Shell's exit could be a further blow to the already ailing economy.

Shell’s exit could be a further blow to the already ailing economy. Image from Twitter by Shell USA.

Shell to exit South Africa: Departure plans revealed

Shell’s purported decision to exit South Africa has surprised many, given the country is a lucrative market for the international oil giant.

Shell's exit could be a further blow to the already ailing economy.

Shell’s exit could be a further blow to the already ailing economy. Image from Twitter by Shell USA.

Shell Plc has confirmed recent news that it’s planning to leave South Africa.

They’ll be selling off their downstream assets, including more than 500 service stations or forecourts nationwide.

Shell leaves South Africa

Shell has chosen to reshape its Downstream portfolio and has plans to sell its shareholding in Shell Downstream South Africa (SDSA).

This decision was communicated in a statement responding to inquiries from Daily Maverick.

According to BusinessTech, after reviewing its downstream and renewables business in various regions and markets, the energy company, as reported on the website citing Shell, has decided to divest from certain ventures.

Shell intends to leave South Africa, an active market since 1902 and currently operates approximately 600 forecourts.

The largest refinery in South Africa, located in Durban on the east coast, is jointly owned by Shell and BP Plc’s southern African unit.

In 2022, the 180,000 barrel-a-day facility, which was scheduled for sale, ceased operations and suffered flood damage.

New regulations published by the government in the same year mandated refiners to comply with low-sulphur fuel specifications by 2023, rendering much of the nation’s fleet outdated, as a lobby group representing fuel manufacturers reported.

In 2020, Shell announced a review of its shareholding in Sapref.

Understanding the impact: How Shell’s exit affects Its petrol stations in South Africa

Peter Morgan, CEO of the Liquid Fuels Wholesalers Association of South Africa, reassures the public, stating that there is no need to panic regarding potential job losses or a shortage of filling stations due to Shell’s departure from the country.

During an interview with Cape Talk, Morgan mentioned that Shell will likely adopt a similar approach to other African countries. 

This entails leaving behind a smaller sub-brand in South Africa, in which it will maintain a stake.

“Don’t panic. What Shell is saying is they’re not going to close down their retail network if they do what they did in the rest of Africa,” he said.

“They will go, but they will leave behind a smaller sub-brand called Viva. They will find an 80% partner and keep 20% of that. So they aren’t closing the service stations and going away,” said Morgan.

This is a common pattern with all the oil majors throughout Africa.”

News regarding Shell’s intention to depart from South Africa initially emerged in early May 2024. 

This development followed a disagreement between the company and its longstanding Black Economic Empowerment (BEE) partner, Thebe Investment Corporation.

Thebe Investment Corporation owns a 28% stake in Shell Downstream South Africa and alleges that Shell intentionally prolonged the resolution of their dispute to facilitate its departure from the country.

The conflict dates back to 2022 when Thebe communicated to Shell its intention to invoke its “opt-out” clause, seeking to liquidate its shares to reinvest the proceeds in expanding the company.