The Economic Intervention Forum of South Africa (Eifsa) has described as a “sad day” the conclusion of the sale of South Africa’s largest fuel station chain, Engen, to Dutch energy giant Vitol Emerald Bidco’s subsidiary, Vico Energy.
Engen and Vivo Energy announced the completion of the transaction to combine their respective businesses, with Malaysian State energy company Petronas selling its 74% shareholding in Engen to Vivo Energy, creating a pan-African energy champion.
In a statement released yesterday, the partners said the combined Vivo Energy Group now had over 3 900 service stations, and more than two billion litres of storage capacity across 28 African markets.
Mthunzi Luthuli, chairman of Eifsa said they noted the announcement of the Engen-Vivo Energy transaction with sadness.
Eifsa had last year lodged a formal complaint with the Competition Commission, saying it was concerned by the Commission’s “failure” to stop or improve this transaction.
“For us, this is a sad day for South Africa. Engen is a South African company, with South African assets, South African customers (the majority of whom are black), and South African revenues,” Luthuli said.
“The disposal of the Petronas stake in Engen presented a perfect opportunity to increase black shareholding in Engen and achieve real transformation of the petroleum sector and the South African business landscape.”
Luthuli said the government failed to insist on this, despite numerous calls to do so from many black organisations, and despite its own stated policies.
“To us, it is obvious that this government pays lip service to its pro-black policies. Under this administration, Black Economic Empowerment has come to a screeching halt. No BEE deals are being done or concluded,” he said.
“We hope that things will be different with the Shell transaction, and with other black empowerment initiatives in general. There is a lot of discontent in the country with the continued exclusion of black people from the mainstream economy. This poses serious political risks and possibilities of socio-economic instability. Things have to change. We cannot continue like this.”
In a joint statement, Vivo Energy CEO Stan Mittelman, and Engen managing director and CEO, Seelan Naidoo, said they would now work together to take the ‘best of both’ from Engen and Vivo Energy, positioning the combined organisation well for growth and success in the years to come.
The enlarged Vivo Energy will only make changes that add value, keeping a ‘business as usual’ approach for customers, partners, suppliers, and employees.
The Phembani Group, Engen’s long-standing B-BBEE shareholder, will continue its strategic association with Engen and will remain invested as a 21% shareholder in the South African business.
A new 5% employee share ownership programme is being created, resulting in Engen South Africa being 26% owned by historically disadvantaged persons.
The Competition Commission’s spokesperson Siyabulela Makunga said they noted progress made by parties in finalising the transaction, having concluded the matter on their side.
“This follows a decision of the Competition Tribunal handed down on 25 April, essentially approving the transaction subject to both competition and public interest conditions.”
The conditions the Tribunal imposed in relation to procurement from Sasol and Astron Energy to address the customer foreclosure concern and the effect of the merger on the South African petrochemical industry.
Engen will enter into a supply contract with Astron Energy in terms of which Engen will procure from Astron certain products produced by Astron Energy's Cape Town refinery on the terms and conditions set out in the conditions.
Rod Crompton, visiting adjunct professor at the African Energy Leadership Centre of the Wits Business School, said it has been rumoured that Petronas has being trying to sell off its interest in Engen for many years.
Crompton said though Vitol was just replacing Petronas in a relatively straightforward transaction, the months and effort expected of a foreign investor like Vitol to close the deal were a real disincentive to foreign investment.
“Engen’s competitors (Sasol and Astron Energy) have also exploited the processes created by the Competition Act. The upshot is that Sasol and Astron have advanced their interests by obtaining concessions from Engen, that leaves them much better off than before Vitol replaced Petronas,” Crompton said.
“Conversely, Engen is now worse off compared to those competitors – presumably less of a prize than Vitol originally envisaged. Organised labour have also scored concessions out of the process that they would have been unlikely to achieve without the Vitol transaction. Why should a change in a shareholder leave a company worse off than before? And that includes the company’s BEE shareholders.”
BUSINESS REPORT