Money was what pushed Shell out of South Africa as return on investment & risk profile not worthwhile– expert reports

Shell’s exit from South Africa reflects global investment strategies, emphasising upstream ventures over downstream assets.

Shell’s decision to exit the South African market after 122 years had nothing to do with global trends toward renewables – money was the bottom line, said Peter Morgan, CEO of Liquid Fuels Wholesalers Association of South Africa.

Companies stay in business and invest when the return and risk profile is worth their while, he said.

“As an investor, if your return is compromised and the certainty is low, then you move your investments.

“The oil majors have been moving out of Africa since early 2000 because they could do more with their investors’ money by going upstream.

“In South Africa’s case, the retail regulatory environment is not as attractive as it used to be. So Shell shareholders want to invest upstream where they believe the returns will be more favourable.”

Shell decided to exit SA, reportedly after a fallout with Thebe Investment Corporation, their black economic empowerment (BEE) partner for 22 years.

Thebe sold its 28% stake in Shell Downstream South Africa in 2022, accusing it of undervaluing Thebe’s stake. According to Daily Maverick, Shell will sell its downstream assets, including more than 500 service stations or forecourts.

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This decision was made, according to the oil giant, following a comprehensive review of the downstream and renewables businesses across all regions and markets.

Dawie Roodt, the chief economist at the Efficient Group, said Shell was not only restructuring in SA, but worldwide.

“Shell is not doing well after selling its downstream business. There’s very little left offshore in SA, so it is disinvesting from the country totally,” Roodt said.

“Some of the other energy companies could also decide to leave, which means chances are slim that somebody else will start a new mine or factory in South Africa.”

The Congress of South African Trade Unions (Cosatu) said it was concerned about the impact on Shell’s workers.

“With a 41% unemployment rate, we cannot afford to see a single worker lose their job in South Africa,” Cosatu spokesperson Matthew Parks said.

“The department of trade, industry and competition and the Competition Commission need to ensure that part of the approvafor Shell’s sale is a commitment that no worker loses their job,” he said.

Roodt said Shell’s withdrawal was not going to have much of an impact on the economy because they were hoping to get a buyer for their assets.

“But who is going to do business when you have to give away some of your business because of BEE?

“You have to generate your own electricity; the trains are not working properly; you have to deal with the construction mafia and wait forever for licences if you want to prosper in South Africa,” Roodt said.