Fuel Retailers Association points to regulatory failures for Shell SA’s exit

South Africa – Cape Town – 07 – May – 2024 – Shell intends to exit shareholdings in its South African retail, transport and refining operations. The energy company made the decision after reviewing its downstream and renewables business across all regions and markets. Photographer: Leon Lestrade / Independent Newspapers.

The Fuel Retailers Association of South Africa (FRA) has said that the rate at which oil companies were exiting South Africa was alarming following the news that Shell would leave in the wake of Chevron and Engen.

Shell has undertaken a comprehensive review of the Downstream and Renewables businesses across all regions and markets in line with Shell’s focus on performance, discipline, and simplification.

The oil industry company said it had decided to reshape its downstream portfolio and intended to divest shareholding in Shell Downstream South Africa (SDSA) after 120 years in the country as a result of this review.

FRA CEO Reggie Sibiya yesterday said Shell’s exit spoke to perhaps key regulatory failures, and not necessarily that regulation did not work.

“Regulation in the main protects consumers. As we can see it is in deregulated markets where motorists are suffering most in terms of fuel prices,” Sibiya told Business Report yesterday.

“If you think of how long retail margins have been under recovering due to regulatory failure, you can imagine what would happen if retailers were allowed to fully recover their under recoveries, ie, on credit cards and not wait for a regulator for almost 15 years without cost recovery.”

The FRA represents fuel service station owners in the retailing of fuel in South Africa.

Sibiya said that on the other hand, regulatory failure squeezed margins and businesses suffered with the resultant departures.

“We are seeing a lot of hands changing at retail level/service stations except the walls are not going down. Margin pressures are everywhere in the value chain,” Sibiya said.

“We are however pleased that the Shell brand will remain to protect our members who are Shell retailers from losing customers. We are hopeful that Shell will find a suitable buyer who should improve current working relationships with retailers and maintain jobs.

“We don’t think that jobs will be affected so long as we improve the regulation of margins and the same applies to businesses.”

Sibiya noted that Vivo, which is owned by Vitol, bought Shell in all African markets except South Africa.

“However, Vivo has just bought Engen in South Africa so I can’t see them buying Shell as this may raise serious competition issues of market dominance,” Sibiya said.

According to Shell, the energy company was working with its customers and across sectors to help accelerate the transition to net-zero emissions. Its climate target was to become a net-zero emissions energy business by 2050.

Shell said it supported the more ambitious goals of the Paris Agreement, which were to limit the rise in global average temperature this century to 1.5 degrees Celsius above pre-industrial levels.

For Shell, becoming a net-zero emissions energy business meant that the company was reducing emissions from its operations and from the fuels and other energy products, such as electricity, that they sold to their customers.

It also meant capturing and storing any remaining emissions using technology, protecting natural carbon sinks and providing high-quality carbon credits to customers to compensate for hard-to-abate emissions.

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