Azra Hoosen | ah@radioislam.co.za
8 May 2024 | 12:00 CAT
2 min read

After over a century of operation in South Africa, Shell has announced its decision to withdraw from the country, marking the end of an era. The oil giant revealed its intention to divest its majority shareholding from a local South African downstream unit following a thorough evaluation of its downstream and renewables ventures worldwide.

In an interview with Radio Islam, Professor Jannie Rossouw from Wits Business School simplifies Shell’s stance, stating that the company is essentially seeking a buyer for its investments in South Africa and is no longer inclined to maintain its stake in the country.

“Shell will sell its filling stations to someone else; it depends on the sale agreement whether the brand name will continue or change. They believe they have other business opportunities in other countries and regions in the world rather than South Africa, which is very serious for us because other investors might reach the same conclusion,” he said.

Rossouw pointed out that the possibility of job losses remains uncertain as details of the deal structure are yet to emerge.

Rossouw emphasised that Shell’s departure marks the end of a longstanding relationship with South Africa and serves as a stark wake-up call for the government.

“If a company with a 120-year legacy is prepared to walk away from it, it means that SA is increasingly becoming less attractive to international investors. From that perspective, it is concerning because it means international companies will become less hesitant to invest in projects in SA. We need new investors to get the economy rolling at a faster pace and create jobs for many unemployed South Africans,” he said.

Reports from weekend media suggest that whoever acquires Shell’s business in South Africa will need to engage with an empowerment partner. The ongoing situation reveals a dispute between Shell and its current investment parent, Thebe Investment Corporation, which is reportedly seeking to divest its stake.

City Press reported that the Dutch/UK-based Company finds itself embroiled in a heated and contentious battle with its BEE (Black Economic Empowerment) partner. The BEE partner places a value of approximately R3.7 billion ($200 million) on its 28% stake in Shell Downstream South Africa (SDSA). However, Shell contests this valuation, asserting that the stake is essentially worthless and not even equivalent to the R1.3 billion ($73 million) initially paid by Thebe for the stake over two decades ago. Should Shell’s assessment be accurate, it implies that Thebe would exit the investment empty-handed after more than twenty years of involvement.

“The government forces international companies to take BEE partners when they want to continue with investment in South Africa. It is an additional layer of complexity for international investors. It might be the reason, but we do not really know,” said Rossouw.

Shell and BP Plc’s joint ownership of the Sapref refinery, South Africa’s largest, faced challenges with a halt in operations ahead of a sale in 2022 and subsequent flood damage. New government regulations requiring refiners to meet low-sulfur fuel specifications by 2023 impacted the nation’s vehicle fleet. Shell’s review of its shareholding in Sapref as early as 2020 hinted at potential strategic changes.

The international oil giant has maintained a significant presence in South Africa since 1902, spanning over a century of operations.

LISTEN to the full interview with Ml Sulaimaan Ravat and Professor Jannie Rossouw from Wits Business School, here.