Engen Petroleum

Maintaining growth at a manageable rate is hard enough, without the added complications of red tape when that growth is cross-border. Wayne Hartmann gives Andrew Pelis an insight into the strategy behind an ambitious international expansion programme.

As South African businesses thrive in the post-Apartheid era, many companies are looking at opportunities to develop the entire sub-Sahara region. There is no guarantee of success, however, and the ability to adapt to local dynamics and customer preferences is a major challenge.

For Engen Petroleum, the challenge of expansion involves international red tape, differing customer expectations, variable transportation networks and often limited IT infrastructure. Despite these considerations, Wayne Hartmann, general manager for International Business Division, has overseen a period of continued growth, as the oil company gathers momentum towards fulfilling its EPIC 2016 Vision.

“We are not involved in oil production; we purchase crude oil from other areas of Africa and the Middle East, which we refine and then market and distribute. The Durban site produces 125,000 barrels per day and employs about 1 500 people (700 of which are contractors). Engen as a group employs in the region of 4,500 staff.”

Today Hartmann oversees the company’s extensive network of service stations across 18 countries in sub-Saharan Africa and exports to many other territories, mostly in Africa and the Indian Ocean Islands. “By March 2011 we will be running in excess of 1,650 retail sites with 448 of those based in neighbouring countries,” he says. “We are very much guided by market and customer expectations and feel that our awareness of the cultural differences in each country has given us a commercial advantage—different markets have different needs and our approach reflects that.

“Since 2006 our target has been to aggressively grow the business outside of South Africa by eight to ten times and we aim to accomplish this by 2016, which is where the name ‘EPIC 2016’ comes from. We have tripled our income to date and we are on course to meet our target.”

The company has been in business for over a hundred years and was formerly owned by Mobil, until it pulled its business interests out of South Africa at the height of the Apartheid era. Engen was then taken over by local mining house Gencor and was subsequently renamed Engen and listed on the Johannesburg Stock Exchange.

“In 1996 Petronas bought 30 percent of Engen and took 100 percent ownership in 1999. A subsequent de-listing of the company occurred concurrent with the sale of 20 percent to a local empowerment company called Worldwide Africa Investment Holdings,” Hartmann explains. “For many of our non-SA businesses we have local shareholders who better understand what is happening in regards to local policy and also what local customer preferences are. This makes a huge difference and the end result is a richer outcome—I expect we will see more of this approach in the future,” he adds.

Engen has two major distribution channels, the first being its retail arm, which concentrates on service stations, offering a variety of services depending on the requirements in-country. “Since we decided to expand across the sub-Sahara region we have built 20 to 30 stations each year. They represent our brand through an initiative to train staff and franchise owners.” The strategy continues to work and the recent acquisition of seven businesses from Chevron adds to a list of previous purchases from multinational companies including Shell and Total.

The second distribution channel is the business to business sector, where Engen has forged strong relationships with a number of industries including airlines, mining and transport companies.

International trade puts extra strain on supply chain management, which is one of Hartmann’s main challenges now. “This is definitely a work in progress for us and we often encounter national regulations that determine where we have to source products from, meaning we can’t always use our Durban production. We have invested over £14 million over the past three years on supply chain infrastructure and recently opened a new depot in Zambia, which will significantly increase our capacity to support growth.

“Another challenge is ensuring that we have enough skilled people for an organisation that wants to grow rapidly. We run in-house training schemes to develop staff with technical skills and we have a targeted personal development programme, which runs alongside a graduate recruitment initiative.”

One of the key areas Engen is looking to improve on is its carbon footprint. Hartmann says this is far from straightforward, in an area where other companies can gain an advantage by operating in a less committed fashion. “We have to strike a balance and we are currently rolling out an aggressive growth programme that invests in technology and environmental measures that will stand us in good stead for the future. We are trying to reduce the amount of cooling that takes place at each station by using solar and wind power and different building materials.

“We are trying to understand the latest best practices and better manage our use of power in areas such as lighting. All of this costs money of course and not every competitor considers their environmental impact in this manner, which keeps their costs down and is sometimes used against us competitively.”

Hartmann has been with Engen for 25 years and was formerly in charge of the Durban refinery. He is positive about what happens next. “The next twelve months will see the transition period for the Chevron businesses we have acquired. We must integrate these sites into our existing operation and ensure the people are motivated to succeed. We will look to make more acquisitions in the future and Kenya, Uganda and Ghana are areas to focus on.

“Change must be managed well; we must understand where the customers are and what their needs are—that is where our continued growth will stem from,”he concludes.  www.engen.co.za