News / National
7 big global companies dump South Africa
02 Oct 2024 at 12:35hrs | Views
Many large global companies, including Shell, HSBC, PNB Paribas, Rolex, AngloGold Ashanti, TotalEnergies, and BP's Aviation Fuel Business, are dumping South Africa.
Last week, HSBC announced that it was exiting its operations in South Africa after concluding deals with FirstRand and Absa to take over its two main divisions.
The transaction includes transferring HSBC's branch's clients and banking assets and liabilities to FirstRand. As part of the agreement, HSBC's branch employees will also be transferred.
Subject to regulatory and governmental approvals, the transaction is expected to be completed in the fourth quarter of 2025.
The London-based HSBC has been operating in South Africa since 1995, meaning its three-decade journey has ended.
Once HSBC's current international wholesale banking clients have transferred to FirstRand, they will continue to be connected through HSBC channels in South Africa.
The transaction will also support HSBC's global clients who require future access to South African corporate banking products and services.
Absa has reached an agreement with HSBC to provide its global equities and securities finance clients with access to the South African market.
Absa will provide HSBC and its clients access to a full suite of equities trading and prime brokerage products in South Africa.
The agreement aligns with Absa's growth ambitions, which include serving corporate and investment banking clients with equities markets and products.
The agreement between Absa and HSBC in South Africa took effect on Wednesday, 26 September 2024.
HSBC is the latest in a string of large global companies to exit or downscale their operations in South Africa.
In May 2024, BNP Paribas South Africa officially closed its corporate and investment bank in South Africa.
BNP Paribas is the second-largest bank in Europe and has been operating in South Africa since 2012. It offered corporate and investment banking services in the country.
While the bank did not have a licence to operate as a fully-fledged bank in the traditional sense, it had significant operations in South Africa.
However, since 2022, BNP has been undergoing a process of limiting its operations in Africa to focus on its business in Asia and Europe, which are far more profitable.
"In Africa, we have adopted a targeted strategy and continue to strengthen our position where the market characteristics correspond well to our strengths," it said.
South Africa's banking regulator, the Prudential Authority, said in a statement that BNP Paribas' ability to conduct the business of a bank via branch was withdrawn on 8 March already.
S&P Global said that this could significantly boost African banks and increase competition between local players on the continent.
"French-owned African subsidiaries are often unable to target certain segments of the economy due to their parent bank's conservative risk appetite," it said.
BNP Paribas also follows more stringent loan classification and provisioning policies than locally owned banks.
In May 2024, Shell announced that it intends to exit shareholdings in its South African retail, transport, and refining operations.
Shell has undergone a cost-cutting exercise, during which all of its operations were reviewed to determine whether it was beneficial for the company to remain invested.
In the case of its South African operations, the company deemed them to be non-core and decided to find a way to dispose of its shareholding.
Shell currently has around 600 forecourts in South Africa, and its announced exit has resulted in interest from Middle East oil giants Adnoc and Aramco in its local assets.
South African oil producer Sasol has also announced its interest in Shell's South African business.
Shell and BP operated the Sapref refinery in Durban, which produced 180,000 barrels a day before operations were halted in 2022 ahead of an anticipated sale.
The government-run Central Energy Fund has since bought Sapref.
BPSA has disposed of its jet fuel business in South Africa and sold its stake in the Sapref Refinery.
BP gave similar reasons to Shell for selling its stake in the refinery, saying it was part of global cost-cutting efforts.
"We view this agreement as a positive outcome for BPSA, South Africa's fuel industry, and the country as a whole, said BP South Africa CEO Taelo Mojapelo.
"Sapref is an important refinery, the largest in Southern Africa, but continued ownership does not fit with BP's global strategy."
This sale followed BP's complete cessation of jet fuel operations in South Africa at the beginning of 2023.
In April 2023, the company warned, "For customers flying in South Africa, please note that we will cease all our operations in the region over the coming months."
"Air BP reviews its portfolio continuously as part of good business practice. In light of our latest review, BP decided to exit all of its aviation activities, including operating airports and being a direct supplier to airlines in South Africa."
From 1 May 2023, BP ceased aviation activities at OR Tambo and King Shaka International Airports, and Sterling cards will no longer be accepted at either of these hubs, along with East London.
Earlier this year, TotalEnergies, Europe's largest oil company, announced plans to give up its licence to drill for oil and gas off the shore of South Africa.
The French company spent at least R7.4 billion to find significant oil reserves off the cost of South Africa in 2019. Estimates put the reserves at 1 billion barrels of hydrocarbons.
It experienced further successes in 2020, finding even more reserves of lucrative fossil fuels. However, none of its discoveries have progressed to commercial operation.
TotalEnergies said it doubts whether the discoveries can be economically viable, given the relatively small demand for fossil fuels in South Africa, where the economy is failing to grow.
One of the project partners – Canadian giant CNR International – has already announced its withdrawal.
TotalEnergies said it would instead focus on reserves found on Namibia's coast, which would be cheaper to operate and export to global markets.
In 2023, AngloGold Ashanti announced an accelerated exit from South Africa, where the gold miner was founded more than a century ago.
AngloGold sold its last mine in the country in 2020, marking an exit from South Africa for a company that emerged from Ernest Oppenheimer's mining empire.
"There is a time for companies to invest in countries, and then there's a moment for strategic reasons to divest and move elsewhere," AngloGold's CEO Alberto Calderon said.
AngloGold hopes that by listing in New York, where many of its investors are already based, the company will be more easily able to tap capital.
It also sees a primary listing there as a way to narrow the discount that the company's shares trade at to larger rivals such as Barrick.
In May 2024, Rolex announced that it would be closing its office in Sandton after 76 years in South Africa,
The luxury watchmaker cited a change in "local markets and conjuncture" as a reason for closing its South African office.
Rolex said it would remain active in the region through its retail network, meaning that customers could still purchase and service watches from the company.
The company gave no further reasons for closing its office, but some speculate it is due to a decline in the luxury watch market in South Africa.
Other reasons may include general economic conditions that make running a physical office in the country too difficult and unnecessarily expensive for Rolex.
Last week, HSBC announced that it was exiting its operations in South Africa after concluding deals with FirstRand and Absa to take over its two main divisions.
The transaction includes transferring HSBC's branch's clients and banking assets and liabilities to FirstRand. As part of the agreement, HSBC's branch employees will also be transferred.
Subject to regulatory and governmental approvals, the transaction is expected to be completed in the fourth quarter of 2025.
The London-based HSBC has been operating in South Africa since 1995, meaning its three-decade journey has ended.
Once HSBC's current international wholesale banking clients have transferred to FirstRand, they will continue to be connected through HSBC channels in South Africa.
The transaction will also support HSBC's global clients who require future access to South African corporate banking products and services.
Absa has reached an agreement with HSBC to provide its global equities and securities finance clients with access to the South African market.
Absa will provide HSBC and its clients access to a full suite of equities trading and prime brokerage products in South Africa.
The agreement aligns with Absa's growth ambitions, which include serving corporate and investment banking clients with equities markets and products.
The agreement between Absa and HSBC in South Africa took effect on Wednesday, 26 September 2024.
HSBC is the latest in a string of large global companies to exit or downscale their operations in South Africa.
In May 2024, BNP Paribas South Africa officially closed its corporate and investment bank in South Africa.
BNP Paribas is the second-largest bank in Europe and has been operating in South Africa since 2012. It offered corporate and investment banking services in the country.
While the bank did not have a licence to operate as a fully-fledged bank in the traditional sense, it had significant operations in South Africa.
However, since 2022, BNP has been undergoing a process of limiting its operations in Africa to focus on its business in Asia and Europe, which are far more profitable.
"In Africa, we have adopted a targeted strategy and continue to strengthen our position where the market characteristics correspond well to our strengths," it said.
South Africa's banking regulator, the Prudential Authority, said in a statement that BNP Paribas' ability to conduct the business of a bank via branch was withdrawn on 8 March already.
S&P Global said that this could significantly boost African banks and increase competition between local players on the continent.
"French-owned African subsidiaries are often unable to target certain segments of the economy due to their parent bank's conservative risk appetite," it said.
BNP Paribas also follows more stringent loan classification and provisioning policies than locally owned banks.
In May 2024, Shell announced that it intends to exit shareholdings in its South African retail, transport, and refining operations.
Shell has undergone a cost-cutting exercise, during which all of its operations were reviewed to determine whether it was beneficial for the company to remain invested.
In the case of its South African operations, the company deemed them to be non-core and decided to find a way to dispose of its shareholding.
Shell currently has around 600 forecourts in South Africa, and its announced exit has resulted in interest from Middle East oil giants Adnoc and Aramco in its local assets.
South African oil producer Sasol has also announced its interest in Shell's South African business.
Shell and BP operated the Sapref refinery in Durban, which produced 180,000 barrels a day before operations were halted in 2022 ahead of an anticipated sale.
The government-run Central Energy Fund has since bought Sapref.
BPSA has disposed of its jet fuel business in South Africa and sold its stake in the Sapref Refinery.
BP gave similar reasons to Shell for selling its stake in the refinery, saying it was part of global cost-cutting efforts.
"We view this agreement as a positive outcome for BPSA, South Africa's fuel industry, and the country as a whole, said BP South Africa CEO Taelo Mojapelo.
"Sapref is an important refinery, the largest in Southern Africa, but continued ownership does not fit with BP's global strategy."
This sale followed BP's complete cessation of jet fuel operations in South Africa at the beginning of 2023.
In April 2023, the company warned, "For customers flying in South Africa, please note that we will cease all our operations in the region over the coming months."
"Air BP reviews its portfolio continuously as part of good business practice. In light of our latest review, BP decided to exit all of its aviation activities, including operating airports and being a direct supplier to airlines in South Africa."
From 1 May 2023, BP ceased aviation activities at OR Tambo and King Shaka International Airports, and Sterling cards will no longer be accepted at either of these hubs, along with East London.
Earlier this year, TotalEnergies, Europe's largest oil company, announced plans to give up its licence to drill for oil and gas off the shore of South Africa.
The French company spent at least R7.4 billion to find significant oil reserves off the cost of South Africa in 2019. Estimates put the reserves at 1 billion barrels of hydrocarbons.
It experienced further successes in 2020, finding even more reserves of lucrative fossil fuels. However, none of its discoveries have progressed to commercial operation.
TotalEnergies said it doubts whether the discoveries can be economically viable, given the relatively small demand for fossil fuels in South Africa, where the economy is failing to grow.
One of the project partners – Canadian giant CNR International – has already announced its withdrawal.
TotalEnergies said it would instead focus on reserves found on Namibia's coast, which would be cheaper to operate and export to global markets.
In 2023, AngloGold Ashanti announced an accelerated exit from South Africa, where the gold miner was founded more than a century ago.
AngloGold sold its last mine in the country in 2020, marking an exit from South Africa for a company that emerged from Ernest Oppenheimer's mining empire.
"There is a time for companies to invest in countries, and then there's a moment for strategic reasons to divest and move elsewhere," AngloGold's CEO Alberto Calderon said.
AngloGold hopes that by listing in New York, where many of its investors are already based, the company will be more easily able to tap capital.
It also sees a primary listing there as a way to narrow the discount that the company's shares trade at to larger rivals such as Barrick.
In May 2024, Rolex announced that it would be closing its office in Sandton after 76 years in South Africa,
The luxury watchmaker cited a change in "local markets and conjuncture" as a reason for closing its South African office.
Rolex said it would remain active in the region through its retail network, meaning that customers could still purchase and service watches from the company.
The company gave no further reasons for closing its office, but some speculate it is due to a decline in the luxury watch market in South Africa.
Other reasons may include general economic conditions that make running a physical office in the country too difficult and unnecessarily expensive for Rolex.
Source - mybroadband
