Shell’s Exit from South Africa: An Opportunity for Growth and Transformation

In a recent announcement, Shell disclosed its plans to divest from its downstream operations in South Africa. This decision has been politicized, with some factions using it to score political points ahead of the national elections. However, a more comprehensive analysis reveals that Shell’s move is part of a broader global strategy, aligned with its 2024 Energy Transition Strategy, rather than a reaction to local issues.

Historically, Shell’s decision is not unprecedented. Other oil majors like Chevron, Engen, and Puma have previously divested from key business operations without attracting similar levels of attention. These decisions are routine within the chemical industries, often reflecting broader strategic shifts rather than local political climates.

Shell’s 2024 Energy Transition Strategy focuses on reducing carbon emissions and pivoting towards more profitable upstream businesses. The strategy, articulated by Shell Chairperson Sir Andrew Mackenzie, emphasizes expanding the company’s electric vehicle charging network and increasing the distribution of biofuels. This transition involves selling fewer oil products, including petrol and diesel, and is part of a global trend seen in other markets like Singapore and Malaysia, where Shell has similarly divested.

For South Africa, Shell’s exit represents a significant opportunity rather than a loss. Here’s why and how this potential can be harnessed:

1. Transformation and Local Economic Development: Shell’s departure opens the door for substantive transformation within the largely untransformed petroleum sub-sector. Historically, many Black Economic Empowerment (BEE) companies have had limited involvement in actual oil and gas operations. Shell’s exit provides a chance to support local companies to fill the gap, potentially increasing local ownership and participation in the sector.
2. Job Creation: Contrary to fears of job losses, Shell’s exit could lead to job creation. When Chevron exited South Africa in 2018, Astron Energy stepped in, sustaining and potentially increasing employment. Shell has been reducing its workforce in South Africa since 2019, making a new business with a fresh strategy likely to reverse this trend and create new job opportunities.
3. SMME and Skills Development: The transition presents a chance for new venture creation and local skills development. While Shell has contributed significantly to skills levies, its exit could foster a more rigorous focus on small and medium-sized enterprise (SMME) growth and skills development within the petroleum sector. This is crucial for the industry’s sustainability and innovation.

There is no need for South Africa to justify its investment attractiveness in light of Shell’s exit. Other countries like Singapore and Malaysia did not feel the need to defend their business environments following similar divestments by Shell. South Africa should similarly view this as an opportunity.

The Chemical Industries Education and Training Authority (CHIETA) is committed to supporting the petrochemicals sector’s growth and development through increased investments in skills development and training. Shell’s exit can catalyze three key opportunities: new job creation, substantive sector transformation, and enhanced SMME and skills development. The challenge now lies in seizing these opportunities for the benefit of local South Africans.