Johannesburg - Dow Chemical, the largest chemical company in the US, is in talks to sell its South African chemical operations to ChemCity, a cluster of chemical companies controlled by Sasol, the companies said yesterday.
Willie Basson, the chief executive and managing director of ChemCity, refused to disclose the value of the deal but said Dow's local businesses had a collective turnover of more than R1 billion.
"The deal will be presented to the board in two or three weeks time. We see the deal being completed by October," Basson said.
He said completion of the deal would result in Dow holding 20 percent of ChemCity.
Sasol and empowerment company Real Africa Holdings (RAH) would each hold a 30 percent stake and Gensec would own the remaining 20 percent.
RAH said yesterday it had invested close on R26 million in ChemCity and it had the option of extending its stake to 51 percent by June next year.
Basson said empowerment in the chemicals industry was virtually non-existent.
"The RAH investment will contribute to the reorganisation of the industry," Basson said.
RAH said while its focus remained on financial services and the information technology sector, it sought out investments that met its strict return-on-investment criteria.
Thero Setiloane, an executive director at RAH, said the chemical industry was an area showing attractive growth potential.
RAH and Gensec are partners in Bioventures, a biotechnology venture capital fund to which they each contributed R20 million.
Basson said the Dow deal would also begin to pull together South Africa's fragmented chemical industry, which he described as an industry on the brink of implosion.
"An implosion could have serious consequences for the country, not least of all the effect it would have on job erosion," Basson said.
The chemical industry had been fragmented by developments during the sanctions era and the sector had not yet been properly consolidated.
Basson said many chemical companies were for sale or were being shut down.
The participation of other major chemical players in ChemCity, such as chemicals manufacturer AECI, had not been ruled out, he said.