Thebe Investment Corporation has remained cautiously optimistic that the dispute over the evaluation of its 28% stake in Shell Downstream South Africa (SDSA) will be resolved within the next three months by arbitration as the two-year period after which its notice to sell its shareholding would have lapsed.
This comes as the 22-year relationship between the British multinational oil and gas company and its South African empowerment partner has hit rock bottom following Shell’s decision to divest its downstream operations.
Shell will divest its majority shareholding from the South African downstream unit and leave more than 600 forecourts after operating in the country for over 120 years, following a comprehensive review by Shell of its businesses across all regions.
However, it also coincided with the dispute over the value of Thebe’s stake in SDSA as the local partner had decided to put up for sale its shareholding nearly two years ago.
In an exclusive interview with Business Report on Friday, Thebe board member Dr Molefe Tsele said they had made their put as far back as August 2022, long before Shell decided to divest.
“The matter of Thebe exercising their put option was formally decided in 2022, but we’ve been reviewing our investment possibly since roughly 2020,” Tsele said.
“We felt that that is the right time to assess whether we still need to (invest), and every index in our business strategy showed that actually we have reached the maturity of our relationship with Shell.”
Tsele said Thebe was aiming to better utilise the proceeds from selling its stake in SDSA in various ways, including paying their shareholders who had not been paid a dividend from 2015 to 2022.
“Firstly, (we want) to reinvest in our food and agriculture sector and also on renewables, but also to reduce our debt levels, and thirdly to give some liquidity to shareholders,” he said.
“So that decision was taken a long time ago. We didn’t even know then that Shell had any plans of exiting.”
Tsele said Thebe wished that all the parties should make an endeavour to act in good faith in this matter by doing the things agreed upon at exactly the agreed times.
He said Shell has 24 months to evaluate and decide whether to buy back Thebe’s stake or get another empowerment partner from the time Thebe made their put.
“The provisions of the shareholders agreement provides for the matter to be resolved within two years from the date of the put, which is 24 months,” he said.
“So all those 24 months were intended for them to actually have their house in order so that by the time we exit in August 2024, they already have the resolve that.
“But it’s fine if we agree to give them time for whatever reason, even if we can finish it at the end of this year, it will still be okay. But wish that it should be fast-tracked so that by the time Shell’s own timetable of exiting is realised, we would have finalised this matter.”
SDSA spokesperson Pam Ntaka yesterday said SDSA “distances itself from speculation or rumours” as a matter of policy and principle, particularly in relation to confidential shareholder agreements and relationships.
“Out of respect for our partners and these agreements, we are not able to provide any further comment currently,” Ntaka said.
“As a responsible company, we take our communication and stakeholder engagement commitments very seriously and will always proactively communicate through the appropriate channels and forums, as and when required to do so.”
Meanwhile, Tsele praised the relationship they initially had with SDSA over the years, particularly during Dr Bonang Mohale’s tenure as chairperson.
Tsele said Mohale had advocated for this relationship to move higher and was instrumental in Thebe increasing its stake in SDSA from 25% to 28%. However, the cracks started showing when the refinery division was experiencing problems as it had a massive capital injection demand of around $50 million per annum.
“Many institutions, once they knew that we are a 28% shareholder of Shell South Africa, were prepared to basically advance quite the lines and instruments. So it went very well for us,” he said.
“We were able to use it to grow our business against it. And then we performed well. We were also fortunate that the leadership of Shell South Africa at the time, at the level of the chairperson, were extremely supportive.”
BUSINESS REPORT