Why do business owners lose in a market where winning is guaranteed?  

The petroleum industry in southern Africa is regulated. Companies that are invested in the different part of the value chain are guaranteed a return on their investment. The regulated prices are published to provide transparency on how compensation works and to serve as a guardrail for over investment and inflated costs. Every business owner should be able to get the guaranteed return, but that is not always the case.  

There are more retail and wholesale businesses that close than open. That is why for example in South Africa, the number of retail fuel stations has remained around 4500 in the last decade. Owners give up on their businesses due to failures to manage several issues in the fuels part of the business, which contributes more than 80% of turnover. The issues range from stock shortages, equipment failures, cash flow, staff productivity, customer service and theft. The primary failure though, occurs in the control and monitoring processes that do not signal in advance before issues deepen. Problems show up when irreparable damage has occurred, often when customers have switched.

There have also been restructuring and job cuts announced by major petroleum companies, every two to three years in the last 6 years. The common reason stated is that companies want to create more focused and efficient business to better service customers. Simplistically, this could this mean that leaders in these organisations tell their people to do activities that do not add value to customers and that they discover every 2 to 3 years to be causing lack of focus and inefficiencies.

Well, most companies do not recover from these events.  Instead they are left with broken processes, lose experienced staff, key customers and wind up shrivelling. The smaller operators close shop. All the while there are opportunities in the industry and governments continue to uphold stable regulatory environments. A case in point: in South Africa, compensation to Retailers and Wholesalers in the years between 2011 and 2016 shows a compound annual growth rate of 10% and 6% respectively. These rates are higher than the average consumer price inflation and interest rates in the same period. That is opportunity!

According to the African Development Bank, Southern Africa has a growing middle-class population that owns vehicles and where most households own more than one vehicle. That is opportunity!

The National Traffic Information system of South Africa reported a live vehicle population of 11 million self-propelled vehicles in December 2017. In December 2009 that number was 8 million, indicating a growth of 3m vehicles since that period. That is opportunity!

There is a growing demand for fuels in well-regulated markets. There are also several new players that have recently established operation in the region. This another indicator of the extant opportunities.

Why do owners give up their businesses and why do some majors restructure and cut jobs every 2 to 3 years? The reasons are from internal challenges than external market forces.

Outflow Petroleum Insights assists business owners align their internal operating environment to meet the ever-changing customer needs. Often leaders go with internal assumptions about customer expectations and do not invest in finding out. Customer needs are discovered from complaints and when customer tell you why they are switching. Knowing customer needs is crucial and that is why we offer Market Research solutions that are focussed to assist with this. When you find out you acquire the intelligence to drive the improvements your staff need to make to service customers better. Moreover, those activities that consume time and resources with insignificant contribution to customers service stick out with opportunities on which are to be ditched to focus time on enhancing the speed and quality of service as well as on growing the customer base.

When you have refocussed your people, you need to measure the quantity of work done and the value of it in money. We show you how to set measures which are calculated to reflect the output of a department by all its individual members. These tools are part of our Strategic Planning services in which we help you connect the daily actions of your people to your high-level goals with measures to use to intervene at any area of your operations.

Tell us, what is the one obstacle in the way of you making money in the petroleum industry? Contact us at info@outflowpetroleum.com, let us help you open your business flows.  By Zwelakhe Mabece Managing Director, Outflow Petroleum Insights.