AfricaBusinessEconomy

Report: Shell is planning to leave South Africa.

The Sunday Times and City Press have two reports claiming that the petrochemical behemoth Shell intends to leave South Africa.

The international firm will sell its 72% share in Shell Downstream South Africa, according to reports quoting sources connected to Shell’s BEE partner in South Africa, Thebe Investments.

Conflict about the worth of Thebe’s remaining 28% interest in the company has resulted from this.

The department and the corporation declined to comment on the change, informing both publications that discussions with shareholders are private and that they do not discuss rumours.

Investors lose interest.

The Department of Mineral Resources and Energy has granted Shell exploration rights, and the company currently operates over 600 forecourts in South Africa. With more than a century of operation, it is a well-known brand among drivers in South Africa.

With several well-known international brands and businesses connected to key industries in the nation casting doubt on the sustainability and future of investment in South Africa, Shell is reportedly leaving the country.

The mining behemoth BHP most recently made a $39 billion bid for Anglo American; however, this agreement would have involved the shirking of assets in South Africa, which analysts claimed was a condemnation of the nation and its governance.

In response to the ensuing controversy, BHP sent a senior delegation, which included its CEO, to South Africa in an attempt to win over local shareholders, regulators, and government representatives.

Additionally, it stressed in a statement released on Thursday that their suggestion was not an attack on the nation.

“The suggested framework is predicated on portfolio and commodity considerations and does not represent a view of South Africa as an investment destination,” the business stated.

Thomas Schaefer, the CEO of Volkswagen Passenger Cars, issued a warning at the end of 2023 about how load-shedding, increased labour costs, and Transnet challenges are making South Africa an unfavourable place to manufacture automobiles, particularly in light of the global transition towards electric vehicles.

Speaking to Reuters at the time, Schafer stated that while South Africa’s low labour costs made it a competitive competitor in the global auto industry, the country was quickly losing this advantage because of its ineffective government and slowly implemented regulatory changes.

Similar to BHP, the local branch of the company quickly provided reassurances that South Africa would not be abandoned and would continue to be a destination for investment after the CEO’s remarks.

VW declared in April 2024 that it would make an R4 billion investment in its Kariega, Eastern Cape, manufacturing facility.

The money will go into modernising the facilities in order to get ready to add a third model to the production line in 2027.

Research from PwC suggests that the negative aspects of South Africa’s numerous problems—which are mostly related to infrastructure, power, and logistics—may be exaggerated, even if evidence indicates that the country is having trouble luring foreign investment and that investors are dissatisfied with the policies of the government.

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

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

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