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Shell confirms downstream exit amid calls for broad ownership in SA’s liquefied energy sector

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Shell’s exit from South Africa has raised alarm bells of further impending corporate departures from the country.

Many investors have been spooked by SA’s declining infrastructure sector. File picture: Reuters, Rick Wilking

AFTER pausing its South Africa refinery operations in 2022, petrochemicals giant Shell on Monday confirmed that it was exiting its downstream operations from the country amid a bitter row with its BEE partner, Thebe Investment.

Shell’s exit from South Africa has raised alarm bells of further impending corporate departures from the country.

BHP’s bid for assets of Anglo American excluding its platinum group metals (PGMs) and iron ore operations could also pave the way for the Johannesburg and London-listed firm departing, while BNP Paribas has also put an end to its banking venture.

“Shell has decided to reshape the downstream portfolio and intends to divest our shareholding in Shell Downstream SA (SDSA). Considering SDSA’s illustrious history, this decision was not taken lightly,” Shell said in a statement.

It said this decision had been made following a detailed review of its renewables and downstream businesses in the regions in which it operates.

Media reports over the weekend, however, said Shell was embroiled in a bitter row with Thebe Investments over a R3.7 billion stake in the company.

“We have to clear up issues over the next few days and come up with a position which basically will confirm the company’s exit from South Africa,” a source with Shell South Africa said on Monday.

While Shell has been scaling down its downstream operations elsewhere, the dispute with Thebe is seen to have fast-tracked the decision to depart the SA operations.

Shell is reportedly opposed to the valuation of Thebe’s 28% stake in the petrochemicals company as a BEE partner.

Known as Shell Downstream SA following its partnership with Thebe after the merger of Shell South Africa Refining and Shell South Africa Marketing, the company is, however, still invested in offshore operations despite campaigns and court actions from activists against fossil fuels.

Trevor Shaku, spokesperson for the South African Federation of Trade Unions (Saftu), said that the state has to intervene to ensure that ownership of the liquefied energy sector is broad following the departure of Shell.

“This issue is primarily for the companies to resolve,” Shaku said.

“However, the state’s intervention is crucial to ensure that, should Shell exit, there is a concerted effort to broaden the ownership of liquid energies and enhance public control over daily fuel supplies that are vital to the citizens.”

Market watchers such as Ntokozo Masuku said “the departure of a major player like Shell, alongside reports of other companies considering similar moves, raises concerns about investor confidence” for South Africa.

Amid the growing departures of companies from SA, analysts are calling for the administration that emerged after the May 29 election to aggressively market and position South Africa as a worthy and lucrative investment destination.

Many investors have been spooked by SA’s declining infrastructure sector which has forced miners and other operators to curtail capital, retrench thousands of workers and close some shafts.

“The dispute between Shell and its BEE partner also sheds light on broader issues within corporate-government relations,” Masuku said.

“Companies like Shell wield significant economic influence, and disputes of this nature underscore the complexities of balancing commercial interests with broader societal goals, such as economic empowerment and community development.”

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