Shell confirms it is leaving South Africa

Petrochemical giant Shell has confirmed that it will divest its shareholdings in Shell Downstream South Africa (SDSA) and sell all its local assets including over 600 service stations and forecourts.

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

This follows an alleged dispute between the fuel retailer and its long-term BEE partner, Thebe Investment Corporation, regarding the latter’s intent to initiate an “opt-out” clause in its contract and cash out its 28% stake in SDSA.

Shell has operated in South Africa since 1902 and enjoys energy exploration rights bestowed upon it by the Department of Mineral Resources and Energy.

Its exit marks the second vote of no confidence in the country following the shutdown of the Shell/BP-owned Sapref refinery in March 2022 which led to an increased reliance on imported fuels.

South Africa isn’t the only economy that Shell is divesting from as it is also pulling the plug on its operations in the Niger Delta region as part of its roadmap to becoming a net-zero-emissions energy business by 2050, Offshore Technology reports.

What happens next

Mikatekiso Kubayi, a researcher at the Institute for Global Dialogue, said the exit of Shell may cause short-term unpredictability for the local fuel market but this shouldn’t last very long.

The expert said that it is possible that another investor, or several, may swoop in and purchase Shell’s 72% stake in SDSA and rebrand the franchise to something new.

He highlighted that a few years ago there were suggestions of Saudi money possibly coming into this sector.

According to Kubayi, South Africa remains a popular destination for international investors. The country was a net recipient of foreign direct investment in recent years due to its engineering and science expertise and its robust financial markets and systems.

“There’s always a possibility that another entity could come in and replace [Shell], or there could be more than just one entity that would be attracted,” said Kubayi in an interview on 702.