Seems there was a lot of unnecessary carping about South Africa’s flagging status as an investment destination with news of oil giant Shell “pulling out” of the country.
It’s hardly catastrophic that Shell is exiting its lower-margin downstream business, which ultimately flows into the sprawling fuel forecourts. This is almost certainly a strategic business decision rather than a political investment decision.
More intriguing will be who buys these assets, which some reckon might be increasingly obsolete as transport modes change and adapt to new technologies. It might also be seen as slightly ironic that the Shell news followed hard on the heels of competition authorities greenlighting energy marketing and trading company Vitol’s takeover of fuel distributor Engen.
Shell, it seems, is still intent on retaining its more profitable upstream business in South Africa. This is a relief, considering the snuffing out of oil and gas exploration efforts off the Eastern Cape coast at a time when our Namibian neighbour is on the verge of an enthusiastically fostered, and potentially economically transformative, energy boom. We’ll see how Namibia’s energy policy shapes the local energy framework in the years ahead.
If there is any justifiable carping, one might forgive shareholders in iconic South African energy giant Sasol. Despite a fairly firm crude oil price and a helpful exchange rate, the company has lost more than a quarter of its value in the first four months of 2024. Over six months Sasol is down 40%, and over a year down 43%. Over five years Sasol — which is still present in many pension funds, exchange traded funds and unit trusts — is down a whopping 70%. That is a paper loss of more than R200bn — and it will have a far greater impact on the local investment psyche than any possible fallout from Shell’s strategic retreat.
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