This is in an effort to stay ahead of new and tighter environmental regulations.
Sasol's Secunda project in South Africa's Mpumalanga province produces synthetic fuels like petrol and gas by burning coal, a process that leaves behind 80,000 tonnes every year of toxic waste, known as "biosludge".
Sasol used to burn the waste or send it to landfill.
Now, the new waste-to-fertiliser plant at Secunda, which Sasol claims is the first such plant in the world, will use bacteria and fungi micro-organisms to break down the "biosludge" and convert it into organic compost, which can be recycled as fertiliser.
Some of the fertilizer will help the growth of sugar graze, a plant which will then be used to break down the sludge.
The fertilising process will get rid of about a third of biosludge waste and almost all of the other 160 types of waste the plant produces, Sasol said in a presentation.
"This is an environmentally sustainable way of removing waste, this project ticks all of the boxes," said Sarushen Pillay, environmental technology manager at Sasol.
Pillay said the project would not be capital intensive but declined to give specific costs.
South Africa is due to introduce new regulations next year that will restrict the amount of carbon that mining and energy companies can emit and firms like Sasol are scrambling to meet the new deadlines.
Sasol said the new process would enable it to meet the new rules.
"Sasol is faced with the challenge of meeting the new air quality act standards and waste management act. An environmentally sustainable alternative is composting," Pillay said.