Cape Town - South Africa is the latest casualty of the trend by global chemical companies to relocate operations closer to raw material sources in the Middle East and to the growing economies of China and India.
US multinational Dow Chemical announced the sale of plastics producer Safripol yesterday, and said its strategic objectives in the Middle East and China were behind the decision.
A consortium backed by Absa Capital bought Safripol, which manufactures high-density polyethylene and polypropylene, for an undisclosed sum.
Ross McLean, Dow's regional manager for sub-Saharan Africa, said the company was developing a shift towards the Middle East to secure access to reliable feedstock. The region was also closer to the high-growth economies of India and China.
Dow acquired Safripol a decade ago through its acquisition of Sentrachem in 1997. Two years later, Dow took full control of Safripol when it bought Hoechst South Africa's interest in the company.
Asked whether the sale represented a reversal of the company's plans in South Africa, McLean said: "It's more of an evolution. It's important to see it in a global context. The world has changed since 1997."
Faced with issues of access to energy and feedstocks, Dow had to look for opportunities to secure feedstock supply and energy security, McLean said.
He declined to say whether Dow intended to sell other South African businesses in its portfolio, which include Dow Agrosciences, but emphasised that the company would continue to evaluate businesses and assess whether they fitted its strategy.
A key factor behind Dow's decision to sell Safripol is the fact that the business is not integrated back into oil.
Safripol purchases ethylene from synthetic fuel producer Sasol, whereas chemical companies in the Middle East could easily have access to a handful of different suppliers.
An analyst who declined to be named said it was not surprising that Dow wished to relocate given South Africa's plans to introduce a windfall tax on the profits of synthetic fuel producers such as Sasol.
"It's just not an investor-friendly environment. We know that Dow is going to the Middle East. But the fact they don't want to be here is bad," the analyst said.
The new owners of Safripol said the investment would enable technical, product mix and capacity enhancements.
A black economic empowerment shareholder would be introduced to Safripol in the near future.
Bloomberg reported that shares in Dow rose 6.2 percent, the most in four years, yesterday on speculation that private equity firms might bid a record $54 billion (R378 billion), or $60 a share, for the company. Dow stock rose $2.70 to $46.15 in early trading on the New York Stock Exchange.