REFINED TASTES

Zambia 2017 | ENERGY | VIP INTERVIEW

TBY talks to Olufemi Babajide, Managing Director of Total Zambia, on safety measures, the country's growth potential, and increasing access to electricity and clean cooking solutions.

How do you assess Total Zambia's performance over the past year?

Total Zambia performed reasonably across several areas in 2016. The first is safety. Fortunately, we did not record any fatalities within the scope of our business in Zambia in 2016, and we can be proud of that result as our trucks covered over 20 million kilometers by road, and this was achieved through tight links with Zambian registered transporters, the implementation of an adequate safety management system, and regular interactions. This approach ensured security for goods and human beings, reduced the number of on road accidents, reduced negative environmental impacts, and guaranteed the quality of products sold to our final customer. Safety for us is not just an utmost priority, but rather a value within our group, and as such 10% of our staff strength is dedicated to health, safety, environment, and quality. We are also an active member of the Global Road Safety Program (GRSP) Zambia, which aims to improve road safety among Zambia's growing youth population, through a road map endorsed by the government for partnership with “Cherise Children's Road Safety Park." The second is business. Economic factors meant the year on the whole was tough. The Zambian economy faced a lot of challenges. These included low commodity prices for products such as copper, electricity deficits, high inflation for most part of the year, a deteriorated external sector, and the government's challenge to fully finance its commitments. Hence GDP growth was 3% against a target of 5%. With a long history and deep roots in the country, and the requisite expertise and personnel, Total Zambia was able to navigate this challenging environment, remaining the market leader in the oil marketing sector and strengthening its leadership position in the market by growing from 23% in 2015 to 24.2% in 2016. This was achieved thanks to our strong investment and aggressive growth strategy in Zambia's downstream market, which led to us to record steady growth in the retail sector. Unlike its international oil major peers (IOCs), Total Group is present with consolidated downstream affiliates in all SADC Countries and is a shareholder of Natref Petroleum Refiners of South Africa (Pty) Limited ('Natref'). This refinery was commissioned in 1971, and is the only inland crude oil refinery located in Sasolburg, Free State Province, in South Africa.

In addition to retail, which other sectors represent key areas of growth for Total's business in Zambia?

After retail, the two key sectors are agriculture and transport. Developments in agriculture tie in with the government's targeted strategic approach in the next five years to diversify the economy. What is more, because of Zambia's location at the heart of SADC and COMESA, transport needs to be boosted in order to successfully link the country up with its neighbors. The government's plans see Zambia become a hub for the sub-region, with all products, goods, and services in transit to neighboring countries passing through here. The government confirmed their emphasis will be on the construction of roads that support economic growth and foster regional trade as well as feeder roads and bridges to ensure connectivity for the farming communities to markets. In line with this, Total has plans to harness the opportunities in this sector with tailor made offers such as our Integrated Services Approach which removes the burden of fuel management off the client, thus the client can focus on her core business and is guaranteed high safety level on site, high quality of products, availability of products through reliable supply chains, and value added services which brings improved cost management and savings. We have also introduced the Total Card, a rechargeable, electronic card for purchase of fuel and goods in Total stations, perfect for fleet management, as it reduces the incidence of fraud associated with buying fuel, and improves the safety of personnel by removing risks associated with carrying cash.

Do you see also the aviation sector picking up in the next year?

With the government's determination to boost tourism in Zambia by implementing the Tourism Development Fund, which will support tourism products development, tourism infrastructure and tourism marketing, this should reverse the trend noticed in the last couple of years that led to major international carriers like British Airways and KLM aborting this route. Also with the planned reforms in the petroleum downstream sector, I expect a collaborative review of the supply and distribution scheme of aviation fuel with the stakeholders to address any weak points and offer solutions to strengthen supply of aviation fuel to all airports within the country at competitive prices. Lastly the Ministry of Transport continues to discuss developments at KKIA International Airport, and there are plans underway for infrastructural projects in Ndola and in Kafue. In 2018, these benefits should trickle down into the system and we should see the aviation market doubling.

What makes Zambia an important region for Total's overall operations?

Zambia is an integral part of Total's history in Africa. We have had a presence here for 67 years now and we operated Indeni refinery which is the only refinery in Zambia between 2002 and 2009, a government-owned holding in which we had a 50% share. From a business point of view, we also see Zambia as one of the countries in Africa that will experience exponential growth. Under its present administration, Zambia can realize its economic potential in the coming years. As a fast growing company mobilized around a deep transformation journey, we have been preparing for this: we recently commissioned a world class invariants compliant fuel depot in Lusaka, investing USD7 million in total in the project. Furthermore, our conviction that real growth will come from rural areas has led us, in the last three years, to spend over USD30 million purchasing and reconstructing sites in these outlying areas that lack fueling stations. As of today, we have about 52 active sites across the whole country. However, we are not stopping there, and in 2017 we have plans to invest USD12 million in constructing and buying new stations in rural and urban areas. We continue to develop expertise and build up the capacities of the communities where we operate, with initiatives such as the Total Young Dealer Scheme, the Total Young Graduate Program, and the Total Start Upper Challenge for Young Entrepreneurs. We are also an active member of the Business-Linkages program, organized by PEP-Zambia and aimed at reinforcing links between SMEs and larger companies.

How have petrol subsidies had an impact on your business in general?

We noticed a sharp drop of about 15% in volume at our retail outlets when subsidies were lifted in October and prices increased. However, I am confident that the government will soon put palliative measures in place to protect the purchasing power of Zambian citizens, and, therefore, this lower demand should not affect us in the long term. Lifting the subsidies will also allow the government to invest its budget more wisely. This is further supported by the government announcing its planned exit from the market and also change in pump price policy, prices shall now be revised upwards or downwards every 60 days. Factors to be considered will be exchange rate and oil price on the international market.

What plans does Total have for 2017 to diversify into other markets?

We plan to strengthen our footprints in renewable energy. Our vision is to ensure access to affordable, reliable, sustainable, and modern energy for all, especially for the low income population as we know that there are 1.1 billion people in the world without access to electricity, and 2.9 billion people without access to clean cooking solution. We shall continue to foster partnerships with big players in other sectors like Lafarge. The Awango Lafarge dual branded partnership in Zambia allowed the Cement Company to install mobile shops in our service stations. Since Total and Lafarge are both market leaders in their respective industries, we saw an opportunity to grow sales of solar lamps and cement distribution points across both networks. Most of our service stations will be 100% solar-powered within five years. This is part of Total Group's initiative to solarize 5,000 Total service stations in the world by 2021. We also have our sights on the second round of the Scaling Solar project, hoping to work with the government to come up with renewable energy through solar at the right rate. Finally, Total Zambia is in partnership with Emerging Cooking Solutions, a company committed to replacing charcoal for cooking with waste biomass pellets powered by healthy and high-performing stoves, thereby providing a more environmentally friendly solution which in the long run is also mere economical.