Sustaining African growth during downturn Engen speaks at Petro.t.ex

Fri day, 29 May2009

Exciting and challenging times lie ahead for Engen Petroleum, the African energy multinational, as it seeks to sustain aggressive profitable growth in sub-Saharan Africa while combating worldwide economic fallout.

How it will achieve this feat is to be the subject of a keynote address that will be delivered by Wayne Hartmann, Engens GM of International Business, at Petro.t.ex 2009. Engen is a Gold Sponsor at the oil industry exhibition and conference, to be held in Midrand, South Africa, on 09 - 11 June.

African riches

Allowing a sneak peek at the broad strokes of his presentation, Hartmann begins by explaining Engens EPIC 2016 vision for growth, originally crafted in 2006. EPIC positions Africa as central to the companys growth plans.

While other oil companies are pulling out of Africa in favour of more immediately profitable regions, such as the Far East, we see it as a long-term opportunity with massive growth potential, he reveals.

In 2006 Engen already had a handful of interests on the continent, particularly in southern Africa, but in the last two years it experienced an all-out growth spurt in all regions below the Sahara. During that period it acquired operations in the Democratic Republic of Congo, Gabon, Guinea-Bissau, Rwanda and Burundi with more on the way. A new operation started up in Nigeria, and an acquisition is being finalised in Zimbabwe.

Today the company has affiliates in 17 countries including its domestic market. Almost all were the result of acquisitions, except in its traditional stronghold of southern Africa (SA, Namibia and Botswana).

The systemic strain of growth

Getting to this point of relative strength has placed severe pressure on organisational resources, Hartmann says. Consider that were managing growth of many companies at once whilst also embarking on more acquisitions.

For that reason, he says, Engens skills requirement in Africa is very different from that of its South African business, which has reached a level of maturity and aims all activities and resources at maintaining its leading 27% market share. You need very different technical skills to grow a business, he notes.

Undaunted ambition

These are not the only challenges. In many countries Engen is starting off on a low base generating insufficient funds to infuse the world-class standards and processes that will make it competitive. It also faces challenges of managing transition amid highly dynamic conditions brought on by ownership change.

Meanwhile, a worldwide recession has beaten the stuffing out of many companies the world over, and left commodity-dependent Africa particularly vulnerable.

But notwithstanding the many difficulties of maintaining growth and profits in these circumstances, Hartmann reveals unchanged ambitions. By 2016, the company still wants one third of profits to come from Africa. Africa is the future for Engen, he says.

Winning tactics

So what is the company doing to protect and grow its investment?

• Acquisitions are always a good tactic, where reasonable (sustainable) opportunities exist, Hartmann says.
• The companys Western African interests will be boosted when Engen Nigeria gets off the ground.
• While Engen is stronger in the East, its presence in Kenya, another huge market, is small, and must be augmented with further acquisitions or organic growth.
• Organic growth requires substantial investment too. It involves bringing new service stations on stream, re-imaging ones acquired from other networks and putting in new infrastructure to comply with regulations as well as health, safety and environment (HSE) standards. Last year the company added 30 new retail service stations on the continent.
• Growing, recruiting and retaining technical skills to grow the business

Is Engen winning?

Hartmann says Engens values are transplanting well in African soil. Trust has been gained in all cases. Our high HSE standards are a boon, but have revealed much room for improvement in specific countries, which will improve performance.

He says getting to know the rules of the game in each country, such as procurement processes, regulations and pricing, has been a problem in some cases. But diligent stakeholder engagement helps to resolve that.

As regards uncertain economic climes, Hartmann says it is inevitable that turnover will drop off to some degree.

In the final analysis it is quite simple. We will simply have to step up our focus on growing organically and acquisitively.

For further information, please contact Tania Landsberg at Tel: +27 21 403 5258 or tania.landsberg@engenoil.com.