Chinese multinational, Sinopec will invest R6 billion in SA as part of a deal to take over Chevron South Africa, according to government authorities.
The agreement between Sinopec and the SA government has been hailed as a bold transaction which is now subject to final regulatory consideration and resolution of a Right of First Refusal by minority shareholders.
Sinopec is one of China’s largest state-owned companies.
The investment seeks to modernise the Cape Town-based oil refinery owned by Chevron South Africa and to use South Africa as its base to expand its African refining and downstream businesses.
Ebrahim Patel, Minister of Economic Development said Chevron’s South African assets include an oil-refinery in Cape Town with a name-plate capacity of 100 000 barrels a day, a lubricants blending plant in Durban, storage tanks and distribution facilities as well as about 850 fuel service stations trading under the Caltex brand.
“The company employs about 1 200 workers directly and it reports that it supports about 56 000 jobs indirectly. Sinopec made an offer to buy the company’s local assets for US $900 million.”
“The commitment by Sinopec to invest in the refinery capacity will enhance and increase effective output of locally-refined oil products and improve health and safety standards in the refinery operation.”
“The agreement also provides for Sinopec to increase the level of BEE ownership in the local company from 25% to 29%, which will include an employee ownership component. The Chinese investor committed to ensure that no jobs are lost as a result of the merger and that the company will retain at least its current aggregate level of employment for a five-year period,” explained Patel.
Patel further explained that one of the more innovative terms of the agreement provides for Sinopec to use that retail network at service stations to support the export and sale of South African manufactured products to China.
He added that the terms of the Agreement with the Economic Development Department addresses the public interest conditions that will be proposed to the Competition Tribunal for inclusion in any regulatory approval of the proposed transaction.
“Government will not choose to whom Chevron sells control of Chevron South Africa, but we will ensure that proper public interest conditions, in line with the Competition Act, should apply to whoever is the successful bidder.”
“Job creation and improved investment in South Africa are critical as are deeper and bolder economic inclusion measures. We look to the oil industry as a whole to do more on all these metrics. We will also engage with the current minority shareholders to secure similar undertakings on jobs, investment, procurement and empowerment.”
“While the regulatory processes will need to be completed, the commitments by Sinopec shows a strong appetite by global investors to long-term investment in South Africa. Together with the Old Mutual transaction approved yesterday by the Competition Tribunal, this is a welcome and timely injection of confidence in our economy,” said Patel.