A legal showdown is looming over the sale of Shell's downstream business in South Africa. At the heart of the battle is a decision by Swiss energy firm Gunvor to dump Afrifund Investments, led by businessman Sipho Maseko, as its local BEE partner.
Maseko and his investment vehicle are said to be considering legal action after the company was dumped at the last minute in favour of Matasis Investment Holdings, a Johannesburg-based company fronted by former Northern Cape premier Manne Dipico. This has led to accusations that they were sacrificed in favour of a company led by someone with close political ties.
A year ago, Shell announced its decision to divest from the downstream business, which includes a network of 600 service stations across the country. The company said at the time it wanted to reduce its downstream exposure globally to focus on its upstream business, exploration and the extraction of crude oil, natural gas and natural gas liquids. It is believed Shell has placed a $1bn (about R18bn) price tag on the assets.
Gunvor, which has investments in refineries, pipelines, storage and terminals, is understood to be the front-runner to acquire the service stations and forecourts.
The company, led by Swedish billionaire Torbjörn Törnqvist, has significant investments in power generation in Spain, retail fuel distribution in Pakistan, upstream natural gas production in the US and solar development in Italy. In the 2024 financial year, it posted a net income of $729m and revenues of $136bn.
Shell's downstream business had attracted interest from other energy majors, including Saudi Arabia's Aramco, Abu Dhabi National Oil Company and commodities trader Trafigura.
South Africa's Central Energy Fund — which controls PetroSA — had also shown interest, as well as petrochemical giant Sasol. However, it is understood that transaction advisers Rothschild & Co have recommended Gunvor to Shell's board.
Those with knowledge of the behind-the-scenes negotiations said Afrifund and Maseko were stunned when Gunvor decided to terminate their partnership on the eve of the announcement.
The pair entered into an exclusive memorandum of understanding late last year after Gunvor's bid was submitted, and indications were strongly pointing to a Gunvor/Afrifund consortium winning the race for the Shell assets, before the Swiss firm dumped Afrifund at the last minute.
A source close to the bidding process accused Gunvor of having used Afrifund to get shortlisted only to terminate the relationship once they had crossed the crucial hurdle, claiming noncompliance by one of the partners in Afrifund without providing details of the alleged noncompliance.
Gunvor could not provide reasons to enable Afrifund to test them in a proper arbitration or legal process. It raised a concern about a compliance issue with one of Afrifund’s members, but the details with regard to that were never made available to either that specific individual or to other consortium members.
— Source
“Gunvor has been acting in bad faith because they knew that they wouldn't take Afrifund to the final round. They used Afrifund. They presented the BEE partner's credentials to the ministry of trade & industry, and there was a strong indication that the Gunvor/Afrifund consortium would be the successful bidder. But after that, they then wrote to Afrifund to terminate the partnership. They have chosen a political partner with close ties to senior political figures,” the insider said.
“Gunvor could not provide reasons to enable Afrifund to test them in a proper arbitration or legal process. It raised a concern about a compliance issue with one of Afrifund’s members, but the details with regard to that were never made available to either that specific individual or to other consortium members,” the source added.
According to the source, this might create a big risk for Shell and Rothschild because there was a high probability that the process could be interdicted.
Business Times understands that Gunvor proposed an $8m settlement to Afrifund to walk away, but the Swiss firm apparently made a U-turn on the financial offer.
Shell spokesperson Pam Ntaka told Business Times the company “does not comment on operational matters”. A spokesperson for Gunvor declined to comment when contacted on Friday, saying the company “had nothing to say” on the matter. Maseko also refused to comment. Martin Kingston, executive chair of Rothschild, said they did not comment on live transactions. Dipico did not respond to repeated requests for comment.
Matasis was founded in 2006 and has shares in a number of companies, including a 35% stake in professional services group Worley South Africa. It also structures deals and raises funds for transactions.
An insider close to Afrifund said the investment vehicle does not want to stand in the way of Gunvor since it chose to terminate the partnership, but was adamant that the process “has to be done properly and in good faith”.
Business Times has learnt that Shell and Rothschild have requested a formal notice of the termination of the agreement between Gunvor and Afrifund. However, the parties are not now in any discussion.
“Rothschild needs to make sure the process is conducted with integrity and transparency because they run the risk of having the entire disposal process interdicted and may have to start again,” the insider said.
Shell, which has been in South Africa for more than 120 years, formed Shell Downstream SA (SDSA) with Thebe Investments after merging the Shell South Africa Marketing and Shell South Refining businesses.
Shell has previously said that during the divestment process it would work to preserve SDSA's operating capabilities and maintain its brand presence.
One of those assets was Sapref, which it owned with another oil major, BP. Shell and BP have since sold their shares in assets located at the Sapref Refinery Precinct to the Central Energy Fund. This includes other associated assets such as process units, pipelines to and from Sapref to the Island View terminal, and the Single Buoy Mooring for crude imports.
Last year, Reuters reported that BP and Shell would pay about $15m to the Central Energy Fund for operational costs at the Sapref refinery, quoting from a letter from the energy ministry to the finance ministry.
Last year, the Sunday Times reported that Shell and Thebe’s relationship had soured.
It is understood that the 23-year relationship — regarded as one of the most successful and transformative broad-based BEE associations in the country — hit rock bottom after a proposal by Thebe in August 2022 to exercise a put option and sell its 28% stake in SDSA.
The report said Thebe had disputed claims that this was the reason for Shell’s exit from the downstream business.
“This is incorrect,” it told the paper. “Shell’s relationship with Thebe is not the reason for Shell exiting South Africa. Thebe Investments has recently been informed formally by Shell of their intention to exit the downstream business.”
Still, the company confirmed there was a dispute between it and Shell, which it has referred for arbitration. When the partnership was signed in 2002, Thebe invested about $70m. It said that after reviews of its investment strategies and its portfolio landscape to meet long-term goals, its board had decided to “exit its investment with SDSA”.
Additional reporting by Khulekani Magubane
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