Big businesses calling it quits in South Africa
Several international businesses have recently exited or plan to exit South Africa, with government officials at risk of scaring off other foreign investors.
The world’s sixth-biggest bank, BNP Paribas, which has €415 billion (R8.2 trillion) in assets under management, had its license to conduct the business of a bank via a branch withdrawn from the Prudential Authority with the group scaling back from its non-core operations in Africa.
Moreover, BHP has placed two rejected bids to acquire Anglo American, but the offers require the latter to complete two separate demergers of its entire shareholding in South Africa’s Anglo American Platinum Limited (Amplats) and Kumba Iron Ore Limited.
However, it has sent top executives to South Africa to ensure that senior government officials understood that the move was not an indictment of South Africa but rather due to its own portfolio and commodity needs.
The group also said that Amplats, Kumba and itself would continue to be listed on the JSE. Another bid for Anglo-American is expected in the near future.
In addition, Shell is selling its shareholding in Shell Downstream South Africa, which includes a network of 600 petrol stations nationwide. That said, the group is still planning to operate its upstream business.
These aforementioned exits were only announced in the last few weeks, adding to the many other prominent international companies that have exited or cut back their operations in South Africa.
For instance, after selling its assets in South Africa in 2020, AngloGold Ashanti moved its corporate domicile to the UK and its primary listing from Johannesburg to New York last year.
The group, like BHP, said that the move was not an indictment of South Africa but rather the increased cost of mining gold in South Africa.
Also, in 2023, Fitbit products ceased sales in South Africa after its parent company, Google, pulled the brand back from several markets. Petroleum group BP also stopped supplying aviation fuel amid a change in global business strategy.
A year prior, Barclays completed its second-ever exit from South Africa after selling its remaining stake in Absa. Despite re-entering the South African market in 2005, Barclays made a global retreat after being hit hard by the financial crisis.
Like Shell’s planned exit, mining giant Glencore took over the assets of American energy company Chevron after it exited South Africa last decade. As per the move, Caltex is now in the process of being rebranded to Astron Energy.
In 2017, General Motors (GM), the maker of Chevrolet and GMC, announced that it was leaving South Africa due to a global restructuring and its plan to quit unprofitable markets. Isuzu ultimately bought out GM’s operations in South Africa.
Although regulatory and socio-economic challenges may have added pain to these companies, the only company that has ceased its operations in South Africa due to outright government conflicts is the Israeli EL AL Israel.
The airline suspended its twice-a-week flight between Israel and Johannesburg amid a drop in demand after South Africa took Israel to the International Court of Justice over genocide claims in the Gaza Strip, which the court said had prima facie evidence.
| Company | Year | Reason |
| BNP Paribas | 2024 | Restructuring |
| Shell Downstream | 2024 | Restructuring |
| Anglo-American (Possible) | 2024 | BHP’s commodity needs |
| EL AL Airline | 2024 | Geo-political tension/drop in demand |
| AngloGold Ashanti | 2023 | Increased costs of mining |
| Fitbit | 2023 | Google pulls products out |
| BP’s Aviation Fuel Business | 2023 | Global Business Strategy |
| Barclays | 2022 | Restructuring |
| Chevron / Caltex | 2018 | Restructuring |
| GM | 2017 | Restructuring |
Although the recent withdrawals were primarily due to the needs of these companies, Business Leadership South Africa CEO Busisiwe Mavuso said these decisions, particularly Shell’s, could have been reversed if the country had a more predictable regulatory environment and stronger economic growth.
“People vote with their feet, capital has many addresses, and if we’re not going to make it easy to invest here, it is going to land somewhere else,” said Mavuso.
Positives and negative
However, it should be noted that South Africa is still considered an attractive destination for international investors.
PwC recently said that South Africa had seen net foreign direct investment (FDI) inflows (inflows minus outflows) most years since the global financial crisis of 2008
Mavuso acknowledged the R30 billion Amazon Web Services plans to invest in South Africa over the next ten years. The broader Amazon group is also building a R4.5 billion head office in Cape Town and recently launched its online marketplace in South Africa.
However, Amazon’s move into South Africa highlights that while the services industry is growing, the mining and manufacturing industries have seen the opposite.
“This has held true for the last 20 years, reflecting global conditions and the rise of cheaper manufacturing bases, but also the impact of policy uncertainty and the collapse of important economic infrastructure, particularly electricity supply and logistics,” said Mavuso.
“Services companies are less exposed to the efficient working of ports, and many can create their own power sources given they are not particularly power intensive. There is less regulatory risk, given it is hard to threaten services companies over licenses and other bureaucratic interventions on their businesses.”
Mavuso said that to attract new companies that make long-term investments in fixed infrastructure, the country needs to create an investor-friendly environment.
She said that ministers, such as Gwede Mantashe, publically threatening investors would only add to fears.
Although some commentators have said that these international exits are fine as local or other foreign investors step in, this is not necessarily the case.
These other investors will also keep their money on the sidelines if they perceive the potential returns to be low relative to the risks.
“Foreign investors are also important in bringing international expertise to our economy, driving competition and ultimately improving the quality of service that end-consumers receive.”
“Thanks to our low domestic savings rate, there is simply too little domestic capital to be able to provide all the investment that the economy needs.”
“The fewer foreign investors that come, the poorer we are.”
Despite President Cyril Ramaphosa stating that the country is eager to attract investors, Mavuso said that sentiment needs to be met with action through structural reforms that boost the economy.
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