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Wednesday, July 17, 2024

Shell Confirms it is Leaving South Africa

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Petrochemical giant Shell has announced its decision to divest its shareholdings in Shell Downstream South Africa (SDSA), including the sale of all local assets, comprising over 600 service stations and forecourts.

Confirming the move, Shell informed the local publication Daily Maverick, stating, “Shell has decided to reshape the Downstream portfolio and intends to divest our shareholding in Shell Downstream South Africa.”

The decision comes amidst reported discord between the fuel retailer and its longstanding BEE partner, Thebe Investment Corporation.

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The dispute revolves around Thebe’s alleged intention to activate an “opt-out” clause in its contract, leading to the cashing out of its 28% stake in SDSA.

Having established a presence in South Africa since 1902, Shell holds energy exploration rights sanctioned by the Department of Mineral Resources and Energy.

This exit represents the second significant setback in the country, following the closure of the Shell/BP-owned Sapref refinery in March 2022, exacerbating the dependence on imported fuels.

Read | Sale of Engen attracts interest from global oil trading giants

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Shell’s divestment from South Africa aligns with its broader strategy of transitioning to a net-zero-emissions energy business by 2050.

This involves discontinuing operations in the Niger Delta region, as reported by Offshore Technology.

Mikatekiso Kubayi, a researcher at the Institute for Global Dialogue, anticipates short-term market instability following Shell’s departure but believes it will be short-lived.

Kubayi suggests the possibility of new investors acquiring Shell’s 72% stake in SDSA and rebranding the franchise.

He notes the attractiveness of South Africa to international investors due to its expertise in engineering, science, and robust financial systems.

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Kubayi emphasizes that the country has been a net recipient of foreign direct investment, citing its appeal to entities beyond Shell, potentially including interests from Saudi investors, previously rumoured to enter the sector.

In an interview on 702, Kubayi expressed optimism regarding the potential for new entities to step in and fill the void left by Shell, reflecting the ongoing attractiveness of South Africa as an investment destination.

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