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Sinopec, one of China's largest state-owned companies, has undertaken to invest R6 billion in South Africa to upgrade and modernise the Cape Town-based oil refinery owned by Chevron South Africa, if it succeeds in its bid to acquire control of Chevron South Africa. 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.

Sinopec to invest further in SA following successful Chevron saleThe 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 Department of Economic Development said in a statement. “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,” the statement said.

The company currently employs around 1 200 workers directly and supports about 56 000 jobs indirectly. Sinopec made an offer to buy the company's local assets for $900 million.

Other public interest commitments made by Sinopec include its assurance that it will maintain a large presence, well above the industry average, of locally-owned and operated service stations in South Africa. It also will locate the African headquarters of the company in South Africa, and expand its operations elsewhere in the continent from the South African base.

Sinopec has also agreed to set up a development fund of $15 million to promote economic development in South Africa, particularly small businesses, black-owned companies and localisation efforts. This spending is in addition to the R6 billion capital investment commitment by Sinopec. In addition, it will increase the level of LPG (liquid petroleum gas) that is supplied to black-owned businesses and it will procure non-oil products locally wherever feasible.

According to the Department of Economic Development, one of the more innovative terms of the agreement provides for Sinopec, which has a large petrol service-station network in China, to use that retail network at service stations to support the export and sale of South African manufactured products to China.

“While the regulatory processes will need to be completed, the commitments by Sinopec show a strong appetite by global investors to long-term investment in South Africa. Together with the Old Mutual transaction approved by the Competition Tribunal, this is a welcome and timely injection of confidence in our economy,” Ebrahim Patel, Minister of Economic Development, said.

Image credit: http://www.economic.gov.za/about-us/leadership/minister

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