An alliance of energy transformation organisations has belatedly raised objections against the merger of South Africa’s largest fuel station chain, Engen and JSE-listed Vivo Energy.
In February, Malaysian State energy company Petronas sold its majority 74% stake in Engen to Vivo, which is owned by Dutch energy giant Vitol, for an undisclosed sum.
The acquisition was in a bid to combine Engen and Vivo’s respective African businesses to create one of Africa’s largest energy distribution companies.
The Competition Commission approved the deal on February, 9, 2023 after years in the making.
Engen's second-largest shareholder Phembani Group has remained invested as a 21% shareholder in the South African business.
However, the Economic Intervention Forum of South Africa (Eifsa) has lodged a formal complaint with the Competition Commission, saying it was concerned by the Commission’s “failure” to stop or improve this transaction.
In the complaint filed on Monday, Eifsa said the transaction was done in such a manner that it did not open up opportunities for the benefit of South Africans at large, by allegedly deliberately not inviting other key interested groups, including groups that are part of its alliance.
Speaking to Business Report yesterday, Eifsa CEO Mthunzi Luthuli said Vivo’s acquisition of Engen flew in the face of South African economic transformation agenda.
Luthuli said even though they did not know the exact figure of how much Vivo's shareholding in Engen was valued, they had done an estimated evaluation and they were willing to buy it on a project finance basis.
Eifsa’s associate partners include the South African Energy Forum (Saef), Voice-It-In-Action, African Radical Economic Transformation Alliance (Areta), the National African Energy Wholesalers Association of South Africa (Naewasa) and others.
"Firstly, black people need to get into this industry, and secondly, these are South African assets and the consumers are South Africans. So why are we giving these assets away? The money is going to leave this country when you have organisations who are willing to purchase these assets and have expertise to run them,” Luthuli said.
“Imagine if all Engen assets are branded PetroSA, imagine the psychological boost. Our problem as South Africans is that we don’t build anything as black society. For instance, all the refineries were inherited from apartheid government. This is one of the things that Eifsa wants to address.”
Engen has around 1 300 service stations across seven African countries.
Vivo is a major pan-African retailer and distributor of fuels and lubricants to retail and commercial customers, with more than 2 600 service stations across 23 African countries, using the Engen and Shell brands.
The combined group after the merger will have more than 3 900 service stations and more than 2 billion litres of storage capacity across 27 African countries.
Competition Commission spokesperson Siyabulela Makunga said though he had not seen EIFSA’s complaint, it appeared that the organisation was supposed to raise objections during public hearings.
Makunga also indicated that since the translation had already been approved, Eifsa might have to raise their concerns with the Competition Tribunal now.
Engen communications manager Gavin Smith could not immediately comment on Eifsa’s objections since he was not aware of them and was on leave.
Meanwhile, Eifsa’s chairperson Hlathi Madela said a few interested parties they consulted with mentioned that they were simply not invited to be part of bidders even though they had expressed interest in this transaction way before Vivo expressed theirs.
“The process of acquiring Engen did not start with Vivo. We intended to go into partnership with PetroSA where we would raise funding for the deal, taking into account the public-private partnership (PPP), even if PetroSA did not have money,” Madela said.
“A PetroSA-Engen Oil deal would be a landmark PPP transaction, and the most appropriate vehicle to open up opportunities for South Africans at large. The country is in the process of evaluating biofuels but this deal going to Vivo is going to deprive us of that opportunity.”
BUSINESS REPORT