Shell, a global energy giant, is reportedly planning to exit South Africa, a move that could put thousands of jobs at risk. The company has a significant presence in the country, with 4,000 workers in Africa and over 600 fuel stations in South Africa. Shell's history in the country dates back to 1902, with substantial investments over the years. The potential exit is driven by a dispute with its Black Economic Empowerment partner and a court order halting its seismic testing off the Wild Coast. Relations with the BEE partner have reportedly hit "rock bottom" following a disagreement over the valuation of a stake in Shell Downstream South Africa (SDSA).
According to South African media reports from City Press and the Sunday Times, the petrochemical giant, Shell, is planning to exit South Africa.
The potential exit of Shell from South Africa could put thousands of jobs on the line. Shell has around 94,000 employees in more than 70 countries and territories, with approximately 4,000 workers in Africa. In South Africa specifically, Shell operates over 600 fuel stations, indicating a significant presence in the country's energy market. It entered South Africa in 1902 and has invested heavily in the country.
Reasons for Shell's Desire to Exit South Africa
The reason for the exit is driven by a number of factors, not the least of which is a well-publicized recent spat with its BEE partner. Another factor might be a South African court's recent order for Shell to halt seismic tests off the Wild Coast. This was a significant legal setback for Shell's exploration activities in the country, potentially impacting its future plans and investments in the region.
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Relations With Shell BEE Partner Hit "Rock Bottom"
Allegedly, the relationship with the BEE partner in South Africa has hit "rock bottom" which has hastened the oil giant's exit from the country. The conflict follows a dispute over a valuation of a stake in Shell Downstream South Africa ("SDSA"), with Thebe seeking billions for the stake in one of South Africa's largest BEE deals ever.
Playing hardball, Thebe has activated its opt-out provision to sell shares to reinvest the proceeds in other parts of the BEE firm's business. It claims the shares are worth $200 million (i.e., 3.7 billion rands). Shell values the shares far lower at $73 million (i.e., 1.3 billion rands).
What is Black Economic Empowerment (BEE)?
In South Africa, there's a policy called BEE, or Black Economic Empowerment. Its stated purpose is to provide economic advantages to the racial majority in South Africa to make up for wrongs that occurred in the past. It does this by strongly encouraging, often by using the strong arm of the state and taxing authorities, that minority-owned businesses give shares to the dominant majority race which presently runs the country and its institutions.
The arguably noble intentions of BEE policies have been overshadowed by the abuses, scandals and unfair outcomes which are often produced. The black poor have not benefited much from BEE policies with many noticing that their needs have not been effectively addressed by the policies.
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