SA is still a desirable investment choice as Shell leaves - Minister Ebrahim Patel

The fact that Shell is leaving SA has not got Trade, Industry and Competition Minister Ebrahim Patel worried. File Picture: Ayanda Ndamane / Independent Newspapers

The fact that Shell is leaving SA has not got Trade, Industry and Competition Minister Ebrahim Patel worried. File Picture: Ayanda Ndamane / Independent Newspapers

Published May 8, 2024


Trade, Industry and Competition Minister Ebrahim Patel said that the withdrawal of petrochemical heavyweight Shell is not going to impact how the international investment community views South Africa.

He specifically said that the withdrawal of Shell is not a reflection of a negative investment case for the country, and in fact, there are various foreign businesses that are keen to invest in SA.

Patel made these comments to News24, during an industrial policy and strategy review.

The minister also said that South Africans should also recognise that Shell leaving could also be a part of its long-term global plan.

Patel said that Shell has exited from a number of global markets, not just South Africa. He mentioned that Shell has made efforts to leave Colombia and Uruguay.

In January, Reuters reported that Shell was also planning to leave Nigeria.

South Africa is still very desirable

The minister emphasised that a number of companies want to buy into SA and that we are still a very attractive destination.

“We must become a bit more self-confident about the fact that we are an attractive destination for many companies. More companies are buying businesses here in SA,” Patel said.

He said that he had been approached by a number of foreign investors that, over the next couple of months, will be making announcements of bids in SA.

Patel also said that these prospective investors are working through partnership arrangements with companies that they wish to buy.

Why is shell leaving?

The Dutch/UK-based company is currently in the throes of an angry and contentious battle with its BEE partner, the Thebe Investment Corporation.

There have been several meetings and heated negotiations between Thebe and Shell over the value of Thebe’s stake in the company.

Thebe is accusing Shell of undervaluing their stake in the multinational holding.

The BEE partner values its 28% stake in Shell Downstream South Africa (SDSA) at around R3.7 billion ($200 million).

Shell, however, is contending that the stake is worthless and not even worth the R1.3 billion ($73 million) that Thebe paid for the stake 22 years ago.

If Shell is correct, then Thebe would walk away with nothing, after more than two decades worth of investment.

In 2022, Thebe reportedly informed Shell that it was exercising its right to use its opt-out clause so that the BEE company could sell its stake in the petrol company.

Thebe wanted to cash out and reinvest their money elsewhere and had every right to do so, according to their contract with Shell.

“Based on the figures and information we received from Shell, we did our calculations to evaluate our stake and submitted it to them,” a shareholder disclosed.

Moreover, Thebe used a top auditing firm to calculate the value of their position for the sale. The company used figures that were sent by Shell and waited for a response from the company.

According to the shareholder, Shell waited eight months to respond and changed their figures to illustrate that there was no value in the Thebe shares.

“They deliberately changed the figures to undermine the value of our stake,” the shareholder said.

“International valuation principles state that stake calculations should be based on the value prevailing on that particular day of opting out. Shell changed this, which was a complete re-engineering for the outcome and back-solving to suit the outcome they themselves desired,” the share shareholder added.

In response to the allegations by the Thebe shareholder, Shell said that it does not engage in speculations and rumours.

“As a matter of policy and principle, Shell Downstream SA distances itself from speculation or rumours, particularly in relation to confidential shareholder agreements and relationships. Out of respect for our partners and these agreements, we’re unable to provide any further comment currently,” Shell spokesperson, Pam Ntaka said.