The great business retreat

The announcement last week by oil giant Shell that it is to divest from downstream operations in South Africa seems to have been a godsend to the political opposition, which did not waste time in attributing the decision to failure by the governing African National Congress (ANC) to foster a business-friendly environment.

While it can be argued that the ANC has not quite covered itself in glory when it comes to ensuring that businesses operate with ease, it’s contestable that Shell – which has had a presence in this country for the past 122 years – is being driven out by ANC incompetence.

Shell let it be known last year that, after 2025, its downstream business globally – retail service stations, basically – would focus on charging electric vehicles (EVs) and providing low-carbon fuels. Now, South Africa’s EV fleet is too minute to warrant Shell’s rolling out of charging stations in the country, while it looks like South Africa’s clean-fuel plan won’t be fully implemented for decades. Against this background, the British multinational’s announcement is hardly surprising.

Shell is not the only major global corporation to have pulled out of Africa, or scaled back operations on the continent, in recent times. It was not so long ago that British banking groups Standard Chartered and Barclays had a huge presence in many of Africa’s regions. However, between April 2022 and December 2023, the former exited Angola, Cameroon, the Gambia, Sierra Leone, Tanzania and Zimbabwe – along with some markets in the Middle East – while it sold its consumer banking business in Cote d’Ivoire. The move came on the back of a decision to focus on fast-rising markets.

For its part, Barclays exited the African market in 2017 and sold its remaining 7.4% shareholding in South African lender Absa in 2022.

Meanwhile, another international bank, France’s BNP Paribas, has called it quits in South Africa. BNP Paribas, which has R8.2-trillion under management globally, was granted permission to conduct business as a bank in South Africa in 2012 by means of a branch, allowing it to offer corporate and investment banking services. Its pull-out, announced in the Government Gazette about two months ago, is in line with a new strategy to scale back from noncore assets across Africa and focus on Europe and Asia instead.

Other recent high-profile corporate departures have been those of drugs companies Sanofi, GlaxoSmithKline, Bayer and Moderna. The first to do so was GlaxoSmithKline, which exited Nigeria in August 2023, with Sanofi following suit three months later. Bayer has made a similar move in Kenya, while Moderna has halted its plans to establish a vaccine factory in the East African country.

One can add to the list the already- executed or planned departures or scaling back of the Unilevers, Bolt Foods and Proctor & Gambles of this world.

In many of the cases, the reasons cited have included volatile economies, challenges with repatriating dividends and shrinking demand.

The retreat from Africa has dire consequences for the continent’s people. The departing corporations leave with their technical know-how, brand presence and corporate social investment, as well as tax revenue.

As the Clayton Christensen Institute, a US think-tank, notes, the withdrawal of big corporations from developing countries can be devastating for economies – contributing to unemployment as workers are laid off, and lowering living standards.

Another impact is a sharp increase in prices, with this having been noted already in recent times in the healthcare sector of Nigeria. According to the Clayton Christensen Institute, routine medicine costs in the West African country have risen by a staggering 300% since GlaxoSmithKline’s pull-out.

This implies that these medicines are now beyond the reach of the vast majority of Nigerians, and this could have significant implications.

Granted, there is not much that our governments can do when a company such as Shell decides to call it quits because lingering in the African downstream oil industry would not make business sense, considering its new focus on EVs and clean fuels. But it’s within their power to make access to forex or repatriate dividends as easy as possible.