by which the Accumulated Benefit Obligation (ABO) exceeds the
fair value of the defined benefit pension plan assets. The additional minimum pension liability is recorded by
recognizing an intangible asset to the extent of any unrecognized prior service costs and unrecognized transition
obligations.

Post-retirement healthcare

Post-retirement healthcare expenses are calculated and recognized in the income statement in accordance

with Statement of Financial Accounting Standards No. 106, Employers’ accounting for post-retirement benefits
other than pensions (SFAS 106). The projected unit credit method is used to determine the accrued benefit
obligations based on completed service. The post-retirement healthcare plans are unfunded.

Independent actuarial valuations are prepared annually using a market-related discount rate and an

individual best-estimate approach for the other assumptions that are pertinent to valuing the accrued obligations.
The actuarial gains and losses that emerge when the plans’ experience differs from the assumptions made are
recognized in the period in which they arise, as permitted by SFAS 106. Prior service costs or credits that arise
from plan amendments are amortized by assigning an equal amount to each future period of service of each
employee active at the date of the amendment that is expected to receive benefits under the plan.

The amount stated in the balance sheet will differ from the Accumulated Projected Benefit Obligation

(APBO) to the extent that there are unamortized prior service costs or credits.

F–17

F–18

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Share-based payments

The Sasol Share Incentive Scheme allows certain senior group employees the option to acquire shares in

Sasol Limited over a prescribed period. The exercise price of these options equals the market price of the
underlying shares on the trading day immediately preceding the granting of the option.

Effective 1 July 2005 the provisions of Statement of Financial Accounting Standards No. 123R, Share-

based payment (SFAS 123(R)), were adopted under the modified retrospective transition method for the Sasol
Share Incentive Scheme. The group applied the modified retrospective transition method of SFAS 123(R) by
adjusting the financial results of prior periods to reflect the fair value method of expensing share-based payments
for all awards which had not vested as at 1 July 2000, on a basis which is consistent with the pro-forma
disclosures required for those periods in terms of SFAS 123. The group adopted the disclosure requirement of
SFAS 123 effective from 1 July 2000, upon listing on the NYSE and filing of its registration statement
on 6 March 2003.

The group previously applied the intrinsic value-based method of accounting prescribed by Accounting

Principles Board Opinion No. 25, Accounting for stock issued to employees (APB 25), and related interpretations
and disclosure requirements established by SFAS 123, Accounting for stock-based compensation, and SFAS 148,
Accounting for stock-based compensation–transition and disclosure–an amendment of FASB Statement No. 123.

Under the provisions of SFAS 123(R), share-based payments are measured at the grant date, based on the

calculated fair value of the award, and recognized as an expense over the employee requisite service period
(generally the vesting period of the equity grant).

A description of the group share-based payment plan, information related to options granted under the plan

and additional information on the adoption of SFAS 123(R) is provided in Note 23.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

The table below presents a reconciliation of retained earnings, stated share capital, earnings attributable to

shareholders, cost of sales, net (loss)/income from discontinued operations and earnings per share to the restated
results for the years ended:

Years ended

30 June

2005

2004

(Rand in millions)

Retained earnings as previously reported

44,011

37,080

Effect of change in method of accounting for share-based payment plan

(458)

(390)

Retained earnings, as restated

43,553

36,690

Stated share capital as previously reported

3,356

2,976

Effect of change in method of accounting for share-based payment plan

458

390

Stated share capital, as restated

3,814

3,366

Earnings attributable to shareholders as previously reported

9,787

5,358

Add: Share-based payment expense as prescribed under APB25

Deduct: Share-based payment expense as prescribed under SFAS 123 (R)

(137)

(146)

Earnings attribuatble to shareholders, as restated

9,719

5,237

Cost of sales before effect of change in accounting principle

(25,053)

(23,170)

Add: Share-based payment expense as prescribed under APB25

Deduct: Share-based payment expense as prescribed under SFAS 123 (R)

(128)

(137)

Cost of sales, as restated

(25,112)

(23,282)

Net (loss)/income from discontinued operations before effect of change in

accounting principle

117

(130)

Effect of change in method of accounting for share-based payment plan

(9)

Net (loss)/income from discontinued operations, as restated

108

(139)

30 June

2005

2004

Rand

Earnings per share
Basic earnings per share
Earnings per share as previously reported

15.94

8.78

Effect of change in method of accounting for share-based payment plan

(0.11)

(0.20)

Earnings per share, as restated

15.83

8.58

Diluted earnings per share
Diluted earnings pe share as previously reported

15.76

8.74

Effect of change in mnethod of accounting for share-based payment plan

(0.11)

(0.20)

Diluted earnings per share, as restated

15.65

8.54

There was no income tax recognised as a consequence of the share based payment plan.

F–19

F–20

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Treasury shares

When Sasol Limited’s shares are repurchased the amount paid is recorded as a deduction from total

shareholders’ equity in the statement of changes in shareholders’ equity.

Comparative information

Certain prior year balances have been reclassified to conform with the current year’s presentation.

Use of estimates

The group has prepared the financial statements in conformity with accounting principles generally

accepted in the United States of America. Preparation of these financial statements require group management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of turnover and
expenses during the reporting period. Actual results could differ from those estimates.

Segmental reporting

The group’s primary reporting segments are:

• Sasol Mining

• Sasol Synfuels

• Sasol Oil (previously Sasol Liquid Fuels Business)

• Sasol Gas

• Sasol Synfuels International

• Sasol Polymers

• Sasol Solvents

• Sasol Olefins & Surfactants (discontinued operations)

• Classified as “Other Businesses” in the segment report:

• Sasol Wax

• Sasol Nitro

• Sasol Technology

• Sasol Petroleum International

• Sasol Financing

• Sasol Infrachem

• Merisol

• and the group’s corporate head office

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Segmental analysis is reported on a reporting segment basis using a management approach. This approach

is based on the way management organizes segments within the group for making operating decisions and
assessing performance. Additional geographical disclosure is provided. Segment results have been reported for
the years presented and are described in Note 3.

Convenience translation to United States dollars

The functional currency of Sasol Limited and the reporting currency of the group is rand. This currency

reflects the economic substance of the underlying events and circumstances of the group. Solely for the
convenience of the reader, US dollar information has been presented on an unaudited basis for the 2006
Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Statement of Changes in
Shareholders’ Equity, Consolidated Statement of Cash Flow, and Consolidated Statement of Comprehensive
Income. The convenience translation should not be construed as a representation that the rand amounts have
been, could have been, or could in the future be, converted into US dollars at the noon buying rate for custom
purposes as reported by the Federal Reserve Bank of New York.

Recent accounting pronouncements

The following recent accounting pronouncements which are applicable to the group have been issued by

the FASB and have been adopted by the group during 2006:

Statement of Financial Accounting Standards No. 123R, Share-based payment (SFAS 123(R)), FSP FAS
123(R)-1, FSP FAS 123(R)-2, FSP FAS 123(R)-3 and FSP FAS 123(R)-4

The standard requires the measurement of the cost of employees services received in exchange for an

award of equity instruments based on the grant-date fair value of the award. The cost will be recognized over the
period during which the employees are required to provide service in exchange for the reward.

The group adopted SFAS 123(R) and the related FASB Staff Positions retrospectively from 1 July 2005 for

all periods presented. The impact of adopting this standard is set out in these accounting policies.

Statement of Financial Accounting Standards No. 151, Inventory costs, an amendment of ARB No. 43,
Chapter 4 (SFAS 151)

In November 2004, the FASB issued SFAS 151 which amends the guidance in Accounting Research

The group adopted SFAS 151 effective from 1 July 2005. The adoption of this standard did not have a

material impact on the group’s results of operations, financial position or liquidity.

F–21

F–22

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Statement of Financial Accounting Standards No. 153, Exchanges of nonmonetary assets, an amendment to
APB Opinion No. 29 (SFAS 153)

SFAS 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar

The group adopted SFAS 153 effective from 1 July 2005. The adoption of this standard did not have a

material impact on the group’s results of operations, financial position or liquidity.

FASB Interpretation No. 47, Accounting for conditional asset retirement obligations, an interpretation of
FASB Statement No. 143 (FIN 47)

In March 2005, the FASB issued FIN 47, which is effective for the group from 1 July 2005. FIN 47

clarifies that the phrase “conditional asset retirement obligation,” as used in SFAS 143, refers to a legal
obligation to perform an asset retirement activity for which the timing and/or method of settlement are
conditional on a future event that may or may not be within the control of the company. The obligation to
perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or
method of settlement. Uncertainty about the timing and /or method of settlement of a conditional asset
retirement obligation should be factored into the measurement of the liability when sufficient information exists.
It is acknowledged in SFAS143 that in certain cases, sufficient information may not be available to reasonably
estimate the fair value of an asset retirement obligation. FIN 47 clarifies when an entity would have sufficient
information to reasonably estimate the fair value of an asset retirement obligation.

There were no additional asset retirement obligations requiring recognition by the group as a result of the

initial adoption of FIN 47 with effect from 1 July 2005.

EITF Issue 06-3, How taxes collected from customers and remitted to governmental authorities should be
presented in the income statement (that is, gross versus net presentation) (EITF 06-3)

During its meeting in March 2006 the EITF reached tentative conclusion on how taxes, assessed by a

The group has adopted the guidance of EITF 06-3 and presents taxes within the scope on a net basis

(excluded from revenue). The EITF was considered in the presentation of the group financial statements. The
adoption of this guidance had no impact on the group’s accounting policies.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

EITF Issue 04-6, Accounting for stripping costs incurred during production in the mining industry
(EITF 04-6)

During 2004, a committee of the EITF began discussing the accounting treatment for stripping costs

The group adopted EITF 04-6 effective from 1 July 2005. The adoption of this standard did not have a

material impact on the group’s results of operations, financial position or liquidity or the group’s accounting
policies.

EITF Issue No. 04-13, Accounting for purchases and sales of inventory with the same counterparty (EITF 04-13)

The EITF reached consensus on EITF 04-13 at its September 2005 meeting. This issue addresses when it is

appropriate to measure purchases and sales of inventory at fair value and record the effect of this transaction in
cost of sales and turnover and when these transactions should be recorded as exchanges measured at book value
of the item sold. It was concluded that purchases and sales of inventory with the same counterparty that are
entered into in contemplation of one another should be combined and recorded as exchanges measured at book
value of the items sold.

The group adopted EITF 04-13 effective from 1 July 2005. The adoption of this standard did not have a

material impact on the group’s results of operations, financial position or liquidity.

EITF Issue No. 03-13, Applying the conditions in Paragraph 42 of FASB Statement No. 144, Accounting for
the impairment or disposal of long-lived assets, in determining whether to report discontinued operations
(EITF 03-13)

In November 2004, the EITF reached a consensus on EITF 03-13 on evaluating whether the criteria in

paragraph 42 of Statement of Financial Accounting Standards No. 144, Accounting for the impairment or
disposal of long-lived assets, have been met for the purposes of classifying the results of operations of an entity
that either has been disposed or classified as held for sale as discontinued operations.

The group adopted EITF 03-13 effective from 1 July 2005. The EITF was considered in the presentation of

the group financial statements.

The following recent accounting pronouncements which are applicable to the group but not yet effective have
been issued by the FASB and have not been adopted by the group:

FASB Interpretation No. 48, Accounting for uncertainty in income taxes–an interpretation of FASB
Statement No. 109 (FIN 48)

In July 2006, the FASB issued FIN 48 which prescribes a recognition threshold and measurement attribute

for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. The evaluation of a tax position in accordance with this interpretation firstly requires the determination
whether it is more likely than not that a tax position will be sustained upon examination, based on the technical
merits of the position and secondly the position is measured to determine the amount of benefit to be recognized
in the financial statements. The Interpretation also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective in fiscal years
beginning after 15 December 2006. The provisions of FIN 48 are to be applied to all tax positions upon initial
adoption, with the cumulative effect adjustment reported as an adjustment to the opening balance of retained
earnings.

F–23

F–24

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

The group is in the process of evaluating the impact of this pronouncement and it is believed that it will not

have a material impact on our results of operations, financial position or liquidity.

FASB Staff Position No. FAS 13-1, Accounting for rental costs incurred during a construction period
(FSP No. 13-1)

In October 2005, the FASB issued FSP FAS 13-1 which addresses the accounting for rental costs

The group is in the process of evaluating the impact of this pronouncement and it is believed that it will not

have a material impact on our results of operations, financial position or liquidity.

FASB Staff Position No. FAS 115-1 and FAS 124-1, The meaning of other-than-temporary impairment and
its application to certain investments (FSP FAS 115-1 and FAS 124-1)

In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1 providing guidance for the

The group is in the process of evaluating the impact of this pronouncement and it is believed that it will not

have a material impact on our results of operations, financial position or liquidity.

FASB Staff Position No. FIN 46(R)-6, Determining the variability to be considered in applying
FASB Interpretation No. 46(R) (FSP FIN 46(R)-6)

In April 2006, the FASB issued FSP FIN 46(R)-6 to address how to determine the variability to be

The group is evaluating the impact of this statement and believes that it will not have a material impact on

our results of operations, financial position or liquidity.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant accounting policies (Continued)

Statement of Financial Accounting Standards No. 158, Employers’ accounting for defined benefit and other
postretirement plans, an amendment to FASB Statements No. 87, 88, 106 and 132(R) (SFAS 158)

On 29 September 2006, the FASB issued SFAS 158 which improves financial reporting by requiring an

employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes
in that funded status in the year in which the changes occur through comprehensive income. This statement also
improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its
year-end statement of financial position, with limited exceptions. SFAS 158 requires a company to initially
recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of
the end of the year ending after 15 December 2006. The requirement to measure plan assets and benefit
obligations as of the date of the employer’s fiscal year-end is effective for years ending after 15 December 2008.

The group is in the process of evaluating the impact of this pronouncement on our results of operations,

financial position or liquidity.

Staff Accounting Bulletin No. 108, Considering the effects of prior year misstatements when quantifying
misstatements in current year financial statements (SAB108)

In September 2006, the SEC issued SAB 108. SAB 108 provides interpretive guidance on how the effects

of prior-year uncorrected misstatements should be considered when quantifying misstatements in the curent year
financial statements. SAB 108 requires registrants to quantify misstatements using both an income statement
(rollover) and balance sheet (iron curtain) approach and evalute whether either approach results in a
misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior errors
that have been previously considered immaterial now are considered material based on either approach, no
restatement is required so long as management properly applied its previous approach and all relevant facts and
circumstances were considered. If prior years are not restated, the cumulative effect adjustment is recorded in
opening accumulated earnings (deficit) as of the beginning of the fiscal year of adoption. SAB 108 is effective
for fiscal years ending on or after 15 November 2006, with earlier adoption encouraged. The group is currently
in the process of assessing the impact the adoption of SAB 108 will have on its financial statements.

Segmental analysis

Reporting segments

The group has eight main reportable segments that comprise the structure used by the Group Executive

Committee (GEC) to make key operating decisions and assess performance as noted in our significant
accounting policies.

As a result of the intended sale of Sasol O&S, the chief operating decision maker (CODM) has elected to

transfer the comonomers business, which does not form part of the divestiture group, to the solvents business
unit. Comparative information has been restated accordingly.

The group’s reportable segments are operating segments that are differentiated by the activities that each

undertakes and the products they manufacture and market. They are managed separately because each business
utilizes different technology, manufacturing and marketing strategies.

The group evaluates the performance of its reportable segments based on operating profit. The group

accounts for inter-segment sales and transfers as if the sales and transfers were entered into under the same
terms and conditions as would have been entered into in a market related transaction.

F–25

F–26

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

The financial information of the group’s reportable segments is reported to the chief operating decision

maker for purposes of making decisions about allocating resources to the segment and assessing its performance.
The measurements of reportable segments’ profitability and assets are reconciled to the amounts reported in the
group’s consolidated financial statements prepared in accordance with accounting principles generally accepted
in the United States of America.

The group has formed significant joint ventures to promote Sasol technology and products internationally.

The group is promoting and marketing its gas-to-liquids (GTL) technology for converting remote or flared
natural gas into new-generation, low-emission GTL diesel, GTL naphtha and other products. It is envisaged that
Sasol Synfuels International (SSI) through the recent development of the GTL plants in Qatar and Nigeria would
contribute significantly to the group results and will contribute to the growing of a global GTL business in the
future. Consequently the chief operating decision maker has chosen to include SSI as a reportable operating
segment. SSI did not meet any of the quantitative thresholds but has been considered reportable and has been
separately disclosed in terms of SFAS 131, Disclosures about segments of an enterprise and related information,
as the chief operating decision maker believes that the information about SSI would be useful to readers of the
financial statements.

The financial information presented to our chief operating decision maker, including the financial

information of the group’s reportable segments, is presented in accordance with International Financial
Reporting Standards (IFRS). Since the IFRS financial information is the basis on which segmental financial
decisions are based, resources are allocated and performance is assessed, this is the accounting basis for segment
reporting that is required to be disclosed.

The IFRS segment reporting information is reconciled to the amounts reported in the group’s consolidated

financial statements prepared in accordance with accounting principles generally accepted in the United States of
America for all years presented.

Sasol Mining

Sasol Mining’s activities include the mining and supply of coal to other segments including Sasol Synfuels,

other group companies and to third parties.

Sasol Mining sells coal under both long-term and short-term contracts at a price determinable from the

agreements. Turnover is recognized upon delivery of the coal to the customer, which, in accordance with the
related contract terms is the point at which the title and risks and rewards of ownership pass to the customer,
prices are fixed or determinable and collectibility is reasonably assured. Shipping and handling costs are
included in turnover when billed to customers in conjunction with the sale of the product.

The related costs of sales are recognized in the same period as the supply of the coal and include any

shipping and handling costs incurred. All inter-segment sales are conducted at market related prices.

Sasol Synfuels

Sasol Synfuels’ activities include the production of synthesis gas from coal, supplied by Sasol Mining,

using in-house technology to convert this into a wide range of liquid fuels intermediates and petrochemicals.
Sasol Synfuels also provides chemical feedstock to, amongst others, Sasol Olefins & Surfactants, Sasol
Polymers and Sasol Solvents.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

Sasol Synfuels sells synfuels, chemical feedstock and industrial pipeline gas under contracts at prices

determinable from the agreements. Turnover is recognized for the liquid fuel intermediates and petrochemicals
when the title and risks and rewards of ownership pass to the customer, which is when the product has passed
over the appropriate weigh bridge or flow meter, prices are fixed or determinable and collectibility is reasonably
assured.

Sasol Oil

Sasol Oil is responsible for the group’s crude oil refining activities and for blending and marketing of all

liquid fuels and lubricants.

Sasol Oil sells liquid fuels products under both short-term and long-term agreements for both retail sales

and commercial sales including sales to other oil companies. The prices are regulated and fixed by South African
law for retail sales, and the prices are fixed and determinable according to the specific contract with periodic
price adjustments for commercial sales and sales to other oil companies. Laboratory tests of the fuel
specifications and content are performed prior to delivery. Turnover is recognized under the following
arrangements:

• Commercial sales transactions and sales to other oil companies: when product is delivered to the

customer site, which is the point where the risks and rewards of ownership and title of the product
transfer to the customer, and collectibility is reasonably assured.

• Dealer-owned supply agreements and franchise agreements: upon delivery of the product to the customer,

which is the point where the risks and rewards of ownership of the product transfer to the customer. Title
under these contracts is retained to enable recovery of the goods in the event of customer default on
payment. The title to the goods does not enable the group to dispose of the product or rescind the
transaction, and cannot prevent the customer from selling the product.

Turnover for the supply of fuel is based on measurement through a flow-meter into customers’ tanks.

Shipping and handling costs are included in turnover when billed to customers in conjunction with the sale

of a product. The related costs of sales are recognized in the same period as the turnover.

Sasol Gas

Sasol Gas’ activities include the marketing of clean-burning pipeline gas sourced from Sasol Synfuels and

natural gas from the Mozambican gas fields.

Sasol Gas sells gas under long-term contracts at a price determinable from the agreements. Turnover is

recognized 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 passes to the customer, and where prices are determinable and collectibility is
reasonably assured. Gas analysis and tests of the specifications and content are performed prior to delivery.

Transportation and handling costs are included in turnover when billed to customers in conjunction with the

sale of a product. The related costs of sales are recognized in the same period as the turnover.

F–27

F–28

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

Sasol Synfuels International

Sasol Synfuels International (SSI) is responsible for developing, implementing and managing international

business ventures based on Sasol’s Fischer-Tropsch synthesis technology. SSI is also involved in the
development of GTL fuels and production of other chemical products from GTL derived feedstock.
SSI is currently involved in the establishment of two GTL production facilities in Qatar and Nigeria and is
conducting feasibility studies at various other locations around the world.

Turnover is derived from the rendering of engineering services to external partners in joint ventures upon

the proof of completion of the service.

Sasol Polymers

Sasol Polymers focuses on the production of monomers, polypropylene, polyethylene, vinyls and other

chemical products through its respective businesses.

Sasol Solvents

Sasol Solvents primarily manufactures and markets globally a range of oxygenated solvents and chemical

intermediates to various industries.

Sasol Olefins & Surfactants (discontinued operations)

Sasol Olefins & Surfactants manufactures and markets globally a diverse range of surfactants, surfactant

intermediates, alcohols, monomers and inorganic speciality chemicals.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

The above chemical industry segments (Sasol Polymers, Sasol Solvents and Sasol Olefins & Surfactants)

sell much of their products under contracts at prices determinable from such agreements. Turnover is recognized
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 collectibility is
reasonably assured. Turnover on consignment sales is recognized on consumption by the customer, when title
and the risks and rewards of ownership pass to the customer, prices are determinable and collectibility is
reasonably assured. Product quality is safeguarded through quality assurance programs. The date of delivery is
determined in accordance with the contractual agreements entered into with customers which are briefly
summarized as follows:

Delivery terms

Title and risks and rewards of ownership pass to the customer

Ex-Tank sales

When products are loaded into the customer’s vehicle or unloaded
from the seller’s storage tanks.

Carriage Paid To (CPT)

On delivery of products to a specified location (main carriage is paid
for by the seller).

Free on Board (FOB)

When products are loaded into the transport vehicle – customer is
responsible for shipping and handling costs.

Cost Insurance Freight (CIF) and
Cost Freight Railage (CFR)

When products are loaded into the transport vehicle – seller is
responsible for shipping and handling costs which are included in the
selling price.

Proof of Delivery (POD)

When products are delivered to and signed for by the customer.

Consignment Sales

As and when products are consumed by the customer.

Other Businesses

Other businesses include the group’s treasury, upstream exploration and production activities, production

and marketing of wax and wax related products, manufacturing of ammonia and its derivatives, research and
development activities, synthesis gas, manufacturing of phenolics and cresylics and central administration
activities.

F–29

F–30

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

The results of the reporting segments were as follows:

Year ended 30 June 2006

Year ended 30 June 2005

Year ended 30 June 2004

Inter-

Note

External

segment

Total

External

segment

Total

External

segment

Total

turnover turnover turnover turnover turnover turnover turnover turnover turnover

(Rand in millions)

Sasol Mining

1,517

3,949

5,466

1,471

3,744

5,215

1,083

4,161

5,244

Sasol Synfuels

915

24,734

25,649

820

17,864

18,684

1,329

14,664

15,993

Sasol Oil

32,243

544

32,787

23,525

187

23,712

18,554

297

18,851

Sasol Gas

1,663

1,546

3,209

1,408

996

2,404

1,389

133

1,522

Sasol Synfuels International

161

–

161

–

Sasol Polymers

7,537

102

7,639

7,199

7,282

6,576

6,662

Sasol Solvents

10,485

1,181

11,666

9,361

947

10,308

7,937

748

8,685

Other business

9,329

4,242

13,571

8,713

3,534

12,247

8,124

3,609

11,733

Total Segments – Continuing

operations

63,850

36,298

100,148

52,497

27,355

79,852

44,999

23,698

68,697

Elimination of intersegment

turnover

(36,298)

_______

(27,355)

(23,698)

Total turnover

63,850

52,497

44,999

Reconciliation of segment

information to consolidated
financial statements

Adjustments:
Equity accounting and

reversal of proportionate
consolidation

(1,993)

(1,810)

(1,659)

Entities previously not

consolidated

–

266

As reported in consolidated

income statements

61,857

50,687

43,606

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

The results of the reporting segments were as follows (continued):

Year ended

30 June 2006

30 June 2005

30 June 2004

Operating

Note

profit/(loss)

(Rand in millions)

Sasol Mining

1,180

1,239

1,185

Sasol Synfuels

13,499

7,546

5,498

Sasol Oil

2,432

1,892

1,421

Sasol Gas

1,526

931

386

Sasol Synfuels International

(642)

(201)

(140)

Sasol Polymers

822

1,475

1,021

Sasol Solvents

873

1,021

Other businesses

1,042

480

(239)

Total segments – Continuing operations

20,732

14,383

9,136

Reconciliation of segment information to

consolidated financial statements

Adjustments:
Equity accounting and reversal of proportionate

consolidation

(123)

(180)

Entities previously not consolidated

–

106

Business combinations

(15)

(151)

Research and development expensed

(60)

–

Derivative instruments

(4)

(1)

(12)

Foreign currency translation

–

(3)

(253)

Impairment

375

Asset retirement obligations

134

(94)

(23)

Gain arising from issuance of subsidiary’s shares

–

(108)

Other

(12)

(180)

(288)

As reported in consolidated income statements

20,688

14,377

8,546

F–31

F–32

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

The results of the reporting segments were as follows (continued):

Year ended 30 June 2006

Year ended 30 June 2005

Year ended 30 June 2004

Cash flow information

Depreciation

Note

Additions

and

Additions

and

Additions

and

to PPE*

amortisation

to PPE*

amortisation

to PPE*

amortisation

(Rand in millions)

Sasol Mining

624

(546)

615

(506)

358

(567)

Sasol Synfuels

2,800

(661)

3,248

(560)

1,867

(1,154)

Sasol Oil

724

(463)

1,011

(399)

588

(369)

Sasol Gas

138

(258)

204

(222)

1,544

(78)

Sasol Synfuels International

1,735

(17)

1,246

(1)

1,690

(1)

Sasol Polymers

4,364

(404)

4,423

(284)

1,703

(485)

Sasol Solvents

1,037

(395)

493

(385)

1,336

(351)

Other businesses

612

(656)

602

(820)

1,436

(720)

Continuing operations

12,034

(3,400)

11,842

(3,177)

10,522

(3,725)

Discontinued operations –

Sasol Olefins & Surfactants

992

(768)

578

(832)

632

(1,296)

Total segments

13,026

(4,168)

12,420

(4,009)

11,154

(5,021)

Reconciliation of segment

information to consolidated
financial statements

Adjustments:
Equity accounting and reversal of

proportionate consolidation

(3,707)

169

(2,599)

174

(2,295)

141

Entities previously not consolidated

–

179

(5)

Business combinations

–

102

–

Research and development expensed

(61)

(25)

(38)

(42)

(3)

Derivative instruments

292

(205)

(66)

Impairment

–

(3)

–

(4)

Asset retirement obligations

(26)

(11)

Capital leases

(56)

–

(8)

(19)

Other

235

(83)

520

(6)

(240)

(36)

Discontinued operations

–

669

–

693

–

1,187

As reported in consolidated

financial statements

9,703

(3,253)

10,157

(3,055)

8,671

(3,678)

*Property, plant and equipment

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

The assets and capital commitments of the reporting segments were as follows:

Year ended 30 June 2006

Year ended 30 June 2005

Year ended 30 June 2004

Note

Total

Capital

Total

Capital

Total

Capital

assets

commitments

assets

commitments

assets

commitments

(Rand in millions)

Sasol Mining

4,176

682

3,862

822

3,829

730

Sasol Synfuels

14,832

2,703

12,340

2,909

9,314

6,381

Sasol Oil

13,129

460

10,023

662

8,818

962

Sasol Gas

5,722

212

5,842

212

5,824

425

Sasol Synfuels International

9,320

4,110

6,076

5,990

2,955

5,482

Sasol Polymers

18,700

2,212

13,383

5,696

8,104

8,299

Sasol Solvents

12,625

1,411

11,285

1,304

7,062

1,754

Other businesses

11,723

2,076

11,089

1,041

11,057

514

Continuing operations

90,227

13,866

73,900

18,636

56,963

24,547

Discontinued operations –

Sasol Olefins & Surfactants

11,836

762

13,560

533

16,077

233

Total segments

102,063

14,628

87,460

19,169

73,040

24,780

Reconciliation of segment

information to consolidated
financial statements

Adjustments:
Equity accounting and reversal of

proportionate consolidation

(8,984)

–

(7,356)

–

(3,460)

–

Entities previously not consolidated

–

Business combinations

(1,248)

–

(1,263)

–

(633)

–

Research and development expensed

(372)

–

(311)

–

(341)

–

Derivative instruments

(732)

–

(201)

–

(791)

–

Impairment

981

–

945

–

Pension asset

406

–

315

–

357

–

Capital leases

285

–

254

–

218

–

Deferred tax asset classificaton

1,136

–

578

–

267

–

Assets held for sale

(205)

–

Unamortized borrowing costs

129

–

120

–

140

–

Other

429

–

(113)

–

(104)

–

As reported in consolidated

financial statements

93,888

14,628

80,428

19,169

68,765

24,780

F–33

F–34

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

Notes on the reconciliation of segment information to the consolidated financial statements

Equity accounting and reversal of proportionate consolidation

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, proportionate consolidation is applied

with respect to incorporated joint ventures for IFRS reporting purposes. Under US GAAP, the equity method of
accounting is applied.

Entities previously not consolidated

From 1 January 2004, Naledi Petroleum Holdings (Pty) Limited (NPH) was consolidated for both IFRS

reporting purposes and for US GAAP. (See Note 4 Acquisitions for details relating to the acquisition of the
remaining 75.63% of NPH).

Business combinations

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, the timing of recording of certain fair

value adjustments differs under US GAAP to those recorded for IFRS reporting purposes because transactions
were not accounted for at the same effective date. This will have a continuing impact on depreciation of these
items.

Also, for the year ended 30 June 2004, negative goodwill was recognized for IFRS reporting purposes and

amortized over the remaining useful life of non-financial assets acquired. With effect from 1 July 2004, negative
goodwill was written off against opening retained earnings. US GAAP requires that negative goodwill be
allocated to reduce the amounts of certain non-financial assets acquired and any excess amount remaining is
recognized as an extraordinary gain in the period that it arises.

Research and development expensed

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, for IFRS reporting purposes, research

costs are recognized in the income statement while certain development costs on capital projects are capitalized.
US GAAP requires that certain of these development costs be recognized in the income statement as incurred.

Derivative instruments

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, all new derivative contracts entered into

met the criteria for hedge accounting under both US GAAP and for IFRS reporting purposes.

All contracts entered into prior to 30 June 2002 (open forward exchange contracts) which still existed

at 30 June 2006, 30 June 2005 and 30 June 2004 did not meet the hedge accounting criteria under US GAAP
and as such hedge accounting was not applied.

For IFRS purposes, foreign currency exchange differences arising on cash flow hedge accounting are

capitalized to property, plant and equipment. Under US GAAP, the translation gains and losses arising on cash
flow hedge accounting are recognized in equity, and are amortized over the useful life of the underlying asset.

Foreign currency translation

For the years ended 30 June 2005 and 30 June 2004, only one entity was accounted for differently for IFRS

reporting purposes and under US GAAP. As a result the translation gains and losses arising on translation of
monetary assets and liabilities of this entity were recognized in the income statement.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

Impairment

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, the cumulative effect of impairment

recognized for IFRS reporting purposes is reversed under US GAAP. For IFRS reporting purposes, property,
plant and equipment is considered to be impaired when its carrying value exceeds the discounted estimated
future cash flows, whereas under US GAAP an initial impairment review is required to be performed on an
undiscounted basis.

Asset retirement obligations

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, for IFRS reporting purposes asset

retirement obligations are discounted at a risk free discount rate which is reassessed annually, whereas under
US GAAP, a credit adjusted rate is used for the entire period and not reassessed. Also, for IFRS reporting
purposes, the accretion charge is recognized as an interest expense in the income statement in the year that it
was incurred. Under US GAAP the accretion charge is recognized as an operating expense.

Pension asset

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, for IFRS reporting purposes, any

unamortized prior service cost is recognized in the income statement in the year that the obligation arose.
Under US GAAP, the unamortized prior service cost is recognized over the expected remaining working life of
participants, or where almost all of the plans’ participants are inactive, the unamortized prior service cost is
recognized over the remaining life expectancy of those participants.

10. Gain arising from issuance of subsidiary’s shares

For the year ended 30 June 2004, for IFRS reporting purposes, the gain arising from issuance of a

subsidiary’s shares was reflected in operating income. Under US GAAP this gain has been reflected as non-
operating income.

11. Capital leases

Certain leases classified as operating leases for IFRS reporting purposes were classified as capital leases

under US GAAP as they met the requirements for capitalization.

12. Deferred tax asset classification

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, for IFRS reporting purposes, total

segment assets exclude deferred tax assets.

In addition, other reconciling differences arise as a result of the tax impact of certain other differences

between amounts reported for IFRS reporting purposes and those under US GAAP.

13. Assets held for sale

For the year ended 30 June 2006, the asset values relating to the discontinued operation are different for

IFRS and US GAAP due to fair value adjustments made at acquisition date and different impairment values
being recorded.

14. Unamortized borrowing costs

For the years ended 30 June 2006, 30 June 2005 and 30 June 2004, for IFRS reporting purposes, the

costs associated with the arrangement of long-term debt financing are set-off against long-term debt.
Under US GAAP, these costs are reflected as prepaid expenses.

F–35

F–36

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Segmental analysis (Continued)

Geographic information

In terms of geographic analysis, turnover, the related costs of inventory sold and trade receivables are

reported by location of customer and other assets and expenditure by the location of the operating activities. The
principal geographic markets and operating activities are in Europe, Asia, North America and South Africa.
Within the principal geographic market of Europe, the majority of assets are located in and turnover and
operating profit mainly derived from Germany and Italy. Within the principal geographic market of North
America, the majority of assets are located in and external turnover and operating profit are derived from the
United States of America.

Income statement

Balance sheet

Turnover

Operating

Aditions to

Total

Capital

2006

(external)

profit/(loss)

PPE*

assets

commitments

(Rand in millions)

Germany

2,614

108

6,752

Italy

544

(83)

–

1,981

–

The Netherlands

1,211

152

–

655

Rest of Europe

3,911

501

3,785

–

Europe

8,280

583

113

13,173

102

Iran

1,590

4,124

1,190

Qatar

(104)

449

3,847

501

Rest of the Middle East and India

1,228

141

–

534

–

Middle East and India

1,373

2,039

8,505

1,691

Far East

1,491

–

1,110

–

United States of America

2,861

5,546

Rest of North America

171

–

206

–

North America

3,032

5,752

South America

504

–

223

–

Southeast Asia and Australasia

1,334

174

1,344

–

Mozambique

174

483

3,381

1,384

Nigeria

190

(6)

1,290

5,096

3,783

Other African Countries

4,627

788

102

920

107

Rest of Africa

4,991

1,265

1,477

9,397

5,274

Republic of South Africa

42,845

18,589

8,380

62,559

6,790

Total segments

63,850

20,732

12,034

102,063

13,866

* Property, plant and equipment

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Income statement

Balance sheet

Turnover

Operating

Aditions to

Total

Capital

2005

(external)

profit/(loss)

PPE*

assets

commitments

(Rand in millions)

Germany

2,423

252

5,848

Italy

584

177

–

3,861

–

The Netherlands

1,056

165

440

–

Rest of Europe

4,134

547

2,662

–

Europe

8,197

1,141

148

12,811

Iran

(19)

823

1,823

2,427

Qatar

127

872

2,633

1,503

Rest of the Middle East and India

987

139

–

482

–

Middle East and India

1,097

247

1,695

4,938

3,480

Far East

1,619

–

859

–

United States of America

2,089

6,665

Rest of North America

–

153

–

North America

2,165

6,818

South America

371

–

249

–

Southeast Asia and Australasia

1,294

1,456

–

Mozambique

3,970

427

Nigeria

116

460

1,964

5,076

Other African Countries

2,282

439

888

145

Rest of Africa

2,442

543

615

6,822

5,648

Republic of South Africa

35,312

12,190

9,368

53,507

9,425

Total segments

52,497

14,383

11,842

87,460

18,636

* Property, plant and equipment

F–37

F–38

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Income statement

Balance sheet

Turnover

Operating

Aditions to

Total

Capital

2004

(external)

profit/(loss)

PPE*

assets

commitments

(Rand in millions)

Germany

4,646 81 97

5,108 34

Italy

– 6 –

3,302 –

The Netherlands

– 62

170

634

–

Rest of Europe

2,641

115

2,076

Europe

7,287

264 270

11,120

Iran

93 2

474

711

2,819

Qatar

– 1,085

1,510 2,010

Rest of Middle East and India

993

358

–

Middle East and India

1,133

1,560

2,579

4,829

Far East

1,248

142

–

674

–

United States of America

1,628

5,944

Rest of North America

442

–

118

–

North America

2,070

6,062

South America

340

–

161

–

Southeast Asia and Australasia

1,093

1,456

–

Mozambique

(207)

1,021

4,220

305

Nigeria

155

593 844

3,472

Other African Countries

2,759

387

484

Rest of Africa

2,946

208

1,688

5,548

3,802

Republic of South Africa

28,882

8,362

6,961

45,440

15,863

Total segments

44,999

9,136

10,522

73,040

24,547

* Property, plant and equipment

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Acquisitions and disposals of businesses

Acquisitions

2006 Acquisitions

In November 2005, Sasol Limited acquired the remaining share capital (2%) in Sasol Oil (Pty) Limited

previously owned by minority shareholders through the Sizanani Trust for a consideration of R146 million.

In terms of a loan and security agreement concluded with Lux International Corporation during 2005, Sasol

Wax International AG obtained effective control of the business and therefore consolidated the entity from
January 2006.

The net effect at the dates of acquisition on the cash flow statement is a R147 million reduction in cash.

2005 Acquisitions

There were no significant acquisitions for the year ended 30 June 2005.

2004 Acquisitions

Naledi Petroleum Holdings (Pty) Limited

With effect from 1 January 2004 the group acquired the remaining 75.63% of Naledi Petroleum Holdings

(Pty) Limited (NPH) for a total consideration of R369 million of which R223 million was settled in cash and
R146 million by the issue of Sasol Oil (Pty) Limited shares. In terms of the transaction, 22 shares in Sasol Oil
(Pty) Limited (representing 2% of the issued shares of the company) were issued to some of the previous
shareholders of NPH. The issue of these shares had the effect of diluting Sasol’s interest in Sasol Oil (Pty)
Limited by 2.04%. The effect of the dilution of the group’s interest in Sasol Oil (Pty) Limited resulted in a gain
of R108 million being realized. NPH through its Excel brand supplies fuel and lubricants to retail and
commercial markets.

F–39

F–40

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Book value

Fair value

Total

% acquired

at acquisition

adjustments

fair value

75.63%

(Rand in millions)

Cash and cash equivalents

142

–

142

107

Accounts receivable, net of allowance for
doubtful accounts

305

–

305

231

Inventory 1

–

Current assets

448

–

448

339

Property, plant and equipment

162

253

191

Intangible assets

–

558

422

Investments

9 49

Long-term receivables

–

Deferred tax

–

Non-current assets

162

729

891

673

Total assets acquired

610

729

1,339 1,012

Current liabilities

(544)

–

(544)

(411)

Deferred tax

–

(167)

(127)

Long-term obligations

–

(162)

(123)

Total liabilities assumed

(544)

(329)

(873)

(661)

Net assets acquired

400

466

351

Goodwill

Consideration paid

369

Other smaller acquisitions which were accounted for in accordance with the purchase method of accounting

during the year ended 30 June 2004, were as follows:

With effect from 1 July 2003 Sasol Italy SpA (part of the Sasol Olefins & Surfactants divesture group)

acquired the remaining 48,05% shares in G.D. Portbury Limited (Dubai) trading as Sasol Gulf for a cash
consideration of US$ 2.7 million (R17 million).

In December 2003, Sasol Chemical Industries Limited acquired the remaining 58% shares in ChemCity

(Pty) Limited for a consideration of R22 million, net of cash acquired of R16 million.

Disposals

2006 Disposals

On 1 July 2005, a 25% interest in Republic of Mozambique Pipeline Investments Company (Pty) Limited

was sold to iGas Limited for a consideration of R595 million. The group recorded a profit on disposal
of R269 million.

Other smaller disposals relating to liquidations of dormant companies amounting to R7 million loss on

disposal, was also recognized during the year ended 30 June 2006.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

2005 Disposals

On 1 March 2005, Sasol Wax International AG underwent a restructuring whereby the entity disposed of its

investment in Euro Schumann Sasol Wax GmbH and simultaneously acquired a 100% investment in Sasol Wax
Danmark APS and a 31.25% direct interest in Paramelt RMC BV.

Prior to the transaction Sasol Wax International AG held an effective 31.875% interest in Paramelt, hence

resulting in a 0.625% dilution of their shareholding in Paramelt and net cash disposed of R47 million.

The restructuring was a non-monetary fair value transaction and was accounted for as a share-for-share

exchange, hence there was no gain or loss recognized.

With effect from 1 March 2005, Paramelt RMC BV was equity accounted and Sasol Wax Danmark was

consolidated.

Other smaller disposals amounting to R35 million less cash disposed of, of R34 million, were also

recognized during the year ended 30 June 2005.

2004 Disposals

The group made the following disposals:

Sasol Servo BV (Sasol Servo)

During 2004, Sasol Chemie GmbH sold its 100 % shareholder interest in Sasol Servo to UK-listed

Elementis Plc for Euro 27 million (R204 million) in cash. The group recorded a profit on disposal of
Euro 3.7 million (R28 million).

Sasol Servo is a speciality chemicals manufacturer based in the Netherlands which was acquired by

Sasol as part of the Condea acquisition in 2001. Sasol Servo had an annual turnover of approximately
Euro 120 million, and consists of four divisions: coating additives, oilfield chemicals, chemicals and speciality
surfactants, and pulp and paper chemicals.

This transaction is consistent with Sasol’s stated commitment to divest of any non-core chemical assets at

values that benefit the interests of its shareholders.

Energy Storage Technologies Inc. (EST)

During 2004, Sasol Wax International AG disposed of its 50% interest in EST for a nominal amount. The

group recorded a profit on disposal of approximately Euro 5.9 million (R50 million).

EST’s activities included providing temperature control products and services based on the use of phase

change materials and vacuum insulation.

This transaction is consistent with Sasol’s stated commitment to divest of any non-core assets at values that

benefit the interests of its shareholders.

F–41

F–42

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Operating profit

Operating profit is stated after taking into account:

30 June

30 June

2006

2005

2004

(Rand in millions)

Amortization of intangible assets

263

300

430

Depreciation of property, plant
and equipment (including capitalized leases)

2,990

2,755

3,248

– Mineral assets

770

562

464

– Buildings

– Plant, equipment and vehicles

2,122

2,108

2,703

Exploration costs written off

124

121

223

Effect of the crude oil hedging

1,158

(36)

– effect of crude oil swap

–

1,147

–

– revaluation of crude oil derivative instruments

(36)

Loss/(gain) on disposal of non-current assets

(7)

(202)

Loss on scrapping of property, plant and equipment

264

250

Gain on disposal of businesses

(262)

(9)

(50)

(Gain)/loss on disposal of equity accounted investees

–

(31)

Impairment of

– Investment in Black Top Holdings (Pty) Limited

–

– Property, plant and equipment

134

174

– Goodwill and intangible assets

– Investment in securities

–

Operating lease rentals

– Equipment

208

107

– Buildings

Research and development expenditure

277

188

358

Restructuring charges

–

Technical fees

311

285

237

Write down of inventory to market value

119

Finance costs

30 June

30 June

2006

2005

2004

(Rand in millions)

Interest costs incurred

1,152

1,208

1,235

Less: amounts capitalized

(949)

(1,028)

(1,071)

203

180

164

Amounts capitalized to:
Property, plant and equipment

(587)

(592)

(739)

Equity accounted investees

(362)

(436)

(332)

(949)

(1,028)

(1,071)

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Income tax

30 June

30 June

2006

2005

2004

(Rand in millions)

Income/(loss) before tax

South Africa

19,396

13,432

9,721

Foreign

1,359

860

(1,083)

20,755

14,292

8,638

Income tax expense from continuing operations

Current tax

– South African normal tax

(5,607)

(3,325)

(2,842)

– Secondary tax on companies (STC)

(551)

(375)

(343)

– Foreign

(386)

(420)

(158)

Total current tax

(6,544)

(4,120)

(3,343)

Deferred tax

– South African

(123)

(693)

202

– Foreign

215

(73)

Total deferred tax income/(expense)

(766)

221

Income tax expense for the year

(6,452)

(4,886)

(3,122)

Total income tax expense differs from the amount computed by applying the South African normal tax rate

to income from continuing operations before tax. The reasons for these differences are as follows:

30 June

30 June

2006

2005

2004

Reconciliation of tax rate

South African normal tax rate

29.0

30.0

Increase in rate of tax due to:

– STC

2.6

2.6 4.0

– Different foreign tax rates

–

0.1

–

– Prior year adjustments

0.2

0.6

–

– Disallowed expenditure

1.7

2.6

3.6

33.5

35.9

37.6

Decrease in rate of tax due to:

– Prior year adjustments

–

(0.8)

– Different foreign tax rates

(0.2)

–

– Exempt income

(0.9)

(1.4)

(0.7)

– Investment incentive allowance

–

(0.3)

–

– Change in tax rate

(1.3)

–

Effective tax rate

31.1

34.2

36.1

F–43

F–44

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

The tax effects of temporary differences comprising the net deferred tax liability are as follows:

30 June

30 June

2006

2005

(Rand in millions)

Deferred tax assets

Current assets

284

187

Goodwill and intangible assets

142

Property, plant and equipment

Long-term obligations

1,830

1,730

Long-term debt

101

104

Calculated tax losses carried forward

1,290

1,724

Other

354

144

4,004

4,120

Less: valuation allowance

(307)

(671)

Total deferred tax assets

3,697

3,449

Deferred tax liabilities

Current assets

(428)

(755)

Investments in securities

(390)

(76)

Goodwill and intangible assets

(115)

(157)

Property, plant and equipment

(7,470)

(7,781)

Other

(257)

(221)

Total deferred tax liabilities

(8,660)

(8,990)

Net deferred tax liability

(4,963)

(5,541)

The net deferred tax liability has been classified in the consolidated balance sheet as follows:

30 June

30 June

2006

2005

(Rand in millions)

Current deferred tax asset

267

154

Non-current deferred tax asset

869

424

Current deferred tax liability

(270)

(196)

Non-current deferred tax liability

(5,829)

(5,923)

(4,963)

(5,541)

South Africa

(4,660)

(4,804)

Germany

439

(360)

Italy

United States of America

(460)

(441)

Rest of the world

(288)

(4,963)

(5,541)

At 30 June 2006, the group had unutilized calculated tax losses carried forward of approximately

R5,690 million, of which R32 million will expire in 2013, R135 million between 2020 and 2026, and
R5,523 million can be carried forward indefinitely. A portion of the calculated tax losses carried forward may be
subject to various statutory limitations as to its usage in the event of significant changes in ownership or change
in principal operating activity of the entity.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Unutilized calculated tax losses carried forward relating to the discontinued operation as at 30 June 2006

amounted to R1,736 million.

Due to the uncertainty surrounding the realisation and timing of realisation of the deferred tax assets per

jurisdictional area, the group has recorded a valuation allowance from continuing operations of R307 million
(2005 – R671 million, 2004 – R414 million). R433 million of the valuation allowance relating to O&S was
transferred to discontinued operations. The net change in the total valuation allowance for continuing operations
during 2006 was an increase of R69 million. In 2005 and 2004, the net change in the valuation allowance was
R257 million and R65 million respectively.

At 30 June 2006, management believes it is more likely than not that the deferred tax assets, net of existing

valuation allowances will be realized.

If tax benefits are recognized in the future through a reduction of the valuation allowance, Rnil million

(2005 – R57 million, 2004 – R59 million) of such benefits will reduce intangible assets.

Unremitted earnings of foreign subsidiaries and foreign corporate joint ventures

No provision has been made for South African income tax or foreign tax that may result from future

remittances of undistributed earnings of foreign subsidiaries or foreign corporate joint ventures because it is
expected that such earnings will be permanently reinvested in these foreign entities. The distribution of these
undistributed earnings of R3,787 million (2005 – R1,539 million, 2004 – R1,010 million) by these entities
would result in income and foreign withholding taxes of approximately R51 million (2005 – R80 million,
2004 – R55 million).

Secondary taxation on companies (STC)

STC is a tax levied on South African companies at a rate of 12.5% of dividends distributed. However, in

the case of companies liquidated, STC is only payable on undistributed earnings earned after 1 April 1993.

STC is not included in the computation of deferred tax or the South African normal tax charge.

On declaration of a dividend, the company includes the tax of 12.5% on this dividend in its computation of

the income tax expense in the period of such declaration.

If the group distributed all of its undistributed retained earnings, of which R45,226 million (2005 –

R45,240 million, 2004 – R38,163 million) would be subject to STC, the group would have to pay additional
taxes of R6,275 million (2005 – R5,027 million, 2004 – R4,240 million). If all the earnings attributable to
shareholders for the year ended 30 June 2006 were distributed, the additional estimated STC charge would be
R732 million (2005 – R789 million, 2004 – R478 million). The group expects that R1,877 million undistributed
earnings earned before 1 April 1993 of two dormant companies could be distributed without being subject to
STC of R209 million.

At 30 June 2006, the group had R851 million STC credits available for set-off against future dividends

declared (2005 – R67 million, 2004 – R76 million).

Change in South African Tax Rate

On 8 July 2005, the State President signed the Taxation Laws Amendment Act of 2005 with the effect that

all of our South African registered companies will be assessed at a tax rate of 29% for the year ended 30 June
2005 and all years thereafter.

Had the income tax expense been calculated at 29% for the 2005 financial year, the impact on our reported

results would have been as follows:

F–45

F–46

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Year ended 30 June 2005

As reported

As adjusted

Change

(Rand in millions)

Balance sheet
Income tax payable

(686)

(574)

(112)

Net deferred tax liability

(5,541)

(5,380)

(161)

Income statement
Income tax

(4,886)

(4,615)

(271)

Earnings of equity accounted investees

308

313

(5)

Minority interest

(103)

(107)

Earnings attributable to shareholders

9,719

9,991

(272)

Earnings per share

(Rands)

Basic

15.83

16.27

(0.44)

Diluted

15.65

16.08

(0.43)

Earnings per share

Basic earnings per share is computed by dividing earnings attributable to shareholders by the weighted

average number of ordinary shares outstanding for the period. Diluted earnings per share reflect the potential
dilution that could occur if all of the group’s outstanding share options, to the extent that the effect would be
dilutive, were exercised.

No adjustments were made to reported earnings attributable to shareholders in the computation of earnings

per share.

The following table reconciles the weighted average number of ordinary shares used in calculating basic

earnings per share to the diluted weighted average number of shares used in the calculation of diluted earnings
per share:

30 June

30 June

2006

2005

2004

(Rand in millions)

Earnings attributable to shareholders
Income from continuing operations

14,159

9,611

5,376

Discontinued operations

(2,860)

108

(139)

Earnings attributable to shareholders

11,299

9,719

5,237

Weighted average number of shares:

(Number of shares)

Net weighted average number of shares (in millions)

620.0

613.8

610.0

Potential dilutive effect of share options (in millions)

10.2

7.1

3.0

Diluted weighted average number of ordinary shares (in millions)

630.2

620.9

613.0

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Cash and cash equivalents and cash restricted for use

Cash and cash equivalents

30 June

30 June

2006

2005

(Rand in millions)

Cash on hand and in bank

2,237

1,978

Short-term deposits

259

347

Foreign currency accounts

311

Other

2,808

2,350

Cash restricted for use

Customer foreign currency accounts to be used for designated reactor supply projects

129

–

Cell captive insurance companies

119

135

Collateral for bank guarantees

–

119

Cash held in trust

Other

271

331

Included in cash restricted for use are:

• Customer foreign currency accounts to be used for the construction of reactors where the contractor

pays in advance. The cash can only be utilized for these designated reactor supply projects;

• Cell captive insurance companies funds of R119 million (2005 – R135 million) to which the group has

restricted title. The funds are restricted solely to be utilized for insurance purposes;

• Cash deposits of R nil million (2005 – R119 million) serving as collateral for bank guarantees; and

• Cash held in trust of R17 million (2005 – R51 million) is restricted for use and is being held in escrow

to fund statutory obligations for mining rehabilitation which is to take place during the year ending
30 June 2007.

F–47

F–48

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

10.

Trade receivables, other receivables and prepaid expenses

30 June

30 June

2006

2005

(Rand in millions)

Trade receivables

7,036

8,285

Less: provision for doubtful debts

(147)

(200)

Net trade receivables

6,889

8,085

Duty at source debtors*

1,729

1,234

Value added tax

766

638

Amounts due from related parties

780

558

Insurance related receivables

192

282

Short-term receivables under derivative financial instruments

142

174

Prepaid expenses

109

126

Short-term portion of long-term receivables

Capital project related debtors

Other receivables

546

587

11,260

11,763

Roll forward of provision for doubtful debts

Balance at beginning of year

200

210

Charge for the year

Utilized during the year

(90)

(102)

Foreign currency translation

Disposal of businesses

–

Transferred to discontinued operations

(10)

–

Balance at end of year

147

200

* Duty at source debtors represents the amounts recoverable from customers as soon as the excise dutiable

materials are moved from the refineries. The recoverable amounts are only recorded to the extent that the risks
and rewards of ownership of the materials have been transferred.

11.

Inventories

30 June

30 June

2006

2005

(Rand in millions)

Crude oil and other raw materials

1,565

2,356

Process material

316

358

Maintenance and other materials

1,013

878

Work in process

181

151

Manufactured products

4,548

5,823

Consignment inventory

7,678

9,650

Roll forward of provision for inventory obsolescence
Balance at beginning of year

195

170

Charge for the year

Utilized during the year

(18)

(48)

Foreign currency translation

Acquisition of business

–

Transferred to discontinued operations

(94)

–

Balance at end of year

172

195

There were no inventories pledged as security for long-term debt at 30 June 2006 or 30 June 2005.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

12.

Discontinued operations

In 2003, Sasol determined that it would grow its chemical business conditional upon projects leveraging its

technology or securing integrated and highly competitive feedstock positions. The Sasol Olefins & Surfactants
(O&S) business is only partially integrated upstream into feedstocks and has not adequately provided the
integration benefits required.

On 1 August 2005, Sasol announced that it was considering the divestment from its O&S business

excluding its activities in South Africa.

Management expects that the sale of the business will be completed before the end of the next financial

year. An information memorandum was released during May 2006 and indicative bids received during
June 2006. The bids received on 31 August 2006 confirmed the valuation performed by management and the
business was accordingly written down by R3,110 million before tax to its fair value less costs to sell.

30 June

2006

The disposal group includes the following asssets and liabilities

(Rand in millions)

Cash and cash equivalents

384

Cash restricted for use

116

Trade receivables, other receivables and prepaid expenses

3,524

Inventories

3,953

Investments in equity accounted investees

Prepaid pension asset

181

Long-term receivables

Goodwill and intangible assets

269

Property, plant and equipment

3,128

Assets held for sale

11,679

Bank overdraft

Trade payables

1,999

Accrued expenses and other obligations

1,163

Short-term debt

Income tax payable

Long-term obligations, net of current portion

438

Long-term debt, net of current portion

Long-term deferred income

Post-retirement healthcare benefits

384

Pension liability

630

Deferred tax

639

Liabilities in disposal group held for sale

5,364

F–49

F–50

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

30 June

30 June

2006

2005

2004

(Rand in millions)

The results of operations of the O&S business were as follows

Sale of products

18,563

16,677

15,150

Services rendered

Commission and marketing income

53 40

Turnover

18,609

16,740

15,202

Other operating income

317

185

166

Net foreign exchange losses

(11)

(2)

Cost of sales

(17,228)

(15,085)

(14,127)

Cost of services rendered

(5)

(6)

(7)

Operating expenses

(4,459)

(1,344)

(1,156)

Operating costs and expenses

(21,692)

(16,435)

(15,290)

Operating (loss)/profit

(2,777)

488

Other income/(expenses)

Dividends received

–

10 8

Interest received

Finance costs

(108)

(152)

(204)

(Loss)/income before tax, losses of equity accounted investees

(2,861)

380

(83)

Income tax

(271)

(55)

(Loss)/income before losses of equity accounted investees

(2,859)

109

(138)

Losses of equity accounted investees

(1)

(1)

Net (loss) /income from discontinued operations (including fair value
write-down)

(2,860)

108

(139)

Included in the operating expenses of the O&S business are the
following capital items

Impairment of assets

(131)

(84)

(79)

Loss on disposal and scrapping of assets

(14)

(24)

(15)

Fair value write-down allocated to

(3,110)

–

– Property, plant and equipment

(2,991)

– Goodwill

(6)

– Intangible assets

(113)

(3,255)

(108)

(94)

The cash flows attributable to O&S were as follows

Cash generated by operating activities

1,275

596

1,256

Cash utilized in investing activities

(980)

(554)

(732)

Cash utilized in financing activities

(17)

(1,265)

(1,219)

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

13.

Investments in securities

Marketable equity and debt securities

Held-to-maturity investments at 30 June 2006 and 30 June 2005 consist of debt securities. There were no

available-for-sale or trading securities at 30 June 2006 or 30 June 2005.

Held-to-maturity investments are held at amortized cost and all have maturity dates in excess of five years.

There were no changes in the classification of held to maturity investments from the time of purchase

to 30 June 2006.

30 June 2006

30 June 2005

Amortised

Amortised

cost

Fair value

cost

Fair value

(Rand in millions)

Held-to-maturity investments

240

194 194

There were no unrealized gains/(losses) recognized for the year ended 30 June 2006 and 30 June 2005.

These investments are legally restricted for the purposes of the rehabilitation requirements incurred by

Sasol Mining.

Unlisted equity securities

The unlisted investments represent strategic investments of the group and are long-term in nature.

30 June

30 June

Holding

2006

Holding

2005

(Rand in

(Rand in

millions)

millions)

sEnergy Insurance Limited

–

6% 67

Aetylen Rohrleitungsgesellschaft mbH & Co KG

17%

139

17%

122

Other – not considered significant in aggregate

Unlisted investments

152

201

Held-to-maturity investments

240

194

Total investments

392

395

* With effect from 15 May 2006, sEnergy Insurance Limited suspended its underwriting activities and is

currently in the process of discharging its liabilities and settling all claims in full. The company will be
liquidated. It is expected that Sasol’s initial investment in the company will be repaid within the next year, once
this process has been completed. The amount has been classified as a short-term investment.

There were no impairments relating to investments for the year ended 30 June 2006.

For the year ended 30 June 2005, the group assessed the recoverability of its investments and determined

that there was an impairment charge of R37 million of which R35 million is directly attributable to Black Top
Holdings (Pty) Limited.

F–51

F–52

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

14.

Investments in equity accounted investees

At 30 June 2006, the group’s significant equity accounted investees and the group’s ownership interest in

those equity accounted investees based on outstanding shares and the total carrying value were as follows:

30 June 2006

30 June 2005

Ownership

Carrying value

Ownership

Carrying value

(Rand in millions)

(Rand in millions)

Operational

Sasol Dia Acrylates South Africa (Pty)
Limited and Sasol Dia Acrylates (Pty)
Limited

50%-75%

1,168

50%-75%

1,182

Sasol – Huntsman GmbH and Co KG

50%

530

50%

107

Optimal Olefins Malaysia Sdn.Bhd

12%

424

12%

388

Petlin (Malaysia) Sdn. Bhn

40%

397

40%

271

Merisol LP

50%

321

50%

341

Paramelt RMC B.V.

31%

106

31%

Wesco China Limited

40%

40%

Tosas Holdings (Pty) Limited

70%

70%

Sasol Chevron Holdings Limited

50%

50%

122

FFS Refiners (Pty) Limited

49%

49%

Sasol Petroleum Mocambique Limitada
(Petromoc)

49%

49%

Developing

Arya Sasol Polymer Company

50%

1,985

50%

1,005

Escravos Gas-to-Liquids joint venture

37.5%

1,741

37.5%

772

Oryx Gas-to-Liquids Limited

49%

1,218

49%

849

Other – not considered signficant in
aggregate

118

8,207

5,431

Operational equity accounted investees refer to entities that have commenced their planned principal operations.

** Developing equity accounted investees are investments where the investees still have activities in progress that are

necessary to commence their planned principal operations.

None of the group’s investments in equity accounted investees are publicly traded and therefore no quoted

market prices are available to be disclosed.

During the year interest charges of R362 million (2005 – R436 million) were capitalized to the group’s

investments in developing equity accounted investees while the investee had activities in progress necessary to
commence its planned principal operations. The investees’ activities included the use of funds to construct
qualifying assets for its operations.

The group’s share of undistributed retained gains of equity accounted investees approximates R69 million

(2005 – R345 million). The movement was primarily attributable to the Petlin, Optimal, and Sasol-Huntsman
joint ventures. Included in the carrying value of equity accounted investees is goodwill of R213 million
(2005 – R196 million).

Sasol entered into shareholder agreements with the minority shareholders in Tosas Holdings (Pty) Limited

that restricts Sasol’s ability to exercise control over the operations or assets due to certain approval or veto rights
granted to those minority shareholders. The shareholder agreements entered into by Sasol provide the minority
shareholders with substantive participating interests in the operations of this investee such that Sasol is precluded
from exercising control.

Having limited control over the above equity accounted investee results in Sasol only being able to realize

its gains by selling the investments. Although unlikely and contrary to Sasol’s strategy, such disposal would
result in an insignificant amount of capital gains tax on recognized gains.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Both Sasol Dia Acrylates South Africa (Pty) Limited and Sasol Dia Acrylates (Pty) Limited are structured

so that substantially none of their activities either involve or are conducted on behalf of the reporting enterprise
and its related parties as specified in FIN 46 (R). Hence Sasol has no ability to control these entities and does
not substantially benefit from the shareholding, as the sales to Sasol are less than 30%. The shareholder
agreements entered into by Sasol provide the other shareholder with equal substantive participating interests in
the operations of this investee such that Sasol is precluded from exercising control.

Aggregated summarized financial information in respect of our GTL joint ventures (Escravos GTL and
Oryx GTL):

30 June

30 June

2006

2005

2004

(Rand in millions)

Current assets

1,054

240

–

Non-current assets

15,586

8,934

–

Total assets

16,640

9,174

–

Current liabilities

1,018

2,005

–

Non-current liabilities

10,068

5,756

–

Total liabilities

11,086

7,761 –

Turnover

–

Operating profit

–

Earnings attributable to shareholders

79 –

15.

Goodwill and intangible assets

Patents

and

Emission

Capitalised

Other

Goodwill

trademarks

rights

software

intangibles

Total

(Rand in millions)

Cost
Balance at 30 June 2004

363

384

–

1,089

422

2,258

Additions

–

Transferred from property, plant and
equipment

–

2 –

122

Disposal of businesses

(99)

–

(5)

–

(104)

Disposals

–

(2)

– (42)

(20)

(64)

Impairment

– (3)

– (1)

(9)

(13)

Foreign currency translation

–

Balance at 30 June 2005

277

427

–

1,135

505

2,344

Additions

–

4 305 10

65 384

Transferred from/(to) property, plant

and equipment

–

– 74 (91)

(1)

Acquisition

businesses

6 – – –

–

Disposals

–

(4)

–

(5)

(16)

(25)

Impairment

(9)

(3)

(101)

– –

(113)

from continuing operations

(3)

–

(18)

–

(21)

from discontinued operations

(6)

(3)

(83)

–

(92)

Fair value write-down

(6)

(113)

–

(119)

Transferred to discontinued operations

–

(289)

(162)

(194)

(57)

(702)

Foreign currency translation

–

131

231

Balance at 30 June 2006

273

118

1,035

537

2,005

F–53

F–54

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Patents

and

Emission

Capitalised

Other

Goodwill

trademarks

rights

software

intangibles

Total

(Rand in millions)

Amortization
Balance at 30 June 2004

191

–

608

932

Current

year

charge

–

– 185 119

327

from

continuing

operations

– 11

– 170 119 300

from

discontinued

operations

– 12 – 15

– 27

Transferred from property, plant and
equipment

– – –

Disposals

(88)

(2)

– (42)

(2)

(134)

Foreign currency translation

–

Balance at 30 June 2005

–

253

– 773 192

1,218

Current year charge

–

185

295

from continuing operations

–

– 171

263

from discontinued operations

–

18 – 14

– 32

Transferred from property, plant and

equipment

–

Disposals

–

(2)

– (4)

(16)

(22)

Transferred to discontinued

operations

–

(274)

– (155)

(4)

(433)

Foreign currency translation

–

Balance at 30 June 2006

–

– 813 255

1,124

Net book value 2006

273

222

282

881

Net book value 2005

277

174

–

362

313

1,126

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

The amortization rates of intangible assets, using the straight-line basis, are as follows:

Rates

Goodwill

not subject to

amortization

Patents and trademarks

10-20%

Emission rights

not subject to

amortization

Capitalized software

33%

Long-term customer contracts (included in other intangibles)

25%

For intangible assets subject to amortization, the estimated future aggregate amortization expense per

annum is as follows:

30 June

30 June

2006

2005

(Rand in millions)

For the year ended 30 June
Within 1 year

197

284

1 – 2 years

126

254

2 – 3 years

119

3 – 4 years

4 – 5 years

More than 5 years

566

849

The realizability of intangible assets is evaluated at least annually to assess the recoverability of carrying

amounts. The valuation is based on various analyzes including cash flow and profitability projections.
The valuation necessarily involves significant management judgment.

As a result of the group’s assessment of recoverability of its intangible assets at 30 June 2006, the group

has determined that the net carrying value of certain of its intangible assets at 30 June 2006 has been impaired.
The impairment of R21 million from continuing operations recorded in the current year relates mainly to the
decrease in the market price of emission rights compared to the price at which they were originally issued.
The recoverable amount of the emission rights reviewed for impairment is based on the current market value as
listed on an international exchange.

Impairment relating to discontinued operations amounted to R92 million as at 30 June 2006, relating

primarily to emission rights, mainly due to the decrease in the market price of emission rights compared to the
price at which they were originally issued.

In June 2005, the impairment of R13 million related to intangible assets of which approximately R8 million

is attributable to the Sasol Oil reporting segment for the impairment of certain service contracts.

F–55

F–56

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

16.

Property, plant and equipment

30 June

30 June

2006

2005

(Rand in millions)

Land, buildings and improvements

2,873

3,143

Plant, equipment and vehicles

51,616

47,581

Mineral assets

8,644

7,871

Capital work in progress

10,760

11,367

Exploration assets

106

73,999

70,050

Less: accumulated depreciation

26,045

22,587

47,954

47,463

The depreciation rates applied are:

Buildings and improvements

2 – 5% straight line method

Plant, equipment and vehicles

4 – 33% straight line method

Mineral assets

Units of production method
based on life of related
reserve base

Land, exploration assets and capital work in process are not depreciated.

Assets with a carrying value of R839 million (2005 – R836 million) were held under capital leases and

were included in plant, equipment and vehicles above. The cost of these assets amounted to R1,165 million and
the accumulated depreciation thereon was R326 million as at 30 June 2006.

Included in the cost of property, plant and equipment are asset retirement costs capitalized of

approximately R314 million (2005 – R209 million). These costs are capitalized to the cost of the asset and
depreciated over its estimated useful life.

During the year, interest of R587 million (2005 – R592 million) was capitalized to property, plant and

equipment. Included in the depreciation charge for the year is amortization relating to the capitalized interest of
R225 million (2005 – R190 million).

The carrying value of property, plant and equipment pledged as security for liabilities amounted

to R4,985 million (2005 – R4,978 million). As at 30 June 2006, the carrying value of the secured debt, was
R3,441 million (2005 – R3,713 million).

Assets with an original cost of R4,870 million were fully depreciated as at 30 June 2006

(2005 – 7,724 million) but are still in use by the company and are included in plant, equipment and vehicles
above. The group did not have any idle facilities as at 30 June 2006.

During the year ended 30 June 2005, the group reviewed the useful lives of its assets. This resulted in a

reduction in the depreciation charge for continuing and discontinued operations when compared to the expected
charge had no review been performed, of R1,547 million before tax. The tax effect amounted to R494 million
with a resulting increase in earnings attributable to shareholders of R1,053 million or R1.69 per share.

Some of the significant impairments included in the impairment charge of R98 million for the year ended

30 June 2006 (2005 – R134 million) are impairments in the following business segments:

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Sasol Gas – R67 million

Egoli Pipeline – (South Africa) – In terms of a gas supply agreement with a supplier, a dedicated pipeline

was built to supply hydrogen rich gas during a conversion project. Upon completion of the project, the pipeline
had no strategic or commercial value; hence an impairment of R67 million has been recognized.

Sasol Wax – R17 million

Pass Christian Plant – (United States of America) – The Pass Christian plant in the USA was damaged by

Hurricane Katrina. Management does not intend to rebuild the facility and current plans are being made to sell
the plant which was initiated before 31 March 2006. Accordingly an impairment charge of R17 million has been
recognized.

17.

Accrued expenses and other obligations

30 June

30 June

2006

2005

(Rand in millions)

Employee related liabilities

1,233

1,213

Duty at source creditors

1,093

787

Short-term payables under derivative financial instruments

510

784

Insurance loss accrual

478

201

Amounts due to capital project related creditors

472

571

Short-term portion of long-term obligations (refer note 19)

427

450

Short-term obligations

413

287

Amounts due to related parties

243

156

Value added tax

238

132

Provision for bond interest

Amount due to RWE-DEA *

–

121

Audit fees

Short-term portion of post-retirement healthcare benefits (refer note 21)

–

Short-term portion of accrued pension liabilities (refer note 21)

Other payables

195

381

5,391

5,216

* Amount represents tax refund received by Sasol and due to RWE-DEA under the Asset and Share purchase

agreement with RWE-DEA for the acquistion in 2001 of Condea.

18.

Short-term debt

30 June

30 June

2006

2005

(Rand in millions)

Commercial banking facilities

1,102

2,328

Commercial paper program

–

1,521

Revolving credit facility

487

663

Other

1,606

4,546

Short-term portion of long-term debt (refer note 20)

571

809

2,177

5,355

The weighted average interest rate of short-term debt for the year was approximately 6.1% (2005 – 7.9%).

F–57

F–58

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

19.

Long-term obligations

Environmental

and asset

retirement

2006

obligations

Other

Total

(Rand in millions)

Balance at 1 July 2005

2,161

741

2,902

Charge for year

176

628

804

Utilized during year

(113)

(173)

(286)

Capitalized to property, plant and equipment

105

117

222

Reversal of unused amounts

(46)

(122)

(168)

Accretion

185

222

Effect of change in estimated future cash flows

(15)

–

(15)

Transferred to discontinued operation

(238)

(603)

(841)

Foreign currency translation

143

Balance at 30 June 2006

2,268

715

2,983

Less: short-term portion

275

152

427

Long-term obligations

1,993

563

2,556

Environmental

and asset

retirement

2005

obligations

Other

Total

(Rand in millions)

Balance at 1 July 2004

2,003

585

2,588

Charge for year

308

410

718

Utilized during year

(182)

(280)

(462)

Capitalized to property, plant and equipment

–

Reversal of unused amounts

(232)

(22)

(254)

Accretion

184

– 184

Effect of change in estimated future cash flows

(26)

–

(26)

Foreign currency translation

Balance at 30 June 2005

2,161

741

2,902

Less: short-term portion

261

189

450

Long-term obligations

1,900

552

2,452

In accordance with SFAS 143, an asset retirement obligation is recognized when the obligation arises. The asset

retirement obligation includes estimated costs for the rehabilitation of coal mining, gas and petrochemical sites.

The estimated value of dismantling and future asset removal costs is based on the remaining useful lives of

the assets. During the year ended 30 June 2005, the group reviewed the useful lives of its assets. The effect of
the increase in the useful lives during June 2005 had resulted in a decrease in the value of the obligation and has
been accounted for as a reversal of unused amounts of R628 million.

The environmental and asset retirement obligations include an estimated cost for the rehabilitation of soil

and groundwater contamination. Included in the environmental and asset retirement obligation is an amount
accrued of approximately R395 million in respect of the costs of remediation of the contamination and similar
environmental costs. The rehabilitation is usually only required when the site is vacated unless the contamination
is likely to threaten the surrounding areas. In this case, any rehabilitation required to prevent such a threat to the
surrounding area is initiated in collaboration with the relevant authorities.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

There is an ABSA Bank fixed deposit of R240 million (2005 – R194 million) included in Investments in

securities (refer note 13) which is legally restricted for the purposes of the rehabilitation requirements incurred
by Sasol Mining. The fair value of the investment is R240 million (2005 – R194 million). The carrying value of
the obligation as at 30 June 2006 is R316 million (2005 – R303 million).

The group believes that, based on the current information available, any additional liability for the

environmental and asset retirement obligations in excess of the amounts provided will not have a material
adverse effect on its financial condition, liquidity or cash flow.

Other long-term obligations include liabilities in respect of long-term insurance related obligations,

provisions against guarantees and long-term supply obligations.

20.

Long-term debt

30 June

30 June

Repayment terms

Collateral

Interest rate

2006

2005

(Rand in millions)

Collateralised loans
Repayable in semi-annual instalments A pipeline asset with a carrying

Jibar

2,202

2,362

ending between June 2015 and

value of R3,152 milllion

+(0.4%-3%)

December 2017

(2005 – R3,409 million)

Repayable in monthly instalments

Plant and equipment with a

Jibar

1,202

1,302

until June 2015

carrying value of R1,721 million

+(1.6%-3%)

(2005 – R1,463 million)

Repayable in equal semi-annual

Mortgage over foreign plant with

4.3%-5.0%

instalments ending 31 March 2008

a book value of R112 million

Fixed

(2005 – R106 million)

Settled during the financial year

–

Capital lease liabilities
Repayable in monthly instalments

Plant and equipment with a book

Variable

687

590

over 20 to 30 years ending 2035

value of R687 million
(2005 – R590 million)

Repayable in equal monthly

Building with a book value of

10.6%

207

205

instalments until June 2017

R131 million (2005 – R144 million)

Half yearly payments until April 2009 Building and equipment with a book

20.8%

value of R17 million
(2005 – R52 million)

Repayable in equal monthly

Various

instalments until December 2015
Repayable in equal monthly

Computer equipment with a book value

7%-14%

instalments until April 2007

of R4 million (2005 – R57 million)

Repayable in equal monthly

Computer equipment with a book value 12.2%-14%

instalments until January 2008

of R4 million (2005 – R9 million)

Redeemable preference shares
of subsidiariy
Settled during the financial year

Secured in terms of a put option against

6.8%-8.8%

–

117

the shareholders of National Petroleum
Refiners of South Africa (Pty) Limited

F–59

F–60

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

30 June

30 June

Repayment terms

Interest rate

2006

2005

(Rand in millions)

Unsecured guaranteed registered notes
Repayable on maturity in June 2010
Repayable on 1 September 2007,

3.4% Fixed

2,750

2,419

interest is paid semi-annually in arrears
on 1 March and 1 September each year.

10.5% Fixed

2,000

1,993

Unsecured loans
Repayable in semi-annual instalments

8,0% – 8,9%

ending December 2015

Variable

777

603

Repayable in June 2013

Libor +0.13%

419

390

Loan from iGas (minority shareholder)

–

300

–

in Republic of Mozambique Pipeline
Investments Company (Pty) Limited.
No fixed repayment terms.
Repayable in semi-annual instalments
ending January 2014

11,55% Fixed

272

262

Repayable in May 2008

Namibian

prime rate

146

146

No fixed terms of repayment

8% Fixed

Repayable in four equal annual
instalments until December 2006

2.2%

Repayable in December 2011

8.74% variable

Other

Various

Total debt

11,211

10,747

Less: short-term portion

571

809

Long-term debt

10,640

9,938

The redeemable preference shares were issued by a subsidiary to finance specific projects. These

preference shares were redeemed during the year. The redemption of these preference shares did not result in a
change in control of the subsidiary and even if called upon the guarantees would have been redeemed in
proportion to the existing shareholding. These preference shares did not result in the issue of shares of the
holding company and as a result are classified as long-term debt instruments and the preference dividends are
included in finance costs in the income statement.

The aggregate maturities of total long-term debt (including short-term portion) subsequent to 30 June 2006

and 30 June 2005, are as follows:

30 June

30 June

2006

2005

(Rand in millions)

Within 1 year

571

809

1 – 2 years

2,682

639

2 – 3 years

613

2,706

3 – 4 years

3,354

597

4 – 5 years

602

3,011

More than 5 years

3,389

2,985

Total debt

11,211

10,747

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

21.

Pension and other post-retirement healthcare benefits

Years ended

30 June

30 June

2006

2005

Notes

(Rand in millions)

Post-retirement healthcare benefits

21.1

2,862

2,802

Less: short-term portion

–

(31)

2,862

2,771

Pension liability

868

1,278

– funded

21.2.1

–

– unfunded

21.2.2

868

1,271

Less: short-term portion

(5)

(16)

863

1,262

Prepaid pension assets

21.2.1

485

618

Accrued pension liability

21.2.1

–

(7)

485

611

21.1

Post-retirement healthcare benefits

South Africa

The post-retirement benefit plan provides certain healthcare benefits to South African employees hired prior

to 1 January 1998, who retire and satisfy the necessary requirements of the medical fund. Generally, healthcare
coverage provides for a specified percentage of most healthcare expenses, subject to preset rules and maximum
amounts. The cost of providing these benefits is shared with the retirees. The plan is unfunded.

North America

Certain other healthcare benefits are provided for employees hired in the United States of America.

Generally, healthcare coverage pays a specified percentage of most healthcare expenses, subject to preset
maxima and reduced for payments made by Medicare. The cost of providing these benefits is shared with the
retirees. The plan is also unfunded.

2006

South Africa

North America

Last actuarial valuation

31 March 2006

30 June 2006

Full/interim valuation

Full

Valuation method adopted

Projected unit credit

The weighted average assumptions used in calculating actuarial valuations:

South Africa

North America

30 June

2006

2005

2006

2005

Weighted average assumptions
Discount rate

8.0%

8.5%

6.0%

5.3%

Expected future salary increases

6.0%

5.5%

3.8%

3.8%

Expected future medical inflation
Initial

6.5%

6.5%

8.0%

9.0%

Ultimate

6.5%

6.5%

5.5%

5.5%

F–61

F–62

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

South Africa

The assumed discount rate of 8.0% for the year ended 30 June 2006 represents a 50 basis point decrease

from the 8.5% for the year ended 30 June 2005. This discount rate assumption is based on the discount yield on
government stock which had a 7.3% yield for short duration and 7.5% yield at longer durations at the
measurement rate.

North America

The assumed discount rate of 6.0% for the year ended 30 June 2006 represents a 70 basis point increase

from the 5.3% for the year ended 30 June 2005. This discount rate assumption was determined by matching
future pension benefit payments with expected future AA bond yields for the same periods.

Reconciliation of the funded status to amounts recognised in the consolidated balance sheets:

Post retirement healthcare

South Africa

North America

Total

30 June

2006

2005

2006

2005

2006

2005

(Rand in millions)

Amounts recognised in balance sheet consist of
Long-term portion

2,862

2,389

–

413

2,862

2,802

Short-term portion

–

(31)

–

(31)

Net liability recognised

2,862

2,389

–

382

2,862

2,771

Change in projected benefit obligation
Projected benefit obligation at beginning of year

2,389

2,124

413

347

2,802

2,471

Service cost

Interest cost

200

188

218

210

Net actuarial losses/(gains)

266

(26)

–

240

Benefits paid

(67)

(60)

(23)

(29)

(90)

(89)

Remeasurement

–

Foreign currency translation

–

Transferred to discontinued operations

–

(410)

–

(410)

–

Projected benefit obligation at end of year

2,862

2,389

–

413

2,862

2,802

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

The net periodic post-retirement healthcare cost for the years ended 30 June 2006, 30 June 2005 and

30 June 2004 were as follows:

Post retirement healthcare

South Africa

North America

Total

30 June

2006

2005

2004

2006

2005

2004

2006

2005

2004

(Rand in millions)

Components of net post
retirement benefits cost

Service cost

65 63

Interest cost

200

188

182

22 22

218

210 204

Net actuarial loss/(gains)

266

(26)

– –

240

Periodic benefit cost

540

325

278

(3)

537

350 305

Remeasurement

–

216

42 (4)

42 212

Net periodic benefit cost

540

325 494

541

392

517

Continuing operations

540

325

494

–

540

325

494

Discontinued operations

–

– – 1

The group expects the following benefit payments to be paid out of the plans for the years indicated.

The expected benefits are based on the same assumptions used to measure the group’s benefit obligation as
at 30 June 2006 and include estimated future employee service.

South Africa

(Rand in
millions)

Within 1 year

1 – 2 years

2 – 3 years

3 – 4 years

4 – 5 years

108

More than 5 years

761

1,203

F–63

F–64

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Sensitivity analysis

Assumed healthcare cost trend rates have a significant effect on the amounts reported for the post-

retirement healthcare benefits. A one percentage-point change in assumed healthcare cost trend rates could have
the following effect:

Post-retirement healthcare benefits

South Africa

Foreign

% Point

%Point

% Point

%Point

increase

decrease

increase

decrease

(Rand in millions)

2006
Effect on total service and interest cost components

(53)

–

Effect on accumulated post-retirement benefit obligations

547

(434)

–

2005
Effect on total service and interest cost components

(46)

(3)

Effect on accumulated post-retirement benefit obligations

451

(357)

(30)

2004
Effect on total service and interest cost components

(42)

(3)

Effect on accumulated post-retirement benefit obligations

403

(319)

(35)

21.2

Pension liability

Sasol Limited has defined benefit pension funds and defined contribution funds.

Contributions by the group, and in some cases the employees, are made for funds set up in South Africa

and the United States of America, whilst no contributions are made by employees for plans established in other
geographic areas.

Details of the principal defined benefit funds are set out below.

South African operations

Background

Sasol contributes to a pension fund which provides defined retirement and death benefits based on final

pensionable salary. Prior to 1 April 1994 this fund was open to all employees of Sasol in South Africa. In 1994
all members were given the choice to voluntarily move to the newly established defined contribution section of
the fund, and approximately 99% of contributing members chose to do so. At that date, the calculated actuarial
surplus of approximately R1,250 million was apportioned to pensioners and members transferring to the defined
contribution section, and a R200 million balance was transferred to Sasol.

Contributions

Members of the defined benefit section are required to contribute to the fund at the rate of 7.5% of

pensionable salary. Sasol (South African operations) meets the balance of the cost of providing benefits.
Company contributions are based on the results of the actuarial valuation of the fund in terms of South African
legislation and are agreed to by Sasol Limited and the fund trustees.

Contributions for the defined contributions section are paid by the members and Sasol at fixed rates.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Fund assets

The assets of the fund are held separately from those of the company in a trustee administered fund,

registered in terms of the South African Pension Funds Act, 1956. Included in the Fund assets are 2,369,708
Sasol Limited shares valued at R652 million at year end (2005 – 2,369,708 shares at R428 million) purchased in
terms of an approved investment strategy. The Fund received dividends on Sasol Limited shares of R14 million
(2005 – R11 million) during the year.

The pension charge for the year is determined in consultation with the fund’s independent actuary and is

calculated using the same assumptions as those used at the last actuarial valuation of the fund. The fund assets
have been valued at fair value.

Prepaid pension asset

In December 2001 the Pension Funds Second Amendment Act was promulgated. The Act generally

provides for:

(i) the payment of enhanced benefits to former members and minimum pension increases for pensioners;

and

(ii) the apportionment of any actuarial surplus existing in the Fund, at the apportionment date, in an

equitable manner between existing members including pensioners, former members and the employer
in such proportions as the Trustees of the Fund shall determine.

In determining the prepayment asset of the Fund at 30 June 2002, management, in consultation with the

Fund’s independent actuary, calculated the potential cost of the payment of enhanced benefits to former
members and minimum pension increases for pensioners. This resulted in a R478 million increase in the
projected benefit obligation, which was disclosed as a plan amendment. The remaining unrecognized prior
service cost related to the plan amendment has been included in the prepaid pension asset of the Fund at
30 June 2006.

Although the Sasol Pension Fund has a surplus, in terms of the final scheme apportionment that has been

submitted to the South African Financial Services Board for their approval, the prepaid pension asset recognized
has been limited. Only once approval has been obtained from the Financial Services Board will finality be
achieved regarding the surplus that may be allocated to Sasol in terms of the scheme.

Other

A significant number of the employees are covered by union sponsored, collectively bargained, and in some

cases, multi-employer defined contribution pension plans. Information from the administrators of these plans
offering defined benefitsis not sufficient to permit the company to determine its share, if any, of any unfunded
vested benefits.

Foreign operations

Pension coverage for employees of Sasol’s international operations is provided through separate plans. The

group systematically provides for obligations under such plans as services are rendered by qualifying employees
by depositing funds with Trustees for those plans operating in the United States of America, or by creation of
accounting obligations for other plans.

F–65

F–66

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

21.2.1

FUNDED PLANS

Valuation

The funding details of the individual funds based on the latest actuarial valuations were

2006

South Africa

North America

Last actuarial valuation

31 March 2006

30 June 2006

Full/interim valuation

Full

Market value of assets

R4,640 million

R703 million

Valuation method adopted

Projected unit credit

Value of fund assets/accrued benefits

1.3 times

1.1 times

Investment

Each of the pension fund assets are invested in a diversified range of equities, bonds, property and cash.

The broad proportions in each asset class at the measurement date was as follows

South

North

South

North

Asset classes

Africa

America

Africa

America

2006

2005

Equities

% % % %

– local

– foreign

Fixed interest

Property

–

Other

Total

100

100

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Investment strategy

The investment objectives of the group’s pension plans are designed to generate returns that will enable the

plans to meet their future obligations. The precise amount for which these obligations will be settled depends on
future events, including the life expectancy of the plan’s members and salary inflation. The obligations are
estimated using actuarial assumptions, based on the current economic environment.

The pension plans seek to achieve total returns both sufficient to meet expected future obligations as well

as returns greater than its policy benchmark reflecting the target weights of the asset classes used in its targeted
strategic asset allocation.

In evaluating the strategic asset allocation choices, an emphasis is placed on the long-term characteristics of

each individual asset class, and the benefits of diversification among multiple asset classes. Consideration is also
given to the proper long-term level of risk for the plan, particularly with respect to the long-term nature of the
plan’s liabilities, the impact of asset allocation on investment results, and the corresponding impact on the
volatility and magnitude of plan contributions and expense and the impact certain actuarial techniques may have
on the plan’s recognition of investment experience.

The group targets the plan’s asset allocation within the following ranges within each asset class

South Africa

North America

Ranges

Asset classes

Minimum

Maximum

Minimum

Maximum

Equities
– local

52%

60%

50%

75%

– foreign

–

15%

20%

Fixed interest

12%

15%

20%

40%

Property

10%

20%

–

Other

–

10%

The trustees of the respective funds monitor investment performance and portfolio characteristics on a

regular basis to ensure that managers are meeting expectations with respect to their investment approach. There
are restrictions and controls placed on managers in this regard.

Principal actuarial assumptions

The weighted average assumptions used in calculating actuarial valuations of the principal pension plans were

Pension Benefits

South Africa

North America

30 June

2006

2005

2006

2005

Discount rate

8.0%

8.5%

6.0%

5.3%

Expected return on plan assets

8.5%

8.5%

7.5%

8.0%

Expected future salary increases

6.0%

5.5%

3.8%

3.8%

South Africa

The assumed discount rate of 8.0% for the year ended 30 June 2006 represents a 50 basis point decrease

from the 8.5% for the year ended 30 June 2005. This discount rate assumption is based on the discount yield on
government stock which had a 7.3% yield at short durations and 7.5% yield at longer durations at the
measurement date.

F–67

F–68

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

The expected long-term rate of return on assets assumption remained consistent at 8.5% for the year ended

30 June 2006. The assumption was supported by an analysis performed of the weighted average yield expected
to be achieved with the anticipated make up of investments. In excess of 60% of the assets are invested in
equities and the balance in lower yielding investments.

North America

The assumed discount rate of 6.0% for the year ended 30 June 2006 represents an increase from the 5.3%

for the year ended 30 June 2005. This discount rate assumption was determined by matching future pension
benefit payments with expected future AA bond yields for the same periods.

The expected long-term rate of return on assets declined by 50 basis points to 7.5% for the year ended

30 June 2006. The assumption was supported by an analysis performed of the weighted average yield expected
to be achieved with the anticipated make up of investments. The investment makeup is heavily weighted towards
equities.

Contributions

Funding is based on actuarial determined contributions. The following table sets forth our projected

voluntary pension contributions for the fiscal year 2007:

South

North

Africa

America

Projected

(Rand in millions)

Pension contributions

The accumulated benefit obligations for the year ended 30 June 2006 are:

South Africa

North America

Total

30 June

2006

(Rand in millions)

Accumulated benefit obligation

3,501

525

4,026

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Funding

Reconciliation of the funded status to amounts recognised in the consolidated balance sheets:

Pension Benefits

South Africa

North America

Total

30 June

30 June

30 June

30 June

30 June

30 June

2006

2005

2006

2005

2006

2005

(Rand in millions)

Funded status liability

1,058

721

–

(59)

1,058

662

– Projected benefit obligation

(3,582)

(2,519)

–

(649)

(3,582)

(3,168)

– Fair value of plan assets

4,640

3,240

–

590

4,640

3,830

Unrecognised actuarial losses/(gains)

(797)

(560)

–

227

(797)

(333)

Unrecognised prior service cost

224

282

–

224

282

Net asset/(liability) recognised

485

443

–

168

485

611

Amounts recognised in balance sheet
consist of:
Prepaid pension asset

485

443

–

175

485

618

Accrued pension liability

–

(7)

–

(7)

Net (asset)/liability recognised

485

443

–

168

485

611

F–69

F–70

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Reconciliation of the funded status to amounts recognised in the consolidated balance sheets.

Pension liability

South Africa

North America

Total

30 June

30 June

30 June

30 June

30 June

30 June

2006

2005

2006

2005

2006

2005

(Rand in millions)

Change in projected benefit obligation

Projected benefit obligation at beginning
of year

2,519

2,328

649

555

3,168

2,883

Service cost

Interest cost

206

202

254

242

Member contributions

–

Actuarial losses/(gains)

746

(271)

(65)

109

681

(162)

Benefits paid

(209)

(187)

(48)

(50)

(257)

(237)

Foreign currency translation

–

Settlements

–

(15)

–

(15)

Transfer from Defined Contribution Plan ^

313

440

–

313

440

Disposal*

–

(52)

–

(52)

Transferred to discontinued operations

–

(656)

–

(656)

–

Projected benefit obligation at end
of year

3,582

2,519

–

649

3,582

3,168

Change in fair value of plan assets
Fair value of plan assets at beginning
of year

3,240

2,279

590

514

3,830

2,793

Actual return on plan assets

1,290

702

1,361

733

Employer contributions

Plan participant contributions

–

Benefits paid

(209)

(187)

(48)

(50)

(257)

(237)

Foreign currency translation

–

Settlements

–

(15)

–

(15)

Transfer from Defined Contribution Plan ^

313

440

–

313

440

Disposal *

–

(22)

–

(22)

Transferred to discontinued operations

–

(703)

–

(703)

–

Fair value of plan assets at end of year

4,640

3,240

–

590

4,640

3,830

^ Amount represents retired employees who on retirement have elected to participate in the Defined Benefit Plan by

purchasing a Defined Benefit Pension.

* During the year ended 30 June 2005, the Group restructured certain of its shareholdings in Sasol Wax International’s

underling subsidiaries, thereby resulting in a dilution of its interest in Paramelt RMC B.V.

The entity is now equity accounted, hence the Funded Plan has been accounted for on the disposal line.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

The net periodic pension cost for the years ended 30 June 2006, 30 June 2005 and 30 June 2004 were as

follows:

Pension Benefits

South Africa

North America

Total

30 June

30 June

30 June

30 June

30 June

30 June30 June

2006

2005

2004

2006

2005

2004

2006

2005

2004

(Rand in millions)

Components of net periodic pension
cost

Service cost

Interest

cost

206

202

231

254

242

270

Expected

return

plan

assets

(278)

(224)

(193)

(42)

(42)

(38)

(320)

(266)

(231)

Settlement

curtailment

cost

–

Amortisation of:
– Unrecognised

prior

service

cost

–

– Unrecognised

net

loss

(30)

–

(13)

Net periodic pension cost

(37)

140

206

Continuing

operations

(37)

140

–

(37)

140

Discontinued

operations

–

The group expects the following benefit payments to be paid out of the plans for the years indicated.

The expected benefits are based on the same assumptions used to measure the group’s benefit obligation as
at 30 June 2006 and include estimated future employee service:

South Africa

(Rand in
millions)

Within 1 year

246

1 – 2 years

276

2 – 3 years

291

3 – 4 years

307

4 – 5 years

326

More than 5 years

1,954

3,400

F–71

F–72

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

21.2.2

UNFUNDED PLANS

Valuation

Last actuarial valuation

30 June 2006

Full/interim valuation

Full

Valuation method adopted

Projected unit credit

Actuarial assumptions

The weighted average assumptions used in calculating actuarial valuations of the principal pension plans

were:

Europe

30 June

30 June

2006

2005

Discount rate

4.5%

4.2%

Expected future salary increases

2.5%

2.0%

The assumed discount rate of 4.5% for the year ended 30 June 2006 represents a 30 basis point increase

from 4.2% for the year ended 30 June 2005. This discount rate assumption is based on annuity insurance tariffs
from a group of leading German insurers.

Funding

Europe

30 June

30 June

2006

2005

(Rand in millions)

Projected benefit obligation

1,055

1,489

Unrecognised actuarial losses

(223)

(320)

Unrecognised prior service cost

(4)

–

Minimum pension liability

102

Net liability recognized

868

1,271

Amounts recognised in balance sheet consist of

Accrued pension liabilities
Long-term portion

863

1,261

Short-term portion

Net liability recognized

868

1,271

Change in projected benefit obligation

Projected benefit obligation at beginning of year

1,489

1,103

Service cost

Interest cost

Actuarial (gains)/losses

236

Benefits paid

(35)

(32)

Foreign currency translation

206

Plan amendment

(5)

Transferred to discontinued operations

(731)

–

Projected benefit obligation at end of year

1,055

1,489

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

30 June

2006

2005

2004

(Rand in millions)

Components of net periodic pension cost

Service cost

Interest cost

Amortisation of unrecognized actuarial loss

–

Net periodic pension cost

120

101

100

Continuing operations

Discontinued operations

The group expects the following benefit payments to be paid out of the plans for the years indicated.

The expected benefits are based on the same assumptions used to measure the group’s benefit obligation as
at 30 June 2006 and include estimated future employee service.

Europe

2006

(Rand in
millions)

Within 1 year

1 – 2 years

2 – 3 years

3 – 4 years

4 – 5 years

More than 5 years

251

458

22.

Commitments and contingencies

Lease and purchase commitments

The company and its subsidiaries occupy certain premises under leases which are classified as capital

leases which expire at various dates until 2034. Olefins & Surfactants (discontinued operations) had various
outstanding purchase commitments primarily for feedstock purchases. The commitments arise mainly from
take-or-pay agreements. In general such commitments are at prices not in excess of current market prices.

F–73

F–74

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

The group’s future minimum capital, operating lease payments and purchase commitments are as follows:

2006

Capital

Operating

Purchase

commitments

(Rand in millions)

Within 1 year

165

261

1 – 2 years

156

225

2 – 3 years

158

206

3 – 4 years

145

181

4 – 5 years

143

173

–

More than 5 years

1,015

1,326

–

Total minimum lease/purchase commitments

1,782

2,372

273

Less: amounts representing interest

(824)

–

From continuing operations

958

2,372

273

Discontinued operations

493

16,802

Total operations

969

2,865

17,075

Operating lease expense incurred from continuing operations amounted to R270 million

(2005– R182 million, 2004 – R124 million).

Operating lease expense incurred from discontinued operations amounted to R249 million

(2005– R231 million, 2004 – R180 million).

Capital commitments

Commitments are budgeted, approved and reported in terms of the management approach used for

segmental reporting.

Contracted and authorized capital expenditure for property, plant and equipment and intangible assets for

the group and its joint ventures are summarised below:

30 June

30 June

2006

2005

(Rand in millions)

Capital expenditure

Authorized and contracted for

28,060

26,679

Authorized but not yet contracted for

6,306

7,740

Authorized capital expenditure

34,366

34,419

Less: expenditure to date

(20,500)

(15,250)

Continuing operations

13,866

19,169

Discontinued operations

762

14,628

As of 30 June 2006, the group had authorized approximately R34 billion of group capital expenditure of

which we had spent R20 billion up to 30 June 2006. Of the unspent capital commitments of R14 billion, we
expect to spend R9 billion in 2007 and R5 billion in 2008 and thereafter.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Significant projects, each in excess of R150 million, in progress with a total amount approved at 30 June

2006 of approximately R34 billion include:

Years ended:

30 June

30 June

2006

2005

Project

Business unit

(Rand in millions)

Escravos GTL

(1)

Synfuels International

3,574

4,937

3rd Octene train

Solvents

1,209

1,132

Arya Sasol Polymers

Polymers

1,190

2,457

Project Turbo

Polymers

913

3,152

Mozambique development

Petroleum International

1,229

–

Oryx GTL

Synfuels International

471

1,063

Sulphuric acid plant

Synfuels

608

–

Process automation and control

Synfuels

240

–

Project Turbo

Synfuels

236

1,900

Replacement of Honeywell infrastructure

Synfuels

163

–

Other smaller projects

Various

4,795

4,528

14,628

19,169

(1) Sasol provides risk-based financing for 50% of the capital expenditure on the EGTL joint venture. The project cost is

under review. Sasol’s portion is not expected to exceed US$ 1.45 billion. Due to concurrent increases in commodity
values, this development is not expected to materially affect the returns of this project.

F–75

F–76

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Guarantees

The group has issued the following guarantees for which the liabilities have not been included in the

balance sheet:

30 June

2006

Guarantee

Maximum

included in the

potential amount

balance sheet

Notes

(Rand in millions)

Guarantees in respect of GTL ventures

8,301

109

Guarantees in respect of joint venture commitments

1,360

–

Letters of credit

iii

1,172

–

Performance guarantees

1,035

238

Other guarantees and claims

313

Guarantee to RWE-DEA

276

–

Customs and excise

vii

111

–

Guarantees in respect of natural gas pipeline

–

Subsidiaries’ external obligations

–

12,656

371

Continuing operations

12,001

371

Discontinued operations

655

–

12,656

371

Notes:

Sasol has issued the following significant guarantees for the obligations of several of its subsidiaries in respect of the
GTL ventures. These guarantees relate to the construction and funding of Oryx GTL Limited in Qatar and Escravos
GTL in Nigeria, including, inter alia:

• A completion guarantee has been issued for Sasol’s portion of the project debt of Oryx GTL Limited capped at

US$343 million (R2,459 million) plus interest and costs subject to the project demonstrating a minimum level of
sustained production over a continuous period of ninety days and catalyst deactivation within acceptable parameters
for at least two hundred and seventy days, after commissioning. It is estimated that the project will be commissioned
during the fourth quarter of 2006 calendar year.

• A guarantee for the take-or-pay obligations of a wholly owned subsidiary has been issued under the gas sale and

purchase agreement (GSPA) entered into between Oryx GTL Limited, Qatar Petroleum and ExxonMobil Middle
East Gas Marketing Limited, by virtue of this subsidiary’s 49% shareholding in Oryx GTL Limited. Sasol’s exposure
is limited to the amount of US$123 million (R884 million). In terms of the GSPA, Oryx GTL Limited is
contractually committed to purchase minimum volumes of gas from Qatar Petroleum and ExxonMobil Middle East
Gas Marketing Limited on a take-or-pay basis. Should Oryx GTL terminate the GSPA prematurely, Sasol Limited’s
wholly owned subsidiary will be obliged to take-or-pay for its 49% share of the contracted gas requirements. The
term of the GSPA is 25 years from the date of commencement of operations. It is estimated that the project will be
commissioned during the fourth quarter of 2006 calendar year.

• A guarantee has been issued for the obligation of a wholly owned subsidiary to contribute 49% of the required equity

in respect of the investment in Oryx GTL Limited. Sasol’s equity contribution is estimated at US$160 million
(R1,147 million). It is expected that the project will be commissioned during the fourth quarter of 2006 calendar
year.

• A guarantee of US$31 million (R225 million) in respect of the performance of the Oryx GTL plant has been issued.

An amount of R109 million has been accrued in respect of this guarantee.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

• A performance guarantee for the obligations of subsidiaries has been issued in respect of the construction of

Escravos GTL in Nigeria for the duration of the investment in Escravos GTL limited to an amount of
US$250 million (R1,793 million).

• Sasol Limited issued a performance guarantee for the obligations of its subsidiaries in respect of and for the duration

of the investment in Sasol Chevron Holdings Limited, limited to an amount of US$ 250 million (R1,793 million).
Sasol Chevron Holdings Limited is a joint venture between a wholly owned subsidiary of Sasol Limited and
Chevron Corporation. All guarantees listed above are issued in the normal course of business.

ii.

Guarantees issued to various financial institutions in respect of debt obligations of joint venture companies accounted
for using the equity method.

iii.

Various guarantees issued in respect of letters of credit issued by subsidiaries.

iv.

Various performance guarantees issued by subsidiaries. An accrual of R238 million was recognised in respect of certain
guarantees.

Included in other guarantees are environmental guarantees of R123 million.

vi.

Various performance guarantees issued in favour of RWE-DEA.

vii.

Various guarantees were issued in respect of the group’s customs and excise obligations.

Product warranties

The group provides product warranties with respect to certain products sold to customers in the ordinary

Contingencies – Litigation and competition matters

Subsidiaries

Sasol Limited has guaranteed the fulfillment of various subsidiaries’ obligations in terms of contractual

agreements.

Sasol Limited has guaranteed the borrowing facilities of certain of its subsidiaries. Further details of major

banking facilities and debt arrangements at 30 June 2006 are provided on page F–82.

Mineral rights

As a result of the promulgation of legislation in South Africa, the common law (mineral rights) and

associated statutory competencies of Sasol Mining have been converted to interim statutory rights (Old Order
Rights). Sasol Mining is entitled to convert these Old Order Rights to statutory mining and prospecting rights
(New Order Rights) after complying with certain statutory requirements. All applications due to date, including
the conversion of the four old order mining rights covering the Secunda operations, have been submitted to the
Department of Minerals and Energy (DME), and we are awaiting approval in this regard. To date we have
submitted 41 applications to the DME to acquire prospecting and mining rights. Thus far, five prospecting rights
have been granted. These applications cover all the prospecting rights in the Free State and Waterberg as well as
the prospecting and mining rights in Secunda. No value has been atributed to these rights in the financial
statements.

F–77

F–78

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Litigation in respect of continuing operations

Fly Ash Plant

Sasol Synfuels is in legal proceedings with regard to the operation of a plant in Secunda. Ashcor has

claimed damages of R313 million relating to their inability to develop their business and a projected loss of
future cash flows. The prospect of future loss is deemed to be reasonably possible and the loss is unlikely to
exceed R10 million.

Nationwide Poles

The Competition Commission received a complaint against Sasol Oil (Carbo-Tar division) in April 2003.

The complaint was referred by the plaintiff to the Competition Tribunal. The Competition Tribunal found against
Sasol that during the period of the complaint Sasol was a dominant firm whose conduct met the test required in
establishing prohibited price discrimination. The company filed a notice of appeal and the appeal was heard by
the Competition Appeal Court during September 2005. Likelihood of loss is remote as the Competition Appeal
Court found in favour of Sasol.

Nutri-Flo

Nutri-Flo filed a complaint in 2002 alleging that Sasol Nitro was engaged in price discrimination, excessive

pricing and exclusionary pricing. In November 2003, Nutri-Flo made an urgent application to the Competition
Tribunal to obtain an interdict preventing Sasol from implementing a new price list. In this application Nutri-Flo
again filed a complaint on grounds similar to those specified above, in addition it is alleged that Sasol, Kynoch
and Omnia are acting as a cartel in fixing prices in the fertilizer industry. Nutri-Flo subsequently withdrew its
application, however, the Competition Commission has investigated the complaint and in May 2005, referred the
matter to the Competition Tribunal, alleging findings of price fixing, prevention/lessening of competition, abuse
of dominance and exclusionary conduct. The Competition Commission requested the Competition Tribunal to
impose the maximum administrative penalty in terms of the Competition Act. Sasol took the matter on review to
the Competition Appeal Court. The court ruled against Sasol in April 2006 and the matter must consequently be
heard by the Competition Tribunal. Sasol has filed an exception to the referral of the complaint to the
Competition Tribunal on the basis that it is vague and does not disclose a clear contravention of the Competition
Act. On the basis of the pleadings in their current form, we believe the likelihood of a finding of unlawful
conduct is remote. In the event that the Competition Commission amends the referral, our current assessment
may require review. For this reason, it is currently not possible to make an estimate of the contingent liability
(whether arising out of penalties that may be imposed by the Competition Tribunal or civil lawsuits that may
arise in the event of a finding of unlawful conduct).

Sasol Wax

On 28 and 29 April 2005 the European Commission conducted an investigation at the offices of Sasol Wax

International AG and its subsidiary Sasol Wax GmbH, both located in Hamburg, Germany. A parallel
investigation is being conducted by the US Department of Justice in the United States. On 28 April 2005 Sasol
Wax Americas Inc. received a subpoena for information from the United States District Court regarding its wax
sales activities. The investigations in the US and the European Union arise from alleged anticompetitive
behaviour among industry members in the paraffin wax industry. Sasol Wax is co-operating with the competition
authorities in the US and in the European Union in order to clarify this issue. At this point of the investigation it
is not possible to assess the financial implications or inherent risk. A reliable estimate of the amount of the
possible penalty cannot be made, since the determination thereof is at the sole discretion of the antitrust
authorities.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Profert

Profert filed a complaint against Sasol in August 2004 alleging that Sasol Nitro refused to supply Profert,

that discriminatory pricing towards Profert in sales of LAN was committed and that Sasol is engaged in
exclusionary conduct to exclude Profert from the fertilizer market. In May 2006, the Competition Commission
referred the complaint to the Competition Tribunal alleging that Sasol, AECI and Kynoch have entered into
agreements dividing the LAN market in order to make Sasol the exclusive supplier, that Sasol is engaged in
conduct that favours Kynoch in supply arrangements to the exclusion of other suppliers, and that Sasol is
committing discriminatory pricing against Profert. The Competition Commission requested the Competition
Tribunal to impose the maximum administrative penalty in terms of the Competition Act. Sasol filed a reply to
the referral of the complaint on 4 August 2006. The Competition Commission has not yet replied to Sasol’s
submission. Preparations for the hearing are proceeding. On the basis of the pleadings in their current form, we
believe the likelihood of the Competition Tribunal imposing a penalty is remote. In the event that the
Competition Commission amends its referral, our current assessment may require review. For this reason, it is
currently not possible to make an estimate of the contingent liability (whether arising out of penalties that may
be imposed by the Competition Tribunal or civil lawsuits that may arise in the event of a finding of unlawful
conduct).

Sale of Phosphoric Acid production assets

In June 2004, Foskor increased its phosphate rock price to such an extent that Sasol indicated that it would

shut down the operations in Phalaborwa. Sasol and Foskor then entered into an agreement in terms of which
Foskor would purchase the Phalaborwa plant. For the period that this intended sale was under assessment by the
regulatory authorities, the parties entered into an agreement that Foskor would supply phosphate rock at its cost
and Sasol would toll manufacture phosphoric acid for Foskor. The toll manufacturing agreement commenced on
1 September 2005. In October 2005, the South African Competition Commission issued a recommendation that
the proposed merger be prohibited and referred the matter to the South African Competition Tribunal. The
parties abandoned the merger in June 2006 and notified the Competition Commission that they intend to enter
into a new toll manufacturing agreement for a period of 4 years. The Competition Commission has not
expressed any view on whether the intended transaction would amount to a merger or not. The parties intend to
finalize the terms of a new toll manufacturing agreement and to notify the Competition Commission of the
provisions of such agreement. Views that may be expressed by the Competition Commission will be taken into
consideration prior to implementation of the new agreement.

The Competition Commission is also investigating whether the current toll manufacturing agreement (that

commenced in September 2005) amounts to pre-implementation of a merger without the required approval by
the Competition Tribunal and/or if there were any other unlawful agreements between Foskor and Sasol relating
to the proposed sale of the phosphoric acid assets. If the matter is ultimately referred to the Competition
Tribunal and the parties are found to have implemented a merger without the necessary Tribunal approval, the
parties could be faced with penalties of up to 10% of the turnover of their relevant businesses. We believe the
likelihood of the finding of unlawful conduct to be remote. In the event that the Commission refers the matter to
the Tribunal, our current assessment may require review. For this reason, it is currently not possible to make an
estimate of the contingent liability.

Other

From time to time Sasol companies are involved in other litigation and administrative proceedings in the

normal course of business. 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.

F–79

F–80

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Litigation in respect of discontinued operations

The EDC pipeline litigation

Sasol North America (Sasol NA) had numerous separate pending cases which originated as a result of a

1994 rupture of the ConocoPhillips ethylene dichloride (EDC) pipeline connecting Conoco’s dock to Sasol NA’s
vinyl chloride monomer plant in the United States. Plaintiffs sought compensatory and punitive damages as a
result of alleged exposure to EDC. As of 30 June 2006 there is a class action and 13 lawsuits pending, brought
by approximately 500 plaintiffs. Plaintiffs allege various personal injuries resulting from exposure to EDC while
employed as contractors of ConocoPhillips to clean up the EDC or to perform other projects on the
ConocoPhillips refinery where the rupture occurred. The plaintiffs seek recovery of unspecified compensating
and punitive damages. Sasol NA has successfully obtained substantial insurance cover for costs to be incurred in
connection with this litigation. Previous settlements for approximately $10 million of which Sasol NA’s share
was $3 million were made in 2003. While the cases are being vigorously defended the likelihood of financial
loss in future is probable. The loss is unlikely to exceed the amount of $3 million for previously settled cases.

Under the Asset and Share Purchase agreement with RWE-DEA for the acquisition of Condea, the costs in

respect of the EDC pipeline cases are reimbursable by RWE-DEA less insurance and tax benefits.

Sulfur dioxide litigation

During January 2003 Sasol NA and ConocoPhillips refinery released a quantity of sulfur dioxide to the

environment as a result of a power outage in the ConocoPhillips Lake Charles refinery. Lawsuits were filed
against ConocoPhillips and Sasol NA has since been added as a defendant. At 30 June 2006 more than
600 lawsuits had been filed on behalf of more than 20,000 plaintiffs. ConocoPhillips and Sasol NA jointly
defended the lawsuits and Sasol NA’s liability for defense and settlement costs has been limited, by agreement.
Sasol NA has paid the “cap” as per the agreement and therefore the prospect of future loss in this matter is
remote and no future loss in this regard is expected.

Yellow Rock litigation

In July 2005 Sasol NA received notice of suit by Yellow Rock LLC alleging over US$1 million in damages

and seeking an injunction that would require Sasol NA to remove its ethylene from Salt Storage Dome 1-A in
Sulfur, Louisiana near the Lake Charles Chemical Complex. The suit alleges that in 2004 the Dome 1-A was
leaking ethylene and caused the “blow out” of an oil and gas exploration well being drilled by Yellow Rock. An
integrity assessment of the well performed by an independent consultant in early 2005 concluded that the Dome
1-A was not leaking. These results were conveyed to Yellow Rock and were signed off on by the Louisiana
Department of Natural Resources, but did not deter the filing of suit. Prospects of future events confirming a loss
are therefore remote.

US hearing loss cases

There are presently approximately 160 hearing loss cases pending in the Sasol NA business. These claims

for occupational hearing loss in Louisiana are not covered by Workman’s Compensation. The likelihood of loss
is considered reasonably possible as these claims will be settled. The range of expected future loss through
settlement is estimated to be between US$ 800,000 and US$ 1,150,000.

Environmental orders

The group is subject to loss contingencies pursuant to numerous national and local environmental laws and

regulations that regulate the discharge of materials into the environment or that otherwise relate to the protection

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

of human health and the environment in all locations in which it operates. These laws and regulations may, in
future, require the group to remediate or rehabilitate the effects of its operations on the environment. The
contingencies may exist at a number of sites, including, but not limited to, sites where action has been taken to
remediate soil and groundwater contamination. These future costs are not fully determinable due to factors such
as the unknown extent of possible contamination, uncertainty regarding the timing and extent of remediation
actions that may be required, the allocation of the environmental obligation among multiple parties, the
discretion of regulators and changing legal requirements.

The group’s environmental obligation for continuing operations accrued at 30 June 2006 was 2,268 million

compared to R2,161 million in 2005 (R238 million and R158 million was accrued for 2006 and 2005
respectively for our discontinued operations). Included in this balance is an amount accrued of approximately
R395 million (R134 million for our discontinued operations) 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 ongoing monitoring. Due to uncertainties
regarding future costs the potential loss in excess of the amount accrued cannot be reasonably determined.

Under the agreement for the acquisition of Sasol Chemie, we received an indemnification from RWE-DEA

for most of the costs of remediation and rehabilitation of environmental contamination existing at Condea Vista
Company located in the United States on or before 1 March 2001.

Although the group has provided for known environmental obligations that are probable and reasonably

As with the oil and gas and chemical industries generally, compliance with existing and anticipated

September 2004 Accident Trust

On 1 September 2004 the lives of ten employees and contractors were lost and a number of employees and

contractors were injured during an explosion that occurred at our Secunda West ethylene production facility.

Since January 2006, the Company, Solidarity, the Chemical, Energy, Paper, Printing, Wood and Allied

The Company will fund the September 2004 Accident Trust to pay the ex gratia grants. Whilst accepting

F–81

F–82

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

payments are dependent on the number of applications submitted to the Trust, the independent findings of each
application and the calculation of the grants based on the applicable South African legal principles. It is believed
that the possible loss is unlikely to exceed R20 million.

Borrowing facilities

The group has borrowing facilities from continuing operations with major financial institutions of

approximately R40,000 million (2005- R40,000 million). Of these facilities approximately R18,000 million
(2005 – R19,000 million) had been utilized at year end.

There were no events of default for the years ended 30 June 2006 and 30 June 2005.

List of major banking facilities and debt arrangements at 30 June 2006:

Expiry Date

Currency

Facility

Utilization

(millions)

(Rand in millions)

Sasol Financing

Uncommitted facilities

Commercial banking facilities

Various (short-term)

Rand

12,880

1,102

Commercial paper program

None

Rand

6,000

–

Committed facility
Revolving credit facility (syndicated)

May 2008

Euro

1,834

–

Debt arrangements

RSA Bond

August 2007

Rand

2,000

Japan Bank for International Co-operation

June 2013

US Dollar

419

Sasol Financing International
Uncommitted facilities
Commercial banking facilities

Various (short-term)

Euro

151

–

Committed facilities
Revolving credit facility

May 2008

Euro

1,834

487

Debt arrangement
Eurobond

June 2010

Euro

2,750

Other Sasol businesses

Asset based finance

Republic of Mozambique Pipeline
Investments Company (Pty) Limited *

June 2015 and

December 2017

Rand

2,502

Sasol Petroleum Temane Limitada *

June 2015

Euro and Rand

1,202

Debt arrangements

National Petroleum Refiners of South
Africa (Pty) Limited *

Various

Rand

1,230

1,078

Property finance leases

Sasol Oil *

Various

Rand

687

Other banking facilities and debt
arrangements

Various

1,200

1,032

34,689

13,259

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Facility

Utilization

(Rand in millions)

Comprising:
Long-term debt (refer note 20)

11,211

Short-term debt (refer note 18)

1,606

Bank overdraft

442

13,259

* Facilities held by these subsidiaries.

Excluded from the above analysis are
borrowing facilities held by the group’s joint
ventures

Oryx GTL Limited

2,459

2,329

Arya Sasol Polymer Company

1,911

1,795

Sasol Dia Acrylates South Africa (Pty) Limited

1,179

712

Other

130

5,679

4,925

23.

Shareholders’ equity

Ordinary shares in issue

30 June

30 June

2006

2005

2004

(Number of shares)

Balance at beginning of year

676,877,125

671,271,425

668,798,425

Share options implemented

6,101,300

5,605,700

2,473,000

Balance at end of year

682,978,425

676,877,125

671,271,425

Less: Treasury shares

(60,111,477)

(60,111,477)

622,866,948

616,765,648

611,159,948

Treasury shares

At each annual general meeting since 25 October 1999 until the meeting on 24 November 2004 the

shareholders have authorized the directors to undertake a repurchase of issued securities limited to a maximum
of 10% of the company’s issued securities at the time that the authority was granted.

The current restrictions imposed on the directors by the shareholders, the Companies Act and the JSE

Limited are:

• the general authority is valid from annual general meeting to annual general meeting and can be varied

and revoked by special resolution prior to the company’s next annual general meeting;

• the general authority shall be valid until the company’s next annual general meeting, but shall not extend

beyond fifteen months from the date of the special resolution;

• the repurchase must be made through the order book of the JSE Limited trading system and without any

prior arrangement between the company and the counter party;

• only one agent may be appointed at any point in time to make repurchases on behalf of the company;

• the general authority to acquire the company’s shares shall be limited to a maximum of 10% of the

issued share capital of that class at the time the authority is granted;

F–83

F–84

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

• any repurchase will not be made at a price more than 10% above the weighted average of the market

value of the share for the five business days immediately preceding the date of purchase;

• repurchases may only be undertaken if, after such a purchase, the JSE Limited requirements regarding

shareholder spread are still complied with;

• shares may not be repurchased during a prohibited period; and

• should the company, or any of its subsidiaries, cumulatively repurchase 3% of the company’s shares in

terms of the general authority an announcement shall be made in accordance with the requirements of the
JSE Limited.

Repurchases may be made at times and at prices deemed appropriate by management and consistent with

the authorization of the shareholders. No shares of the company were repurchased for years ended 30 June 2006
and 30 June 2005.

At 30 June 2006, a total of 60,111,477 shares, representing 8.9% of the issued share capital of the

company, had been repurchased since 9 May 2000 at an average price of R60.67 per share.

Share-based payments

Effective 1 July 2005, the group adopted, under the modified retrospective transition method, the provisions

of SFAS 123(R), which establishes accounting for share-based payments exchanged for employee services.
Under the provisions of SFAS 123(R), share-based payment expense is measured at the grant date, based on the
fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally
the vesting period of the award).

Refer to note 2 (Significant accounting policies) for the effect on the financial results and financial position

on the adoption of SFAS 123(R).

The group recognized share-based payment expense for the periods indicated:

30 June

30 June

2006

2005

2004

(Rand in millions)

Continuing operations

156

128

137

Discontinued operations

169

137

146

There was no income tax recognized as consequence of the share-based payment plan.

Total unrecognized share-based payment expense related to non-vested share options, expected to be

recognized over a weighted average period of 5.6 years, amounted to R361 million at 30 June 2006.

The Sasol Share Incentive Scheme allows certain senior group employees the option to acquire shares in

Sasol Limited over a prescribed period. The exercise price of these options equals the market price of the
underlying shares on the trading day immediately preceding the granting of the option.

The objective of the Sasol Share Incentive Scheme is the retention of key employees. Allocations are linked

to the performance of both the group and the individual.

For options are granted after 25 October 1999, vesting periods for these options are as follows:

• 2 years – 1st third

• 4 years – 2nd third

• 6 years – final third

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

For options granted prior to 25 October 1999, vesting periods for these options are as follows:

• 4 years – 1st third

• 6 years – 2nd third

• 8 years – final third

The offer price of these options equals the closing market price of the underlying shares on the trading day

immediately preceding the granting of the option.

In terms of the scheme, options to a maximum of 60,000,000 ordinary shares may be offered by the

trustees to eligible group employees. Each employee is limited to holding a maximum of 1,000,000 options to
acquire Sasol Limited shares.

On resignation, share options which have not yet vested will lapse and share options which have vested

may be taken up at the employee’s election before their last day of service. Payment on shares forfeited will
therefore not be required. On death, all options vest immediately and the deceased estate has a period of twelve
months to exercise these options. On retirement the options vest immediately and the nine year expiry period
remains unchanged.

30 June

30 June

2006

2005

2004

Number of shares

Shares allotted

32,305,600

26,204,300

20,598,600

Share options granted

23,818,700

24,975,700

27,097,900

Available for allocation

3,875,700

8,820,000

12,303,500

60,000,000

60,000,000

The following tables summarize the activity of share options and provide further information of the

outstanding share options:

Weighted

Number of shares

average

Movements in the number of options granted

option price

Rand

Outstanding at 30 June 2003

26,495,200

66.40

Options granted

3,950,700

90.99

Options exercised

(2,473,000)

45.26

Options forfeited

(63,100)

92.14

Options expired

(811,900)

74.14

Outstanding at 30 June 2004

27,097,900

71.77

Options granted

4,208,800

120.34

Options exercised

(5,605,700)

55.33

Options forfeited

(43,700)

128.70

Options expired

(681,600)

83.99

Outstanding at 30 June 2005

24,975,700

83.18

Options granted

5,390,500

218.95

Options exercised

(6,101,300)

70.52

Options forfeited

(37,700)

218.18

Options expired

(408,500)

137.95

Outstanding at 30 June 2006

23,818,700

116.32

F–85

F–86

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

30 June

30 June

2006

2005

2004

(Rand)

Weighted average price at which share options were granted
during year

218.95

120.34

90.99

Weighted average grant-date fair value

58.74

33.44

28.40

Average market price of options exercised during year

234.13

138.73

94.78

Average fair value of share options vested during the year

26.17

22.81

21.67

(Rand in millions)

Total intrinsic value of share options exercised during the year

998

468

122

30 June

30 June

2006

2005

2004

Number of shares

Vesting periods of options granted

Already vested

5,295,500

5,034,700

5,567,000

Within one year

5,208,500

5,826,000

5,165,200

1 – 2 years

4,751,700

5,522,300

5,765,000

2 – 3 years

2,624,400

3,206,100

4,435,500

3 – 4 years

2,891,000

2,797,700

3,391,100

4 – 5 years

1,291,400

1,218,200

1,496,700

More than 5 years

1,756,200

1,370,700

1,277,400

23,818,700

24,975,700

27,097,900

Weighted

Aggregate

average

intrinsic

Range of exercise prices

Number

exercise

remaining

value

of shares

price

life

(Rand in

(Rand)

(Years)

millions)

Share options outstanding at 30 June 2006

R20.01 – R40.00

1,753,700

29.23

1.64

R40.01 – R60.00

3,184,000

47.79

2.69

R60.01 – R80.00

2,324,800

77.15

4.07

R80.01 – R100.00

3,736,000

89.99

6.10

R100.01 – R120.00

6,312,900

112.91

6.01

R120.01 – R140.00

497,000

127.39

6.79

R140.01 – R160.00

663,100

151.44

8.00

R160.01 – R180.00

84,100

170.20

8.00

R180.01 – R200.00

695,300

193.33

8.00

R200.01 – R220.00

3,339,300

216.83

8.08

R220.01 – R240.00

857,700

228.84

8.31

R240.01 – R260.00

197,800

253.84

9.00

R260.01 – R280.00

173,000

274.50

9.00

23,818,700

115.97

5.63

3,788

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Weighted

Aggregate

average

intrinsic

Range of exercise prices

Number

exercise

remaining

value

of shares

price

life

(Rand in

(Rand)

(Years)

millions)

Share options vested but not yet exercised at
30 June 2006

R20.01 – R40.00

743,100

33.87

R40.01 – R60.00

1,828,100

48.44

R60.01 – R80.00

863,700

77.48

R80.01 – R100.00

687,000

90.59

R100.01 – R120.00

1,110,300

113.12

R120.01 – R140.00

62,600

132.40

R140.01 – R200.00

–

R200.01 – R220.00

700

218.00

5,295,500

71.18

3.84

1,079

The fair value of share options is determined using the Black Scholes valuation model, consistent with the

provisions of SFAS 123(R) and the Securities and Exchange Commission Staff Accounting Bulletin No, 107.
Key input assumptions used to estimate the fair value of share options include the grant price of the award, the
expected option term, volatility of the Sasol share price, the risk-free interest rate, and the dividend yield.
Management believes that the valuation technique and the approach utilized to develop the underlying
assumptions are appropriate in calculating the fair values of the share options granted. Estimates of fair value are
not intended to predict actual future events or the value ultimately realized by employees who receive equity
awards.

The weighted average assumptions that were used for option grants in the respective periods are as follows:

30 June

30 June

2006

2005

2004

Risk free interest rate (%)

8.00

9.5

10.75

Expected volatility (%)

Expected dividend yield (%)

4.0

4.3

Vesting period (years)

2, 4 and 6

2, 4 and 6

The risk-free rate for periods within the contractual term of the share options is based on the South African government
bonds in effect at the time of grant.

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

Dividends

An interim dividend of R2.80 per share (2005 –R2.30 per share, 2004 –R2.15 cents per share) was paid on

10 April 2006. A final dividend in respect of the year ended 30 June 2006 of R4.30 per share (2005 – R3.10 per
share, 2004 – R2.35 per share) was declared on 12 September 2006. As the final dividend for 2006 was declared
subsequent to the financial year end, no liability was recognized in the annual financial statements in respect of
this final dividend.

The cash flow of the final dividend of R4.30 per share is expected to be approximately R2,678 million.

F–87

F–88

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

24.

Accumulated other comprehensive loss

The components of accumulated other comprehensive loss are summarized as follows:

30 June

30 June

2006

2005

2004

(Rand in millions)

Realised and unrealised holding losses from cash flow
hedging activities, net of tax

(1,371)

(1,436)

(1,437)

Translation of foreign operations with a functional currency
other than rand, net of tax

117

(1,275)

(1,303)

Minimum pension liability adjustment, net of tax

(37)

(64)

–

(1,291)

(2,775)

(2,740)

25.

Concentration of risk

Financial and market risk

In the normal course of business, the group is exposed to liquidity, credit, foreign currency, interest rate and

crude oil price risks. In order to manage these risks, the group has developed a comprehensive risk management
process to facilitate control and monitoring of these risks. General corporate hedging unrelated to specific
transactions or projects is not undertaken. Throughout the years ended 30 June 2006 and 30 June 2005 it has
been, and remains, our policy that no speculative trading in derivative instruments be undertaken.

Unless specified otherwise, derivative financial instruments did not qualify as designated cash flow hedges

and thus fair value gains and losses are recognized in the income statement.

Liquidity risk

The group manages liquidity risk by proper management of working capital, capital expenditure and cash

flows. We finance our operations through a mixture of retained profits, short-term and long-term bank funding, a
commercial paper programme and corporate bond issues. Adequate banking facilities and reserve borrowing
capacities are maintained. We have sufficient undrawn call/demand borrowing facilities, which could be utilized
to fund any potential shortfall in cash resources.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Maturity profile as at 30 June 2006

Financial assets and liabilities

Maturity

More

Carrying

Within

1 – 2

2 – 3

3 – 4

4 – 5

than

value

one year

years

5 years

(Rand in millions)

Financial assets

Cash and cash equivalents (refer note 9)

2,808

–

Cash restricted for use (refer note 9)

271

–

Trade and other receivables

11,260 11,260

–

Short-term investment

Investments in securities (refer note 13)

392

–

392

Long-term receivables

773

–

646

Long-term financial assets

234

–

234

–

15,810 14,411

321

1,038

Discontinued operations

(i)

4,065

4,026

19,875 18,437

327

1,053

Financial liabilities

Bank overdraft

442

–

Trade payables

4,685

–

Accrued expenses and other obligations

5,391

–

Long-term and short-term debt

12,817

2,177

2,682

613

3,354

602

3,389

23,335 12,695

2,682

613

3,354

602

3,389

Discontinued operations

(i)

3,244

3,231

–

26,579 15,926

2,689

619

3,354

602

3,389

(i)

Relates to O&S and reflects the maturity in respect of that business.

F–89

F–90

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Forward exchange contracts

Contract

Within 1 year

1 – 2

amount

years

(Rand in millions)

Transactions which have already occurred

Imports – capital

US dollar

103

–

Euro

–

109

–

Imports – goods

US dollar

542

–

Euro

–

Pound sterling

–

556

–

Discontinued operations

603

–

Exports

US dollar

129

–

Pound sterling

–

190

–

Discontinued operations

418

–

608

–

Other payables (liabilities)

US dollar

–

Euro

–

Other receivables (assets)

US dollar

884

–

Related to future commitments

Imports

US dollar

333

–

Euro

318

–

Pound sterling

–

653

–

Other payables (liabilities)

US dollar

Euro

–

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Forward exchange contracts

Contract

Within 1 year

1 – 2

amount

years

(Rand in millions)

Commodity derivatives

Futures – Crude Oil

428

–

Zero cost collar – call options sold

10,024

–

Zero cost collar – call options bought

7,552

–

Other

–

Maturity

Nominal

Within

More than

Cross currency swaps

value

1 year

1 – 2 years

2 – 4 years

4 years

(Rand in millions)

Euro to US dollar

5,099

–

Euro to Rand

2,580

1,371

–

1,209

–

Other

375

–

375

8,054

6,470

–

1,209

375

Interest rate derivatives

Pay fixed rate receiving floating rate
Rand

1,562

125

625

812

–

Interest rate cap or collar
(relating to long-term debt)

Rand – cap

500

–

Credit risk

The group has credit risk with respect to long-term receivables, trade receivables, cash and cash

equivalents, held-to-maturity investments and derivative contracts. The exposure to credit risk with regard to
trade receivables is not concentrated due to a large customer base. Adequate provision is made for doubtful
debts.

We minimize our credit risk relating to financial instruments by only transacting with major financial

institutions on listed exchanges. Counterparty credit limits are in place and reviewed and approved by the
respective subsidiary boards.

F–91

F–92

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

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

2006

2005

By business segment

Sasol Mining

Sasol Synfuels

Sasol Oil

Sasol Gas

Sasol Polymers

Sasol Solvents

Other businesses

Continuing operations

100

Discontinued operation

100

By geographic location

South Africa

Rest of Africa

Europe

Middle East

Far East

North America

–

South America

–

Southeast Asia and Australasia

100

100

No single customer represents more than 10% of the group’s total turnover for the years ended, or total

trade receivables at, 30 June 2006 and 30 June 2005.

Foreign currency risk

Our operations are denominated in various foreign currencies and consequently, we are exposed to foreign

currency fluctuations that have an impact on our cash flows and financing activities. We manage our foreign
exchange risks through our group financing policies and the selective use of forward exchange contracts, cross
currency swaps and cross currency options. We use foreign exchange contracts to reduce foreign currency
exposures arising from imports into South Africa. Hedging of exports from South Africa is evaluated regularly
and on a case-by-case basis.

All foreign currency derivative contracts are supported by underlying commitments or receivables.

The fair value gains/(losses) calculated below are determined by recalculating the daily forward rates for

each currency using a forward rate interpolator model. The net market value of all forward exchange contracts at
year end was then calculated by comparing the forward exchange contracted rates to the equivalent year end
market foreign exchange rates. The present value of these net market values was then calculated using the
appropriate currency specific discount curve.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

The following forward exchange contracts were held at 30 June 2006:

Contract

foreign

Estimated fair

currency

Contract

value gains/

Calculated

Forward exchange contracts

amount

(losses)

average rate

(Millions)

(Rand in millions)

Transactions which have already
occurred

Imports – capital

US dollar

103

7.00

Euro

–

9.01

109

Imports – goods

US dollar

542

6.94

Euro

–

8.83

Pound sterling

–

13.27

Continuing operations

556

–

Discontinued operations

–

603

Exports

US dollar

129

7.18

Pound sterling

–

13.28

Continuing operations

190

Discontinued operations

418

–

608

Other payables (liabilities)

US dollar

–

7.21

Euro

8.20

Other receivables (assets)

US dollar

122

884

7.26

Related to future commitments

Imports

US dollar

333

6.75

Euro

318

9.25

Pound sterling

–

11.01

653

F–93

F–94

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Contract

foreign

Estimated fair

currency

Contract

value gains/

Calculated

Forward exchange contracts

amount

(losses)

average rate

(Millions)

(Rand in millions)

Other payables (liabilities)

US dollar

6.46

Euro

7.82

Cross currency swaps

Euro to US dollar

563

5,099

(385)

9.05

Euro to Rand

382

2,580

143

6.75

Other

375

6.40

8,054

(166)

Interest rate risk

The group monitor’s exposure to interest rate risk on debt and investments on a continuous basis.

The financing of the group is structured on a combination of floating and fixed interest rates. The benefits of
fixing or capping interest rates on debt to achieve improved predictability of cash flows are considered and
implemented on a case-by-case basis.

The following interest rate derivative contracts were in place at 30 June 2006:

Estimated fair

Notional contract amount

Rand

Average

value gains/

equivalent

Expiry Date

fixed rate

(losses)

(Rand in

millions)

Interest rate derivatives

Pay fixed rate receive floating rate

Rand

500

30 June 2008

9.7%

(8)

Rand

1,062

15 December 2009

7.6%

Total

1,562

Interest rate cap or collar

(relating to long-term debt)

Rand – cap

500

29 June 2007

9.4%

(4)

Crude oil price risk

The group make’s use of derivative instruments, including commodity swaps, zero cost collars, options and

futures contracts of short duration as a means of mitigating price and timing risks on crude oil and other energy
related product purchases and sales. In effecting these transactions, the companies concerned operate within
procedures and policies designed to ensure that risks, including those relating to the default of counterparties are
minimized.

In order to protect the group against short-term US dollar oil price volatility and Rand/US dollar currency

fluctuations adversely affecting the cost of crude oil purchases (approximately 54000 b/d) used in our Natref
refinery, a combination of forward exchange contracts and crude oil futures are used. This hedging mechanism
does not protect the group against longer term trends in crude oil prices.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

As a result of the group’s substantial capital investment programme and cash flow requirements, it was

deemed necessary to protect the group’s income from fluctuations in crude oil prices by means of appropriate
hedging strategies, it was deemed necessary to protect the group’s income from fluctuations in crude oil prices
by means of appropriate hedging strategies.

In June 2005, we hedged the equivalent of approximately 30% of Sasol Synfuels’ production (45,000 b/d)

by entering into a forward sale agreement. This resulted in an opportunity loss for the year on this hedge of
R1,147 million before tax.

For the 2006 year, we revised our hedging strategy and again hedged the equivalent of approximately 30%

of Sasol Synfuels’ production by entering into a zero cost collar in terms of which the group was protected at
monthly average dated Brent crude oil prices below US$45.00/b but able to take advantage of higher crude oil
prices, only incurring a cash outflow at monthly average dated Brent crude oil prices above US$82.61/b. The
monthly average dated Brent crude oil price traded within the range of this collar throughout the hedging period
and therefore the collar had no cash flow effect.

We believe this revised strategy to be more appropriate in the context of high but volatile crude oil prices

and, as a result of our continued requirement to fund our extensive capital investment programme, have again
hedged the crude oil equivalent of approximately 30% of our Sasol Synfuels’ production by entering into a zero
cost collar in terms of which the group was protected at monthly average dated Brent crude oil prices below
US$63.00/b and will incur a cash outflow should average monthly average dated Brent oil prices be in excess of
US$83.60/b. As a result of the significant increase in monthly average dated Brent crude oil prices toward the
end of the year, after entering into the collar, the market value of the collar resulted in an expense of R93 million
being recognized.

The following hedging instruments were in place in respect of crude and fuel oil derivative instruments at

30 June 2006:

Estimated

Contract

fair value

foreign

Contract

gains/

currency

amount

(losses)

Average price

(Millions)

(Rand in millions)

US dollar

Commodity derivatives

Futures

Crude oil (US dollar)

428

(3)

55.95

Zero cost collar

(93)

Call options sold (US dollar)

1,398

10,024

83.60

Put options bought (US dollar)

1,054

7,552

63.00

Other

–

Commodity chemical prices

We are exposed to price risk in respect of certain of our chemical products. The prices of chemical products

are based on international chemical prices of those commodities, which include ethylene, propylene, ammonia
and certain solvents and polymer prices. No derivative instruments were entered into to hedge these risks.

Disclosures regarding fair value of financial instruments

Cash and cash equivalents and bank overdraft

The carrying amount approximates fair value as a result of the short-term maturity of these instruments.

F–95

F–96

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Investments

The fair value of debt securities is determined using a discounted cash flow method. It is not practical to

determine the fair value of unlisted equity investments. These investments are carried at their original cost in the
balance sheet.

Long-term receivables

The fair value of long-term receivables approximates the carrying value as market related rates of interest

are charged on these outstanding amounts.

Long-term and short-term debt

The fair value of long-term debt is estimated based on the effective interest rate and expected future cash

flows. The fair value of short-term debt approximates the carrying value as a result of the short-term maturity
periods.

Forward exchange contracts and cross-currency options

The fair value gains/(losses) are determined by recalculating the daily forward rates for each currency using

a forward rate interpolator model. The net market value of all forward exchange contracts at year end was then
calculated by comparing the forward exchange contracted rates to the equivalent year end market foreign
exchange rates. The present value of these net market values were then calculated using the appropriate currency
specific discount curve.

Interest rate swaps and oil futures

The fair value of interest rate swaps and oil futures is determined by reference to quoted market prices for

similar instruments.

The fair value of financial instruments was as follows:

2006

2005

Carrying

Carrying

value

Fair value

value

Fair value

(Rand in millions)

Cash and cash equivalents

2,808

2,350

Cash restricted for use

271

331

Short-term investment

–

Investments in securities

practical to estimate fair value

240

194

impractical to estimate fair value

152

–

201

–

Long-term receivables

773

616

Bank overdraft

(442)

(266)

Long-term and short-term debt

(12,817)

(15,293)

Forward exchange contracts

137

(19)

Cross currency swaps

(166)

(595)

Interest rate derivatives

(38)

Commodity derivatives

(93)

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

Labour risk

Approximately 54% of the South African labour force in South Africa are members of labour unions. The

majority of the union members are blue-collar employees. The unions negotiate an annual wage agreement
which is binding on employees in the bargaining unit which consists of occupational groupings of mainly blue
collar workers in the organisation. These agreements are valid from 1 July to 30 June of each year. There are no
long-term wage agreements in place.

The levels of unionization for operations outside South Africa varies. It is mostly contained amongst blue

collar workers and membership ranges from 30-50%.

Mining Charter

In October 2002, the government and representatives of South African mining companies and mineworkers’

unions reached broad agreement on the Mining Charter, which is designed to facilitate the participation of
historically disadvantaged South Africans in the country’s mining industry. The Mining Charter’s stated
objectives include the:

• expansion of opportunities for persons disadvantaged by unfair discrimination under the previous

political dispensation;

• expansion of the skills base of such persons;

• promotion of employment and advancement of the social and economic welfare of mining communities;

and

• promotion of beneficiation, or the crushing and separation of ore into valuable substances or waste within

South Africa.

The Mining Charter, together with a scorecard which was published on 18 February 2003 to facilitate the

interpretation of and compliance with the Mining Charter (the scorecard) requires mining companies to ensure
that DHSAs hold at least 15% ownership of mining assets or equity in South Africa within 5 calendar years and
26% ownership within 10 calendar years from the enactment of the new Mineral and Petroleum Resources
Development Act which came into force on 1 May 2004. The Mining Charter further specifies that the mining
industry is required to assist DHSAs in securing finance to fund their equity participation up to an amount of
R100 billion within the first 5 calendar years after the coming into force of the aforementioned Act. Beyond this
R100 billion commitment, the Mining Charter requires that participation of DHSAs should be increased towards
the 26% target on a willing seller-willing-buyer basis at fair market value

Various principles of the Mining Charter have been incorporated in regulations promulgated by the

Minister of Minerals and Energy under the Mineral and Petroleum Resources Development Act (MPRD Act)
with respect to the South African mining industry. These regulations came into force on 1 May 2004.

The scorecard provides a method of indicating the extent to which applicants for the conversion of their

On 16 March 2006 we announced the implementation of the first phase of Sasol Mining’s broad-based

BEE strategy through the formation of Igoda Coal, an empowerment venture with Eyesizwe Coal, a black-
owned mining company. Igoda Coal will be one of South Africa’s largest empowered coal export companies.
Eyesizwe Coal owns 35% of the empowerment venture, while Sasol Mining holds the remaining 65%. Igoda
will become fully operational as a statutory business entity and take transfer of the relevant mining area from
Sasol Mining once the transfer of the mining rights have been effected.

F–97

F–98

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

As a result of this transaction we will obtain credit towards equity ownership targets. It has been announced

that we will further expedite plans to advance the second phase of Sasol Mining’s broad-based BEE ownership
strategy. This strategy will see Sasol Mining achieve full compliance with the Mining Charter’s 2009 and 2014
targets, respectively, in pursuance of the conversion of its mining rights.

Liquid Fuels Charter

The Liquid Fuels Charter requires the group to ensure that historically disadvantaged South Africans hold

at least 25% ownership of the liquid fuels business by the year 2010. Initially it was envisaged that Tshwarisano
would acquire a 12.5% shareholding in the former proposed joint venture, Uhambo Oil, if the Competition
Tribunal had approved the proposed merger of our liquid fuels business with Petronas’ South African liquid fuels
business. Pursuant to the Competition Act of 2000, the Competition Tribunal prohibited the merger
on 20 February 2006.

By agreement, as a result of the proposed merger not occurring, Tshwarisano had acquired a 25%

shareholding in Sasol Oil effective 1 July 2006.

26.

Net cash generated by operating activities

30 June

30 June

2006

2005

2004

(Rand in millions)

Earnings attributable to shareholders

11,299

9,719

5,237

Minority interest

157

103

(Earnings)/losses of equity accounted investees

(13)

(308)

Net loss/(income) from discontinued operations
(including fair value write-down)

2,860

(108)

139

Income before earnings/(losses) of equity accounted

investees and minority interests

14,303

9,406

5,516

Dividends received

(9)

(13)

(6)

Interest received

(261)

(82)

(142)

Finance costs

203

180

164

Gain arising from issuance of subsidiary’s shares

–

(108)

Income tax

6,452

4,886

3,122

Operating profit

20,688

14,377

8,546

Adjusted for

non-cash items

26.1

4,805

4,043

3,327

Cash flow from operations relating to discontinued

operations

26.2

1,770

1,599

1,906

27,263

20,019

13,779

(Increase)/decrease in working capital

26.4

(3,048)

(2,151)

Net cash flow from operations

24,215

17,868

13,839

Interest received

294

116

183

Dividends received

161

Finance costs paid

(311)

(332)

(368)

Income tax paid

(5,484)

(3,616)

(4,005)

18,875

14,097

9,686

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

26.1

Non-cash items relating to continuing operations

30 June

30 June

2006

2005

2004

(Rand in millions)

Continuing operations

amortization of intangible assets

263

300

430

capitalised exploration expenditure written off

–

153

depreciation of property, plant and equipment

2,990

2,755

3,248

effect of cash flow hedge accounting

–

share-based payments

156

128

137

impairment of:

property, plant and equipment

134

174

goodwill

–

intangible assets

investments in securities

–

investments in equity accounted investees

–

loss/(gain) on disposal of:

non-current assets

(7)

(202)

investments in businesses

(262)

(9)

(50)

equity accounted investees

–

(31)

scrapping of property,plant and equipment

264

250

proceeds from insurance

(40)

(159)

–

movement in long-term prepaid expenses

–

movement in provision for doubtful debts

(10)

movement in provision for inventory obsolescence

(111)

movement in short-term obligations

317

–

movement in pension and other post-retirement benefits

–

movement in long-term obligations

421

243

(66)

realisation of foreign currency translation reserve

–

(8)

–

translation effect of foreign currency loans

198

–

translation of net investment in foreign operations

210

(570)

write-down of inventories to market value

119

4,805

4,043

3,327

26.2

Cash flow from operations relating to discontinued operations

Discontinued operations

Net (loss)/income from discontinued operations

(2,860)

108

(139)

Losses of equity accounted investees

(Loss)/income before losses of equity accounted investees

(2,859)

109

(138)

Dividends received

–

(10)

(8)

Interest received

(24)

(34)

(41)

Finance costs

108

152

204

Income tax

(2)

271

Operating (loss)/profit

(2,777)

488

Adjusted for non-cash items (refer to note 26.3)

4,547

1,111

1,834

1,770

1,599

1,906

F–99

F–100

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

26.3

Non-cash items relating to discontinued operations

30 June

30 June

2006

2005

2004

(Rand in millions)

Discontinued operations

amortization of intangible assets

depreciation of property, plant and equipment

637

666

1,136

impairment of:

property, plant and equipment

goodwill

–

intangible assets

–

loss/(gain) on disposal of:

non-current assets

investments in businesses

–

(28)

share-based payments

fair value write-down

3,110

–

movement in provision for doubtful debts

–

movement in short-term obligations

–

movement in pension and other post-retirement benefits

458

311

551

movement in long-term obligations

136

(83)

write-down of inventories to market value

–

4,547

1,111

1,834

26.4

(Increase)/decrease in working capital

Movement in cash restricted for use

(65)

611

(131)

Movement in trade receivables

(1,614)

(830)

(426)

Movement in other receivables and prepaid expenses

(748)

(228)

(1,172)

Movement in inventories

(1,483)

(1,567)

(108)

Movement in trade payables

1,142

930

(42)

Movement in accrued expenses and other obligations

(24)

(1,067)

1,939

Movement in long-term financial assets

(256)

–

(3,048)

(2,151)

27.

Dividends

30 June

30 June

2006

2005

2004

(Rand in millions)

Dividends paid

Final dividend – prior year

(1,920)

(1,440)

(1,432)

Interim dividend – current year

(1,740)

(1,416)

(1,316)

(3,660)

(2,856)

(2,748)

Dividends received

Investments

–

Equity accounted investees

161

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

28.

Cash flow from investing activities

28.1

Acquisition of business

30 June

30 June

2006

2005

2004

(Rand in millions)

Current assets acquired

(355)

–

Fair value of non-current assets acquired

–

(577)

Liabilities assumed including deferred taxes

–

330

Cash paid, net of cash acquired

(259)

–

(247)

28.2

Disposal of businesses

Current assets disposed of

225

Non-current assets disposed of

–

265

Cash balance disposed of

–

Liabilities disposed of including deferred taxes

324

(292)

(360)

Net assets disposed of

325

(51)

133

Realization of accumulated translation effects

–

(24)

Gain on disposal of business

262

Total consideration

587

(46)

254

*Included in liabilities disposed of including deferred tax is R299 million which

iGas Limited assumed as its portion of the shareholder’s loan granted to
Republic of Mozambique Pipeline Investments Company (Pty) Limited.

28.3

Assets acquired under finance lease obligations

Assets acquired under finance lease obligations . . . . . . .

–

288

157

29.

Related parties

The group entered into transactions with related parties, comprising mainly product sales and sales of raw

materials. These sales are in the ordinary course of business and terms and conditions are determined on an
arm’s length basis.

The transactions and balances with related parties are summarised below:

30 June

30 June

2006

2005

2004

(Rand in millions)

Income

Sales of goods and services

1,742

1,770

1,050

Expenses

Purchases of goods and services

905

1,190

1,048

Included in the above amounts are a number of transactions with related parties which are individually

insignificant.

F–101

F–102

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

There were no related party transactions in respect of discontinued operations.

The balances of receivables and payables between the group and its related parties are as follows:

30 June

30 June

Relationship

2006

2005

2004

(Rand in millions)

Receivables

Sasol Dia Acrylates (Pty) Limited

Equity accounted investee

–

Merisol LP

Equity accounted investee

Exelem Aviation (Pty) Limited

Equity accounted investee

–

Total South Africa Limited

Joint venture partner

129

111

Wesco China Limited

Equity accounted investee

DPI Holdings (Pty) Limited

Equity accounted investee

Oryx GTL Limited

Equity accounted investee

Escravos GTL Joint Venture

Equity accounted investee

–

Tosas Holdings (Pty) Limited

Equity accounted investee

Sasol Chevron Holdings Limited

Equity accounted investee

–

Spring Lights Gas (Pty)Limited

Equity accounted investee

–

Asphacell GmbH and Co KG

Equity accounted investee

–

Oil Insurance Limited

Unlisted equity security

–

Other related parties

121

113

559

558

396

Long term receivables

Merisol LP

Equity accounted investee

Petlin (Malaysia) Sdn.Bhd

Equity accounted investee

–

Spring Lights Gas (Pty) Limited

Equity accounted investee

Oryx GTL Limited

Equity accounted investee

–

Sasol Fibres (Pty) Limited

Equity accounted investee

–

Other

Payables

Sasol Dia Acrylates (Pty) Limited

Equity accounted investee

Oryx GTL Limited

Equity accounted investee

–

Sasol Huntsman GmbH and Co KG

Equity accounted investee

Asphacell GmbH and Co KG

Equity accounted investee

–

Merisol LP

Equity accounted investee

Oil Insurance Limited

Unlisted equity security

–

Spring Lights Gas (Pty) Limited

Equity accounted investee

–

Optimal Olefins Malaysia Sdn.Bhd

Equity accounted investee

–

Other related parties

205

156

128

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements (Continued)

30.

Post balance sheet events

The following developments have occurred subsequent to 30 June 2006:

On 30 June 2006, Sasol announced that the R1,45 billion Tshwarisano broad based black economic

empowerment transaction had been successfully concluded. In terms of the agreement, Tshwarisano has, with
effect from 1 July 2006, acquired a 25% shareholding in Sasol Oil (Pty) Limited. Sasol is providing considerable
facilitation and support for Tshwarisano’s financing requirements.

The disposal of DPI Holdings (Pty) Limited was approved, and an agreement was signed for the sale of our

50% share to Dawn Limited for a consideration of R51 million. The transaction was approved by the South
African Competition Tribunal and became effective during October 2006.

Our acquisition of the remaining 40% shareholding of Sasol Dyno Nobel (Pty) Limited not owned by us

The 2006 budget presented by the Minister of Finance, South Africa, made reference to a task force being

appointed to investigate a windfall tax which may affect Sasol. In response to a report by the National Treasury
Task Team, Sasol, on 10 August 2006, submitted a written submission assessing possible reforms to the fiscal
regime applicable to windfall profits in South Africa’s liquid fuel energy sector, with particular reference to the
synthetic fuel industry. Sasol participated in the public hearings held during August 2006. The task team handed
their report containing their recommendations to the Minister of Finance on 26 September 2006. It is expected
that the Minister of Finance’s decision will be announced in 2007.

At the general meeting held on 3 October 2006, shareholders approved that Sasol Limited acquire

60,111,477 Sasol Limited shares held by its subsidiary, Sasol Investment Company (Pty) Limited. Once
repurchased, these shares were cancelled. Except for the related transaction costs, the repurchase and
cancellation of these shares will have no effect on the consolidated financial position of the group. At the
meeting of 3 October 2006, shareholders also approved that Sasol be granted the authority to acquire Sasol
Limited shares by way of a general repurchase. Both of these special resolutions were registered by the South
African Registrar of Companies on 5 October 2005.

On 26 September 2006, the South African Financial Services Board approved the Sasol Pension Fund

Surplus Apportionment Scheme. Had this approval been obtained prior to year end, the prepaid pension asset
would have increased by R130 million.

F–103

(This page has been left blank intentionally)

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements

SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)

In accordance with FAS 69, “Disclosures about Oil and Gas Producing Activities”, and regulations of the

US Securities and Exchange Commission, this section provides supplemental information about oil and gas
exploration and production operations. Tables 1 through to 3 provide historical information pertaining to costs
incurred for property acquisitions, exploration and development; capitalized costs and results of operations.
Tables 4 through to 6 present information on the estimated net proved reserve quantities; standardized measure
of estimated discounted future net cash flows related to proved reserves and changes therein.

TABLE 1 – COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION,

AND DEVELOPMENT ACTIVITIES

Other

Mozambique

areas

Total

(Rand in millions)

Year ended 30 June 2004
Acquisition of unproved properties

–

1.6

Exploration

159.0

64.1

223.1

Development

654.4

104.4

758.8

Total costs incurred

813.4

170.1

983.5

Year ended 30 June 2005
Acquisition of unproved properties

–

86.8

Exploration

19.2

70.3

89.5

Development

58.9

57.0

115.9

Total costs incurred

78.1

214.1

292.2

Year ended 30 June 2006
Acquisition of unproved properties

6.4

3.2

9.6

Exploration

83.0

41.5

124.5

Development

97.0

93.9

190.9

Total costs incurred

186.4

138.6

325.0

G–1

G–2

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements

TABLE 2 – CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES

Other

Mozambique

areas

Total

(Rand in millions)

Year ended 30 June 2004
Proved properties

2,458.3

223.8

2,682.1

Producing wells and equipment

2,238.8

164.8

2,403.6

Support facilities and equipment

24.0

–

24.0

Non-producing wells and equipment

195.5

48.0

243.5

Other

–

11.0

Unproved properties
Uncompleted and non-producing wells and equipment

–

30.5

Capitalised costs

2,458.3

254.3

2,712.6

Accumulated depreciation

(28.6)

(68.5)

(97.1)

Net book value

2,429.7

185.8

2,615.5

Year ended 30 June 2005
Proved properties

2,508.2

311.8

2,820.0

Producing wells and equipment

2,333.8

253.6

2,587.4

Non-producing wells and equipment

174.4

58.2

232.6

Unproved properties
Uncompleted and non-producing wells and equipment

–

87.6

Capitalised costs

2,508.2

399.4

2,907.6

Accumulated depreciation

(178.9)

(107.2)

(286.1)

Net book value

2,329.3

292.2

2,621.5

Year ended 30 June 2006
Proved properties

2,101.3

443.2

2,544.5

Producing wells and equipment

1,889.4

335.7

2,225.1

Non-producing wells and equipment

211.9

107.5

319.4

Unproved properties
Uncompleted and non-producing wells and equipment

6.4

99.6

106.0

Capitalised costs

2,107.7

542.8

2,650.5

Accumulated depreciation

(308.1)

(177.7)

(485.8)

Net book value

1,799.6

365.1

2,164.7

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements

TABLE 3 – RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES

Other

Mozambique

areas

Total

(Rand in millions)

Year ended 30 June 2004
Sales to unaffiliated parties

–

261.6

Transfers to affiliated parties

50.1

–

50.1

Total revenues

50.1

261.6

311.7

Production costs

(36.3)

(70.6)

(106.9)

Foreign currency translation losses

(28.3)

–

(28.3)

Exploration expenses

(159.0)

(64.1)

(223.1)

Depreciation

(28.5)

(42.5)

(71.0)

Other income/expenses

(2.8)

6.8

4.0

Operating (loss)/profit

(204.8)

91.2

(113.6)

Tax

99.5

(78.0)

21.5

Results of operations

(105.3)

13.2

(92.1)

Year ended 30 June 2005
Sales to unaffiliated parties

3.1

392.5

395.6

Transfers to affiliated parties

445.1

–

445.1

Total revenues

448.2

392.5

840.7

Production costs

(126.3)

(76.0)

(202.3)

Exploration expenses

(42.4)

(78.1)

(120.5)

Depreciation

(142.2)

(48.3)

(190.5)

Operating profit

137.3

190.1

327.4

Tax

(48.2)

(108.6)

(156.8)

Results of operations

89.1

81.5

170.6

Year ended 30 June 2006
Sales to unaffiliated parties

98.5

550.0

648.5

Transfers to affiliated parties

588.0

–

588.0

Total revenues

686.5

550.0

1,236.5

Production costs

(82.2)

(89.4)

(171.6)

Foreign currency translation gains

40.8

–

40.8

Exploration expenses

(83.0)

(40.3)

(123.3)

Depreciation

(171.4)

(55.9)

(227.3)

Operating profit

390.7

364.4

755.1

Tax

(81.5)

(158.4)

(239.9)

Results of operations

309.2

206.0

515.2

G–3

G–4

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements

TABLE 4 – PROVED RESERVE QUANTITY INFORMATION

Crude Oil and Condensate

Natural Gas

Other

Mozambique

areas

Total

Mozambique

areas

Total

Millions of barrels

Billions of cubic feet

Proved developed and undeveloped reserves
First estimate

–

9.2

1,445.0

–

1,445.0

Production

–

(1.5)

(7.0)

–

(7.0)

Balance at 30 June 2004

–

7.7

1,438.0

–

1,438.0

Revisions

7.5

2.7

10.2

(24.9)

–

(24.9)

Extensions and discoveries

–

1.0

–

Production

(0.2)

(1.6)

(1.8)

(45.2)

–

(45.2)

Balance at 30 June 2005

7.3

9.8

17.1

1,367.9

–

1,367.9

Revisions

0.3

0.2

0.5

(6.7)

–

(6.7)

Extensions and discoveries

0.1

–

0.1

–

Production

(0.4)

(1.4)

(1.8)

(55.1)

–

(55.1)

Balance at 30 June 2006

7.3

8.6

15.9

1,306.1

–

1,306.1

Proved developed reserves
At 30 June 2004

–

4.3

375.0

–

375.0

At 30 June 2005

3.1

4.7

7.8

385.7

–

385.7

At 30 June 2006

3.1

3.0

6.1

373.5

–

373.5

The table above records estimates of the reserve quantities held by Sasol, through its various operating

entities under Sasol Petroleum International (Pty) Limited.

The company currently has reserves in two fields:

In Gabon, the company holds a 27.75% non-operated interest in the offshore Etame field. An internally

determined assessment of oil reserves was conducted during April 2006. As the license held over this property is
a Production Sharing Contract, reserves reported represent the net economic interest volumes attributable to the
company, after deduction for royalties, grossed up for income taxes.

In Mozambique, the company holds a 70% operated interest in the Pande and Temane gas fields. An

internally determined assessment of gas reserves was conducted during April 2006. In respect of Mozambican
gas the standard pressure base used is 14.70 Psia and the standard temperature is 59°F in accordance with the
specifications set by the Government of Mozambique. Reserves reported represent the net economic interest
volumes attributable to the company, after deduction of production tax. Additionally, the volumes booked are
restricted to the take-or-pay quantities defined in the gas sales agreement for the 25-year term. A phased
approach to field development has been followed and only the Temane field has currently been developed. It is
planned to commence with the development of the Pande field in 2007 and subsequently bringing it into
production.

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements

NOTES & DEFINITIONS

The definitions of categories of reserves used in this disclosure are consistent with those set forth in the

regulations of the Securities and Exchange Commission:

Proved Reserves–Those quantities of crude oil, natural gas, and natural gas liquids which, upon analysis of

geologic and engineering data, appear with reasonable certainty to be recoverable in the future from known oil
and gas reservoirs under existing economic and operating conditions i.e. prices and costs as of the date the
estimate is made. Prices include consideration of changes in existing prices provided only by contractual
arrangements, but not on escalations based upon future conditions. Proved reserves are limited to those
quantities of oil and gas which can be expected, with little doubt, to be recoverable commercially at current
prices and costs, under existing regularity practices and with existing conventional equipment and operating
methods. Depending upon their status of development, such proved reserves are subdivided into “proved
developed reserves” and “proved undeveloped reserves”.

Proved Developed Reserves–Reserves which can be expected to be recovered through existing wells with

existing equipment and operating methods.

Proved Undeveloped Reserves–Reserves which are expected to be recovered from new wells on undrilled

acreage, or from existing wells where a relatively major expenditure is required for recompletion.

TABLE 5 – STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

Other

Mozambique

areas

Total

(Rand in millions)

Year ended 30 June 2004
Future cash inflows

10,820.4

1,668.8

12,489.2

Future production costs

(1,987.0)

(570.3)

(2,557.3)

Future development costs

(835.9)

(73.6)

(909.5)

Future income taxes

(1,427.2)

(283.9)

(1,711.1)

Undiscounted future net cash flows

6,570.3

741.0

7,311.3

10% annual discount for timing of estimated cash flows

(4,026.3)

(190.4)

(4,216.7)

Standardized measure of discounted future net cash flows

2,544.0

550.6

3,094.6

Year ended 30 June 2005
Future cash inflows

15,133.0

3,416.0

18,549.0

Future production costs

(3,255.2)

(955.5)

(4,210.7)

Future development costs

(1,157.1)

(107.0)

(1,264.1)

Future income taxes

(2,878.8)

(942.6)

(3,821.4)

Undiscounted future net cash flows

7,841.9

1,410.9

9,252.8

10% annual discount for timing of estimated cash flows

(4,794.6)

(448.9)

(5,243.5)

Standardized measure of discounted future net cash flows

3,047.3

962.0

4,009.3

Year ended 30 June 2006
Future cash inflows

15,767.5

4,215.2

19,982.7

Future production costs

(2,098.1)

(1,411.3)

(3,509.4)

Future development costs

(1,619.8)

(194.1)

(1,813.9)

Future income taxes

(3,181.6)

(1,066.9)

(4,248.5)

Undiscounted future net cash flows

8,868.0

1,542.9

10,410.9

10% annual discount for timing of estimated cash flows

(5,303.4)

(483.2)

(5,786.6)

Standardized measure of discounted future net cash flows

3,564.6

1,059.7

4,624.3

G–5

G–6

Sasol Limited and its subsidiaries

Notes to the Consolidated Financial Statements

The standardized measure of discounted future cash flows, related to preceding proved oil and gas reserves,

is calculated in accordance with the requirements of FAS 69. Estimated future cash inflows from production are
computed by applying year-end prices and year-end quantities of estimated net proved reserves. Future
development and production costs are those estimated future expenditures necessary to develop and produce
year-end estimated proved reserves based on year-end cost indices, assuming continuation of year-end economic
conditions. Estimated future income taxes are calculated by applying appropriate year-end statutory tax rates.

The information provided does not represent management’s estimate of the companies expected future cash

flows or value of proved oil and gas reserves. Estimates of proved reserve quantities shall change over time as
new information becomes available. Moreover, probable and possible reserves, which may become proved in the
future, are excluded from the calculations. The arbitrary valuation prescribed under SFAS 69 requires
assumptions as to the timing of future development and production costs. The calculations are made as of each
fiscal year-end and should not be relied upon as an indication of the companies’ future cash flows or value of
their oil and gas reserves.

TABLE 6 – CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET

CASH FLOWS

Other

Mozambique

areas

Total

(Rand in millions)

Present value at 1 July 2003

–

Net changes for the year

2,544.0

550.6

3,094.6

First estimation

2,544.0

550.6

3,094.6

Present value at 30 June 2004

2,544.0

550.6

3,094.6

Net changes for the year

503.3

411.4

914.7

Sales and transfers of oil and gas produced, net of production costs

(321.7)

(281.6)

(603.3)

Development costs incurred

58.9

57.0

115.9

Extensions, discoveries and improved recovery less related costs

–

154.4

Revisions of previous quantity estimates

773.6

277.9

1,051.5

Net changes in prices, net of production costs

440.8

541.1

981.9

Changes in estimated development costs

(203.7)

8.6

(195.1)

Accretion of discount

283.6

76.5

360.1

Net change in income tax

(539.2)

(420.2)

(959.4)

Others

11.0

(2.3)

8.7

Present value at 30 June 2005

3,047.3

962.0

4,009.3

Net changes for the year

517.3

97.7

615.0

Sales and transfers of oil and gas produced, net of production costs

(600.3)

(464.8)

(1,065.1)

Development costs incurred

57.3

91.1

148.4

Revisions of previous quantity estimates and timing

108.2

(11.3)

96.9

Net changes in prices, net of production costs

1,404.5

464.4

1,868.9

Changes in estimated development costs

(323.8)

(82.8)

(406.6)

Change due to interest sold

(306.3)

–

(306.3)

Accretion of discount

387.9

159.6

547.5

Net change in income tax

(207.0)

(79.6)

(286.6)

Others

(3.2)

21.1

17.9

Present value at 30 June 2006

3,564.6

1,059.7

4,624.3

ITEM 19.

EXHIBITS

1.1 Memorandum of associations of Sasol Limited *

1.2 Articles of association of Sasol Limited *

4.1 Management Share Incentive Scheme *

8.1 List of subsidiaries

12.1 Certification of Lawrence Patrick Adrian Davies, chief executive of Sasol Limited pursuant of Section 302

of the Sarbanes-Oxley Act of 2002

12.2 Certification of Kandimathie Christine Ramon chief financial officer of Sasol Limited pursuant of

Section 302 of the Sarbanes-Oxley Act of 2002

13.1 Certification of Lawrence Patrick Adrian Davies, chief executive of Sasol Limited and Kandimathie

Christine Ramon, chief financial officer of Sasol Limited pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*Incorporated by reference to our registration statement on Form 20-F filed on 6 March 2003.

H–1

H–2

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has

duly caused and authorized the undersigned to sign this annual report on its behalf.

SASOL LIMITED

By:/s/ KANDIMATHIE
CHRISTINE RAMON
Kandimathie Christine Ramon
Chief Financial officer

Date: 27 October 2006

GLOSSARY OF TERMS

Acetic acid

The chemical compound acetic acid, systematically called
ethanoic acid. Acetic acid is a carboxylic acid with chemical
formula C

, also written as H

C-COOH to reflect its

chemical structure. In pure form it has an ice crystal form, which
is called

Acetone

In chemistry, acetone is the simplest representative of the
ketones. It is a colorless mobile flammable liquid. The most
familiar household use of acetone is as the active ingredient in
nail polish remover. Acetone is also used to make plastic, fibers,
drugs, and other chemicals.

Acrylates

Acrylates are a family of polymers and are a type of vinyl
polymer. Acrylates are produced from acrylate monomers.
Acrylate monomers are esters which contain vinyl groups, that
is, two carbon atoms double-bonded to each other, directly
attached to the carbonyl carbon.

Acrylic acid

An unsaturated acid produced mainly by oxidation of propylene
that polymerizes readily and is used as a building block for
acrylic polymers.

Aeromagnetic surveys

The determinations of the variability of the surface magnetism
by trailing a detector behind an aircraft at a certain altitude above
surface. These surveys are used to determine discrete magnetic
bodies in the near surface strata such as dolerite dykes and sills.

Alcohol

Besides the potable form which is ethanol, the term refers to a
broader class of chemicals. Alcohols are produced either from
natural feedstocks such as sugar and coconut oil or synthetically
from petroleum derivatives such as ethylene and propylene. Used
as solvents, fuels and beverages, or as intermediate in production
of range of products such as detergents, pharmaceuticals,
plasticizers and fuels

Alkanolamines

A chemical produced by adding ethylene oxide to ammonia.

Alkylamines

Derivative of ammonia in which one or more of the hydrogen
atoms is replaced by a hydrocarbon group and not an alcohol
group.

Alkylates

Is a product formed by reacting an olefin with an aromatic
compound. In the case of linear alkylbenzene (“LAB”) this is the
reaction of a C11 to C14 linear olefin with benzene. The LAB is
then normally reacted with sulfonic acid to produce a surfactant
called Linear Alkylbenzene Sulfonate LAS.

Alpha olefin

An olefin with a double bond between the 1st and 2nd carbon
atoms. An Alpha Olefin can be linear or branched. Sasol Olefins
and Surfactants manufacture 1-Pentene, 1-Hexene, 1-Octene in
Secunda, which are all Alpha Olefins.

H–3

H–4

Ammonia

A compound of nitrogen and hydrogen and used amongst others
for the production of fertilizers, explosives and nitrogen-
containing acids such as nitric acids.

Ammonium nitrate solutions

A solution in water of the ammonium nitrate salt used as a
nitrogen source in fertilizers and as an oxidising medium in
commercial explosives.

Baseload

The continuous, recurrent volume of pipeline gas provided to a
market through a gas pipeline network, which determines the
economic viability of the particular gas pipeline project,
including the ability to obtain and repay financing for the
project.

Beneficiation

Adding value to lower-value raw materials by further processing.

Borehole density

The ratio of the surface area divided by the number of boreholes
and is an indication of the level of information for a specific
property.

Brownfields

The expansion of an existing mine working into adjacent reserve
areas that are situated next to the existing mine boundaries. It is
contrary to greenfields development, where the development is
not done via an existing working mine.

Butadiene

A chemical molecule consisting of 4 carbon atoms and
hydrogen, containing two double-bonds in its structure. Used
predominantly in the production of synthetic rubber.

Butane

An organic chemical gas used extensively as a propellant or
carrier gas in spray aerosol cans (e.g. deodorants and other
cosmetic applications)

Butene

One of the olefins. Used: (1) as gasoline component,
(2) comonomer for polyethylene, (3) polymerized with itself or
alkylated with aromatics to produce high-octane gasoline
components.

Butyl and ethyl acrylate

Butyl acrylate and ethyl acrylate are acrylic acid esters. Acrylic
acid and its esters are perhaps some of the most versatile
monomers for improving performance characteristics to
thousands of polymer formulations. Major markets for esters
include coatings, textiles, adhesives, paper and plastics. Acrylic
polymers are considered as nontoxic.

Butyl glycol ethers

Butyl glycol ether (“BGE”) is a high performing ethylene glycol
ether solvent used in a wide range of applications. BGE can be
used in both solvent and water based systems and is one of the
best available coupling agents and active solvents for water
based coatings on the market today.

Calcium chloride

An inorganic salt sold as a colourless liquid solution, is widely
used in dust control, moisture-absorbing, as an accelerator for
concretes.

Calcium cyanide

Is a mining reagent used in the recovery of gold.

Carbide

A compound of carbon and a metallic or semi-metallic element
(e.g., calcium, silicon, aluminum, boron).

Carbonaceous mudstone interburden

Clay sized sedimentary material that is encountered between
discrete correlateable coal seams.

Carbonaceous mudstone to
siltstone parting

Material that may be present within a coal seam which is
composed of sedimentary material, deposited in varying
velocities of water, stagnant conditions for carbonaceous
mudstone to slowly moving for siltstone.

Carbon dioxide

Gas produced by complete combustion of carbon-containing
compounds. Uses include dry ice (in solid form) and for
carbonation of beverages.

Catalyst

A material that accelerates or retards a chemical reaction without
being chemically affected itself (although it may be physically
changed or even destroyed).

Caustic soda

A strong industrial alkali sold as a 50% m/m solution, is used in
the manufacture of pulp and paper, aluminium, base metals such
as copper and nickel.

Ceramic

A hard and durable material with a crystalline structure and high
resistance to chemical corrosion and heat, with a broad range of
applications.

Chemical reaction

The formation of new chemical substances from one or more
reactants through the breakage of existing bonds between atoms
and the creation of new ones.

Chlorine

Is an inorganic liquid used as an intermediate in the production
of inter alia polyvinyl chloride (PVC polymer) and in water
purification plants.

Coal fine

The size fraction of coal, passing through a screen with an
aperture of 6.3mm.

Coal pile

Individual bands or laminations of different types of coal within
an individual coal seam that can be correlated horizontally for a
finite distance.

Coal reserves

That part of the coal deposit which, after appropriate
assessments, are considered to be economically mineable, at the
time of the reserve determination. It is inclusive of diluting and
contaminating materials and allows for losses that can occur
when the material is mined.

Cobalt

A metal element often found in the ores of other metals, soils,
plants and animals. Component of catalyst systems used in the
petrochemical and oil refining industries.

Coke

A brittle, solid, black, lightweight, hydrocarbon material, nearly
pure carbon, left as a residual, after the volatiles and most of the
non-combustibles have been removed from coal.

H–5

H–6

Commission

A critical period during which a newly constructed or modified
production facility is de-bugged, tested and “switched-on”,
following which the facility is formally declared commercially
production ready.

Co-monomer

A component added in smaller quantities to the base monomer in
the production of polymers (see Polymer) that by their presence
in the polymer (e.g. automobile trim, plastic bag, water pipes)
convey enhanced performance (appearance, flexibility, impact
strength) attributes to the polymer. Examples of co-monomers
are: propylene, butene, hexene, octene and butyl acrylate.

Condensate

A hydrocarbon liquid that condenses from a gaseous state to a
liquid state when produced.

Continuous miner

A remote-controlled vehicle used in an underground coal mine to
cut and remove coal from the coalface with the aid of a spiked,
rotating cutting drum.

Copolymer

A polymer produced from two or more dissimilar monomers.

Corrosion

The slow destruction of metal by chemical reaction; for example,
iron or steel can rust away through their reaction with oxygen
contained in air or water.

Cracker

The technology that is used to partially decompose high
molecular weight compounds to lighter low boiling compounds
by using elevated temperatures to induce carbon-carbon bond
cleavage.

Creosote

A black liquid derived from the gasification of coal and the
subsequent distillation of the coal tars. Commonly used as a
timber preservative.

Cresol

A liquid obtained from coal tar and containing not more than
5 per cent phenol, ranging from colorless to yellow, brown, or
pink. Its primary use is for sterilizing instruments, dishes,
utensils, and other inanimate objects. Called also cresylic acid.

Cresylics

A commercial blend of phenolic (ring shaped) molecules with
hydroxyl groups (consisting of an oxygen and hydrogen atom)
attached to it. Normally produced from coal tars when coal is
gasified. Used in a wide range of applications such as resins,
gasoline additive, coatings for magnet wire for small electric
motors, and disinfectants.

Cyanide

A generic term for a mining reagent in the form of calcium or
sodium cyanide solution.

Cyclone

A separation device found on chemical facilities to separate
material based on their densities which also separates course and
fine particles.

Derivatization

This refers to the changing of the nature of a chemical by
reaction with a second chemical. For example, when an alcohol
such as ethanol is reacted with acetic acid, ethyl acetate is
produced. Ethyl acetate is then a derivative of ethanol.

Devolatilization

The effect that heating of the coal measures due to emplacement
of dolerite dykes and sills, resulting in the coal losing some of
the volatile matter content contained within the coal.

Directional drilling

The drilling of a continually steered drill hole from the surface
into the selected coal seam, in a predetermined direction and at a
predetermined elevation.

Distillation

A process whereby mixtures of liquids are separated into their
individual components under conditions of controlled heating
and pressure. Each component of the mixture has a boiling-point
unique to its chemical and physical properties enabling
separation.

Dolerite dykes and sills

The igneous intrusions (cross cutting the strata–dykes, and
partially conformable to the strata–sills) in the strata related to
the emplacement of the basaltic lavas of the Lesotho Basalt
Formation during the break up of the Gondwanaland super
continent about 145 million years ago.

Ethanol

Produced chemically from ethylene. Used as a gasoline octane
enhancer and oxygenate. Ethanol also can be used in higher
concentration in alternative-fuel vehicles optimized for its use.

Ethoxylate

Surfactants that are produced by reacting long-chain alcohol
molecules with ethylene oxide (ethylene molecules combined
with an oxygen molecule). Commonly used in detergent
formulations.

Ethyl acetate

A colorless liquid at room temperature and atmospheric pressure.
Commonly known in the chemical industry as an “ester”.
Normally made from acetic acid and ethanol. Commonly used as
a cleansing and extraction agent, in the paper and perfume
industry and as a solvent (in ink and paint).

Ethylene

One of the fundamental building blocks of the chemical industry.
A colorless gas usually produced by cracking crude oil derived
fractions such as naphtha or natural gas fractions such as ethane
at high temperature. Used as a building block in the production
of polymers (polyethylene and polyvinyl chloride) and a whole
range of other chemicals.

Fraction

A term commonly used in the petrochemical industry to describe
a specific “range” (fraction) of hydrocarbons in a mixture, in
terms of their chemical and physical properties.

Front-end engineering design

Conceptualizing and beginning the design of a plant.

Gasification

The process where coal is reacted with oxygen, steam or carbon
dioxide at temperatures of above 850 degrees Celsius to produce
carbon monoxide and hydrogen.

Glacial acrylic acid

Acrylic acid serves as an industrial intermediate product.
Furthermore, acrylic acid is used as an ingredient and occurs as
residual monomer in consumer products like adhesives, paints,
binding agents and printing inks. Crude acrylic acid is processed
to purified (glacial) acrylic acid.

H–7

H–8

Hexene

A co-monomer (see Co-monomer). A straight chain hydrocarbon
molecule containing 6 carbon atoms with one double bond
between 2 carbon (usual terminal) atoms.

Homopolymer

A polymer made from a single monomer. The polymer does not
contain any co- monomer, example: polyethylene.

Horizontal drilling

The drilling of a horizontally orientated drill hole into the coal
horizon from the mine workings. These drill holes are used to
determine the presence of gas accumulations and displacement
of the coal seam horizon.

Hydrocarbon

The broad classification of compounds that are comprised of a
carbon skeleton to which hydrogen is bonded.

Hydrochloric acid

A strong industrial acid sold as a 32% m/m solution.

Igneous

Of fire, fiery. Rocks produced by volcanic or magmatic action.

Impact copolymers

A particular form of polymer that by chemical and mechanical
design is able to resist impact, e.g. automotive components.

Isomerisation

A process that changes the chemical and physical properties of a
molecule without changing the atoms that make up that
molecule. Typically used to upgrade marginal product streams in
a refinery, i.e. from a lower to a higher octene rating.

Ketones

Ketones are a class of organic compound that contain one or
more carbonyl groups bound to two aliphatic, aromatic, or
alicyclic substituents, and are represented by the general formula.
Ketones are an important class of industrial chemicals that have
found widespread use as solvents and chemical intermediates.
Acetone is the simplest and most important ketone and finds
ubiquitous use as a solvent

Krypton/xenon

Rare noble gases found in minute quantities in nature and used
in the lighting and laser technologies as well as flat panel TV
and computer screens.

Limestone

A sedimentary rock composed mostly of calcium (the shell
remains of marine animals), carbon and oxygen. One of its
industrial uses is as an agricultural fertilizer, especially when
mixed with ammonium nitrate, which is rich in nitrogen.

Methane

The dominant component of natural gas, which is highly
flammable. Used in the production of ammonia, methanol, as a
source of heat and a feedstock for our GTL process.

Methylamine

Colorless gas with a strong ammonia smell derived from
methanol and ammonia. It is used as an intermediate for dyes,
pharmaceuticals, fungicides, tanning and solvents.

Methyl Ethyl Ketone (MEK)

A colorless liquid commonly used as a solvent (in adhesives,
inks and paints) and a selective extractant.

Methyl Iso-butyl Ketone (MiBK)

A flammable colorless liquid. It is used largely as a solvent in
surface coatings.

Monomer

A chemical capable of converting to long-chain polymers
(plastics) or synthetic resins by combination with itself or other
similar molecules or compounds.

Naphtha

A crude oil fraction used in the fuel market as a primary
component for gasoline production. Also used as a feedstock for
production of petrochemical products such as olefins and
aromatics, which are the basic building blocks of other
downstream chemical products.

n-Butanol

A straight chain hydrocarbon molecule containing 4 carbon
atoms and a hydroxyl group at the end of the molecule. Also part
of a family of molecules called “alcohols” (see Alcohols) or
“oxygenates”(see Oxygenates). Used as a solvent for resins and
coatings or as an intermediate for production of other chemicals.

Nitric acid

A colorless strong acidic, corrosive liquid produced by oxidizing
ammonia. It is primarily used for the production of fertilizers and
some industrial explosives and chemicals.

Noble gas

Noble gas is the family of gases that are chemically very stable
and form the Group 0 elements in the periodic table.

Octene

A comonomer (see Comonomer). A straight chain hydrocarbon
molecule containing eight carbon atoms and one double bond
between carbon atoms. Used as a co-monomer in the production
of polymers.

Olefin

Hydrocarbon molecules of varying carbon chain length
characterized by a double bond between atoms. They have a
bonding propensity which allows formation of larger molecules.
They are used as chemical intermediates for production of a
variety of components such as plasticizer alcohols, polymers,
polyethylene, fatty acids, detergent alcohol, lube oil additives
and surfactants.

Oligomerize

The process of joining double bond hydrocarbon molecules
(monomers) together to form short chained molecules consisting
only of a few monomers.

Organic peroxides

Organic peroxides are a family of highly reactive agents used as
catalysts.

Oxygenates

Organic compounds containing one or two oxygen atoms in their
structure. They include ketones, alcohols, phenols, esters and
aldehydes which are used as intermediates for producing a
number of chemical products used in industries such as paints,
adhesives, printing, coatings and pharmaceuticals.

Paraffin

Straight or branched saturated hydrocarbons chain containing
only carbon and hydrogen atoms with its physical form varying
from gases to waxy solids as the length of the chain increases.
They are derived from gas oil fractions. Their primary usage is
raw material for the production of olefins, Linear Alkylbenzenes
(“LAB”), solvents, detergent alcohol and lubricants.

H–9

H–10

Paraffin waxes

A white, translucent solid, consisting of hydrocarbons of high
molecular weight and derived from crude wax. Different waxes
exhibit different physical properties such as structure of crystals,
melting point and molecular weight. It can be used neat or as
blends with additives for specific applications, such as candles,
adhesives, polishes and cosmetics.

Pentene

A double bonded hydrocarbon with five carbon atoms. 1-Pentene
(the double bond between atoms is at the start or the end of the
chain) is used as a co-monomer in polypropylene production.

Perchloroethylene

Colorless liquid, used for applications like dry-cleaning solvent,
vapor- degreasing solvent, drying agent and heat-transfer
medium.

Phenol

A ring shaped molecule most commonly produced from cumene.
It can also be recovered from coal tar and petroleum streams. It
is mainly used as a chemical intermediate for downstream
chemicals.

Phosphoric acid

The inorganic acid of phosphorus used in large quantities in the
production of fertilizers, animal feeds, detergents and numerous
other industrial applications.

Petroleum/Petrol

Gasoline.

Phosphate

Phosphorous and phosphoric acid derived chemical, with
commercial markets in agricultural and industrial sectors, e.g.
fertilizers, livestock supplements, paper and water treatment.

Plasticizers

Chemical additives used as processing aids to facilitate the
production of PVC, resins and polymers and influencing the
physical properties of desired products.

Ply

The lateral continuity of a similar type of coal within a coal
seam, as opposed to the vertical continuity of a particular type of
coal.

Polyethylene

A macromolecule consisting of a long chain of ethylene
molecules. It can be composed of straight-chain molecules (in a
line formation), which provide a dense material known as high-
density polyethylene, or of branched chain molecules (in a
branch formation) that yield a product called low-density
polyethylene. Used in a broad range of applications e.g. wire and
cable coatings, pipe and molded fittings and packaging in
especially the food industry.

Polymer

A collective term typically used in reference to polyethylene,
polypropylene and other polymers.

Polymerize

To join molecules (monomers) of the same structure together so
as to form larger molecules (polymers).

Polypropylene

A macromolecule consisting of a long chain of repeating
propylene molecules. Commonly used for packaging film,
molded parts for cars, appliances, housewares, fibers for carpets
and upholstery, crates for soft drink bottles, toys.

Polystyrene

A polymer made from styrene, commonly used in applications
like packaging, disposables, toys, construction and housewares.

Polythene

Generic name for polyethylene. See polyethylene.

Polyvinyl chloride

The plastic known as PVC commonly used for piping and other
applications such as the production of gutters, toys, and garden
hoses. PVC is produced by first reacting ethylene with chlorine
and subsequently using a suitable catalyst to convert the
intermediate product to a long-chain molecule.

Potassium

One of the elemental metals that is essential in plant growth,
animal and human nutrition, occurring in all soils. Potassium is
commonly used as a laboratory reagent, and as a component of
fertilizers.

Prills

A physical form in which a chemical (e.g. urea, polyethylene) as
solid is processed and sold.

Proved developed oil and gas reserves

Reserves which can be expected to be recovered through existing
wells with existing equipment and operating methods.

Proved undeveloped oil and gas reserve

Reserves which are expected to be recovered from new wells on
undrilled acreage, or from existing wells where a relatively major
expenditure is required for recompletion.

Probable Coal Reserves

Reserves for which quantity and grade and/or quality are
computed from information similar to that used for proven
(measured) reserves, but the sites for inspection, sampling, and
measurement are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for
proven (measured) reserves, is high enough to assume continuity
between points of observation.

Propylene

Is a hydrocarbon used as an intermediate in the production of
polypropylene (PP polymer) and n-Butanol.

Proven Coal Reserves

Reserves for which: (a) quantity is computed from dimensions
revealed in outcrops, trenches, workings or drill holes; grade
and/or quality are computed from the results of detailed
sampling; and (b) the sites for inspections, sampling and
measurement are spaced so closely and the geologic character is
so well defined that size, shape, depth and mineral content of
reserves are well-established.

Reactor

Industrial unit to provide the physical conditions required for
specific chemical reactions to take place.

Recoverable coal reserve

The tonnage of mineable, in situ coal reserves that are expected
to be recovered after all geological losses, dilution, mining losses
(mining layout loss, mining layout extraction loss, mining
recovery efficiency factor), contamination and moisture content
correction factors have been applied. The assessments
demonstrate that at the time of reporting, economic extraction is
reasonably justified. The recoverable coal reserves are
subdivided in order of increasing confidence into probable and
proven recoverable reserves.

H–11

H–12

Reclaimers

Large automated machines that consist of a rotating drum which
picks up coal laid out on a pad in an orderly fashion and places
that coal on a conveyor belt. Normally reclaimers will reclaim
coal at a constant rate.

Recordable case rate

The recordable case rate (RCR) is the standard international
measure for reporting work-related injuries and illnesses and
other safety incidents resulting in injury. The RCR is the number
of fatalities, lost workdays, restricted work cases, transfer to
another job cases and medical treatments beyond first-aid cases
for every 200,000 employee hours worked, on a 12 month rolling
average basis.

Reform

Rearrangement or composition of hydrocarbon gases or low-
octane petroleum fractions by heat and pressure, often in the
presence of a catalyst. Steam reforming of natural gas is an
important method of producing hydrogen.

Room and Pillar mining

The mining method used in flat-lying shallow mineral deposits,
where a number of roads are developed leaving pillars to hold up
the roof.

Slurry

Liquid substance containing solid particles.

Sodium cyanide solution

Is a mining reagent used in the recovery of gold.

Solvent

A substance capable of dissolving another substance to form a
solution at the molecular or ionic level. The main uses of organic
solvents are in the coatings field (paints, varnishes and lacquers),
industrial cleaners, printing inks, extractive processes and
pharmaceuticals.

Stackers

Large automated machines that stack coal from a conveyor belt
on to a flat pad in an orderly fashion. They consist of an inclined
conveyor and swinging boom.

Styrene

A liquid hydrocarbon partly composed of a ring-shaped molecule
(benzene) with an ethylene side chain which can be easily
converted to polystyrene used in packaging.

Splitter column

A splitter column is used to separate a mixture of liquids into
different boiling fractions.

Sulfur

A pale yellow non-metallic element found as a component of
crude oil, natural gas and coal. Sulfur is commonly used in
making gunpowder, matches, sulfuric acid, the vulcanizing of
rubber, and the treatment of skin diseases.

Sulfuric acid

The inorganic acid of Sulfur used as a leaching agent in mineral
processing in the mining sector as well as in the production of
fertilizers and numerous other industrial applications

Surfactant

Any compound that reduces surface tension when dissolved
in water or water solutions, or which reduces interfacial
tension between two liquids, or between a liquid and a solid.
A surfactant facilitates the solution of otherwise immiscible
components e.g., oil and water. Also called surface-active agents.
Used as the active ingredient in detergents.

Synfuels

The family of fuels that have comparable or better properties
than that of crude oil derived fuels but they are derived via one
of several potential synthesis routes using alternative feedstock
such as coal or petroleum coke. Two examples of synfuel
technologies are indirect and direct liquefaction of coal.

Train

A sequence of processing units, each of them performing a
different function to arrive at the final product.

Trimerization

Trimerization is the joining of three molecules into one molecule
such as trimerization of ethylene to form 1-hexene

Urea

A soluble, colorless, crystalline, nitrogen-containing compound
derived from ammonia primarily used as a fertilizer.

Units of measures

meter

kilometer

millimeter

square kilometer

square meter

cubic meter

kilogram

tons or tones

kilotons

million tons

tpa

tons per annum

ktpa

kilotons per annum

Mtpa

million tons per annum

barrels

bpd

barrels per day

cubic feet

mg/m

milligrams per meters cubed

ppm

parts per million

gigajoules

MGJ/a

million gigajoules per annum

bcf

billion cubic feet

Vertical diamond drilling

The drilling of a drill hole using a diamond impregnated drill bit
to acquire drill core for the entire length of the drill hole.
Therefore a continuous sample of the rock mass is obtained over
the mineral bearing strata.

Zeolite

A chemical substance consisting of silica and aluminum
extensively used as a water-softener and a detergent component.

H–13

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M–1

M–2

LOCALITY PLAN 1

LOCALITY PLAN 2

M–3

M–4

LOCALITY PLAN 3

M–5

Exhibit 8.1

LIST OF SUBSIDIARIES

Name

Nature of business

Country of incorporation

Interest %

Sasol Mining (Pty) Limited

Coal mining activities

South Africa

100

Sasol Synfuels (Pty) Limited

Production of liquid fuels, gases,

South Africa

100

chemical products and the refing
of tar acids

Sasol Technology (Pty)

Engineering services, research and

South Africa

100

Limited

development and technology
transfer

Sasol Financing (Pty) Limited Management of cash resources,

South Africa

100

investment and procurement
of loans

Sasol Investment Company

Holding company of the group’s

South Africa

100

(Pty) Limited

foreign investments

Sasol Chemical Industries

Production and marketing of

South Africa

100

Limited

mining explosives, gases,
petrochemicals, fertilizers

Sasol Gas Holdings (Pty)

Holding company of the group’s

South Africa

100

Limited

gas interests

Sasol Oil (Pty) Limited

Marketing of fuels and lubricants

South Africa

100

Chemcity (Pty) Limited

Supporting empowered SMMEs

South Africa

100

required to enable them to thrive
in the chemical industry

Republic of Mozambique

Owning and operating of the

South Africa

100

Pipeline Investment

natural gas transmission pipeline

Company (Pty) Limited

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

Sasol Chemical Holdings

Investment in the Sasol

South Africa

100

International (Pty) Limited

Chemie group

Sasol Chemicals Europe

Marketing and distribution of

United Kingdom

100

Limited

chemical products

Sasol Chemicals Pacific

Marketing and distribution of

Hong Kong

100

Limited

chemical products

Sasol-Chem Inc.

Marketing and distribution

United States

100

of chemical products
Surfactants GmbH

Name

Nature of business

Country of incorporation

Interest %

Sasol Chemie GmbH and Co. Investment in the Sasol Germany

Germany

100

GmbH and Sasol Olefins and

Sasol Financing

Management of cash resources,

Isle of Man

100

International plc

investment and procurement
of loans

Sasol Gas Limited

Marketing, distribution and

South Africa

100

transportation of pipeline gas and
the maintenance and operation
of pipelines used for the
transportation of various types
of gas

Sasol Germany GmbH

Production, marketing and

Germany

100

distribution of olefin and
surfactant products

Sasol Italy SpA

Manufacturing, trading and

Italy

100

transportation of oil products,
petrochemicals and chemical
products and derivatives

Sasol North America Inc

Manufacturing of commodity

United States

100

and special chemicals

Sasol Oil International

Buying and selling of crude oil

Isle of Man

100

Limited

Sasol Petroleum International Exploration, production, marketing

South Africa

100

(Pty) Limited

and distribution of petroleum
and natural gas

Sasol Polymers International

Holding company of Sasol

South Africa

100

Investments (Pty) Limited

Polymers’ foreign investments

Sasol Synfuels International

Develop and implement

South Africa

100

(Pty) Limited

international GTL and CTL
ventures

Sasol Wax International

Holding company of the

Germany

100

Aktiengesellschaft

Sasol Wax operations

Sasol Wax GmbH

Production, marketing and

South Africa

100

distribution of waxes and
wax related products

Sasol Wax (SA) (Pty) Limited Production, marketing and

South Africa

100

distribution of waxes and
wax related products

Tosas Beherend (Pty) Limited Investment holding company

South Africa

National Petroleum Refiners

Refining of crude oil

South Africa

of South Africa (Pty) Limited

INCORPORATED JOINTLY CONTROLLED ENTITIES

Name

Nature of business

Country of incorporation

Interest %

Sasol Dia Acrylates (South

Production of acrylic acid

South Africa

Africa) (Pty) Limited

and acrylates

Sasol Dia Acrylates (Pty)

Marketing of acrylic acid and

South Africa

Limited

acrylates

Arya Sasol Polymer Company Production of polyethylene

Iran

DPI Holdings (Pty) Limited

Holding company of DPI group

South Africa

which manufactures and markets
plastic piping systems

Merisol LP

Production, marketing and

United States

distribution of phenolics

Sasol Chevron Holdings

Holding company of the group’s

Bermuda

Limited

joint venture interests with
Chevron corporation

Sasol-Huntsman GmbH

Production and marketing of

Germany

& Co KG

maleic anhydride

Namibia Liquid Fuels

Marketing and distribution of

Namibia

(Pty) Limited

petroleum products

Oryx GTL Limited (Q.S.C.)

Manufacturing and marketing

Qatar

of synthetic fuels from gas

Spring Lights Gas

Marketing of pipeline gas in

South Africa

(Pty) Limited

the Durban South area

Petlin (Malaysia) Sdn. Bhd

Manufacturing and marketing

Malaysia

of low-density polyethylene
pellets