Shell plans to leave South Africa

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Two reports by the City Press and the Sunday Times say that petrochemical giant Shell is planning to leave South Africa.

According to the reports, citing sources related to Shell’s BEE partner in South Africa, Thebe Investments, the global group will sell its 72% stake in Shell Downstream South Africa.

This led to conflict with Thebes over the value of its remaining 28% stake in the company.

The company and the department did not comment on the move, telling both newspapers that they did not comment on speculation, and that discussions with shareholders were confidential.

Investors go sour

Shell has more than 600 courts in South Africa and has been granted exploration rights by the Department of Mineral Resources and Energy. It has been operating in South Africa for more than a century and is an iconic brand among motorists.

Shell’s reported exit comes as other major world brands and companies linked to land industries in the country are casting doubt on the viability and prospects of investing in South Africa.

Most recently, mining giant BHP submitted a $39 billion bid for Anglo American – but this deal would have evaded assets in South Africa, which commentators say is an indictment against the country and government in the country.

BHP responded to the resulting uproar by deploying a senior team, including its CEO, to South Africa to win over government officials, regulators and local shareholders.

It also issued a statement Thursday stressing that his proposal is not an indictment of the country.

“The proposed structure does not reflect a view of South Africa as an investment destination and is based on portfolio and commodity considerations,” the company said.

Thomas Schaefer, CEO of Volkswagen (VW) Passenger Cars, warned at the end of 2023 that South Africa is becoming an undesirable place for the production of cars – especially amid the global shift to EVs – due to issues such as load shedding, rising labour costs, and problems with Transnet.

Schafer told Reuters at the time that although South Africa was a competitive player in global car manufacturing due to its low labour costs, it quickly lost this edge due to poor management and sluggish regulatory reforms.

As was the case with BHP, the CEO’s statements were quickly followed up by assurances from the local branch of the group that he would not be leaving South Africa, and that it remained a destination for investment.

In April 2024, VW announced that it would invest R4 billion in its manufacturing plant in Kariega, Eastern Cape.

The investment will be used to upgrade facilities in preparation for the addition of a third model to its production line in 2027.

While data shows that South Africa is struggling to attract foreign investment due to its many issues – largely due to infrastructure, power and logistics – and investors are soured on government policy, research by PwC indicates that this negative could be overstated.

The group said foreign investors remain largely positive about South Africa’s world-class financial services and communication industries, deep capital markets, strong tertiary institutions, natural resources, geographical location and a certain level of political and policy stability.

As a result, almost every year since the global financial crisis, the country has seen net FDI inflows (inflows minus outflows).

source:https://volkskrag.co.za/wp/2024/05/05/shell-beplan-om-suid-afrika-te-verlaat/#comment-98

Natalie