By Ridwan Gany, CFO at Petrocam
Africa should be treated as the unique content that it is to realise its full potential. This is not to say that multinationals currently operating on the African continent are not adding value, rather it means that far more Africans could benefit if multinationals adapt to the specific context of the continent.
Cost and quality matter in the oil and lubricant sectors worldwide, and even more so in Africa – this is true from Alberton to Abuja. It is all good and well-bringing quality to the continent, but high pricing in the African context excludes the majority except the well-to-do businesses and elite role players. Consequently, most market participants are forced to use an inferior product.
As a business, we are moving trucks throughout various countries on the continent at any given point, interacting with local businesses and various supply chains, and we have observed that Africa is modernising at a noticeable pace.
In the oil sector, Africa has traditionally used older vehicles that utilised certain mineral oil products, but an increase in the standard of living across borders has led to the introduction of a modernised commercial fleet and private vehicle market. This has necessitated bringing in modern, high-spec oils to the continent, but with the proviso that these still be affordable. Despite the increase in economic activity, on a like-for-like basis, the buying power on the continent broadly does not match that of developed markets.
That’s the key. Africa deserves quality at a more palatable price point, and this is achieved by streamlining operations, and carefully managing supply chains. This, in turn, stimulates business activity in various countries on the continent. All these components – from a quality, to price, to active downstream business opportunities – build trust in a brand.
So, what does a multinational need to do then, to switch the script and adapt to Africa as opposed to Africa needing to adapt to a model of business that originates in developed markets?
It sources the best base oil at a cost that doesn’t pass the unnecessary financial burden onto Africans. Then, when it comes to additives, it travels to the countries with best practices and negotiates deals that suit the African market. It then invests in a manufacturing process that does not compromise on quality but is designed to pass the cost savings to the end-consumer. It hires and outsources various aspects of the business to Africans.
It is our view that any oil company that wishes to adjust the status quo in favour of the people of this continent needs to demonstrate three things – it must understand the African context, it must be generating business on the continent and it must have a proven track record which speaks to credibility.
Petrocam’s story in Nigeria is perhaps a testament to this philosophy. Entering a market dominated by truly colossal giants is not easy. Many have tried and many have failed. However, with a client-centric approach focused on quality, reliability, and price sensitivity, Petrocam has been a steady supplier of refined products in Nigeria. Today, with solar-powered filling stations around the country, Petrocam and its lubricants have been accepted as an African brand.
Africa’s time is now. Sure, the pandemic and other geopolitical events have added challenges, but there is no denying the potential of this continent by the mere fact that 60% of this continent is under 25 years old. Businesses that build their models in favour of this demographic today will enjoy a mutually beneficial relationship for many years to come.
What does any of this have to do with South Africa, the most developed market on the continent? South Africans deserve to be treated in the same way. While there are glossy buildings and pockets of immense wealth, there are also large swathes of the population that are excluded from quality and durability on price point alone. Beyond that, why should the wealthier pay more just because they can?
This is the pain point that Petrocam hopes to fill with its African experience: provide quality at a far more inclusive price. By doing this, South Africans, like their African counterparts don’t have to settle for inferior quality because of cost.