Oil giant Shell’s exit from SA should not be seen as a loss
Gap in the market will be filled by another oil, energy major with job opportunities
The recent announcement by Shell that it will be divesting from its downstream operations in SA has been turned into a political football by some in society.
The sensationalism surrounding Shell’s exit is associated with the upcoming national elections. However, a more comprehensive analysis paints a picture of a company implementing its global strategy, regardless of what the issues may be in the SA context.
It’s important to highlight the facts. This is not the first time an oil major has taken a decision to divest from some of its key business operations. Similar decisions were taken by Chevron in 2018, including Engen and Puma. Why was the same level of attention not given to these companies over similar decisions made in the past?
Perhaps the context was not favourable for any political party to do so. That said, we cannot ignore the fact that such decisions by oil and gas companies are not new or unique.
The decision taken by Shell is aligned to its 2024 energy transition strategy. Shell has openly communicated its strategy to reduce carbon emissions and focus on its more profitable upstream businesses.
Shell chairperson Sir Andrew Mackenzie states: “We aim to grow our public charging network for electric vehicles and remain one of the world’s largest blenders and distributors of biofuels.
As the energy transition progresses, we expect to sell more low-carbon products and solutions, and less oil products including petrol and diesel.”
Further, it is important to consider that Shell has taken similar decisions in other countries and not just SA. This includes countries such as Singapore and Malaysia.
Shell has sold its 61-yearold refinery in Singapore, announced plans to sell its 950 service stations in Malaysia, and recently announced its plans to sell its onshore subsidiary in Nigeria. These decisions are more aligned to Shell’s 2024 strategy than they are to any of the other factors being highlighted in the mainstream media.
What does this mean for us in SA? It means that we have been presented with a massive opportunity. Why is this an opportunity and how can we seize this?
First, the decision may present an opportunity for substantive transformation and local economic development rather than a loss of foreign investment. The petroleum sub-sector in the chemical industries remains largely untransformed.
Many of the initiatives have led to BB-BEE companies without any involvement in actual oil and gas production or petroleum operations.
The gap in the market will be filled by another oil or energy major. The question is whether local companies will be supported to seize such an opportunity or will it be left to international oil and energy majors to step in.
The second opportunity lies in the potential for new jobs to be created. Jobs will not be lost.
Shell has actually been “job shedding” since 2019 with employment across its three businesses in SA declining from 1,423 to 1,062 employees. A new business with a new strategy could turn this tide towards more positive jobs figures.
The third opportunity lies in small, medium and micro enterprises (SMMEs) and skills development. The takeover of Shell’s downstream businesses could present an opportunity for new venture creation and local skills development which is much needed in the petroleum sub-sector.
This is not to suggest that Shell has not been contributing to SMME or local skills development. It contributes significantly to skills levies, being the 11th largest contributor in the chemical industries. What it does present is an opportunity for a more rigorous focus on these through a more innovative strategy.
There was no need to justify why SA remains a desirable investment destination. The government of Singapore did not attempt to explain why it remains a desirable investment destination. The SA government should interpret Shell’s exit as an opportunity rather than a loss.
The Chemical Industries’ Sector Education and Training Authority (Seta), Chieta, will continue to support the growth and development of the petrochemicals sector through our increased investments into skills development and training.