Africa’s Lubes market: Opportunities and Challenges

Lubezine Magazine interviewed Steve Munguti, the Regional Head of Specialties -Lubes &LPG at Lake Oil Group and he shares insights into the African market. Mr. Munguti talks about the similarities and differences in the lubricants market in different countries, he also highlights what removing trade barriers between African countries would mean for the lubricants business, among other things.

FOR LUBRICANTS PROFESSIONALS

1 Would you tell us about yourself and your 1 journey in the Lubes Industry?

My journey in the petroleum industry started in 2001 when I was recruited as a lab supervisor at SGS (K) Ltd, and I worked at their petroleum laboratory in Mombasa for two years. Thereafter I was employed by Kenya Shell Limited in the same capacity and after a while I became the Chief Chemist of the company in 2004. As a Chemist, I managed the Quality Control aspect of the lubes blending plant. It is in this role that I interacted with the lubes technical sales team. I eventually started fitting in their customer training program in Mombasa. During this period, the then Lubes Sales and Marketing Manager spotted my customer engagement talent and requested me to join his team. In 2007, I joined the sales team as a Field Based Account Manager for Nairobi, Central and Coastal regions in charge of transport, power, and construction segments. In this role I was again able to showcase my prowess in customer recruitment and retention. In 2011, I was added the role of General Manager Shell Tanzania Limited. This started my journey as a Regional Manager. When Shell Brand was acquired by Vivo Energy in 2012, I was formally given the role of Regional Business Development Manager (BDM) for East and Southern Africa reporting to the Vice President of lubes. I was covering 6 markets; Kenya, Ethiopia, Tanzania, Zambia, Zimbabwe and Rwanda. In 2016, I was made the acting Managing Director for Vivo Energy Mozambique as well. I separated with Vivo Energy in 2018 and joined Oryx Energies as a Regional Lubricants Sales Manager in charge of all lubricants sales activities in Anglophone countries including Kenya, Uganda, Tanzania, Rwanda, DRC, and Zambia. All country sales managers were reporting to me. Currently Iam with Lake Oil Ltd working as the Regional Specilties Manager in charge of both Liquefied Petroleum Gas (LPG) and the Lubes business in the region.

2 As the Regional Head of Specialties -Lubes & LPG at Lake Oil, what does your work entail?

The role of a Regional Specialties Manager entails managing two Lines of Businesses (LoB), namely LPG as well as Lubes. In the LPG LoB, I oversee both sales and operational aspects of the business including stocks acquisition, inventory management, bulk sales, retail business management while ensuring a robust Health, Safety, Security &Environment (HSSE) culture is adhered to. I run two LPG depots in Tanzania and eight filling plants across Tanzania. Similarly, in lubes LoB, I am responsible for sourcing all components, blending, quality control (QC), sales and distribution of packed products as well as providing hospitality service to other blenders.

3 You have immense experience in the East and part of Southern Africa lubricants market, what are some of the similarities and differences?

Primarily, the similarity in all these markets is the “Africanicity” of the people. I have been welcomed in all of them. Africans are social and welcoming by nature and this made it easy to mingle and interact with not only customers but stakeholders at large. The other similarity was the setup of these markets, especially the indirect channel. There is always a high street in all these countries and as a lubes guy, this always pumped adrenaline in my system once I identified and visited a new one. Meeting the mechanics, sharing ideas, and trying to make a sale. Clear differences were language barriers and cultures that I had to understand and assimilate to infiltrate the buyers/influencers. The need to understand the different currencies and how they relate to the dollar and sometimes home currency. There was also the issue of different motor vehicle technologies in different markets depending on local rules of second-hand car importation. In other countries one would find an Original Equipment Manufacturer (OEM) that is absent in other markets e.g., in the Southern countries, Freightliner is a very visible OEM on the road unlike East Africa where you will find Scania and Chinese brand. This meant different sales pitch depending on some of these variations. In other words, versatility is important to this role.

4 In these regions that you have worked in, what is your most memorable and impactful professional experience?

Understanding how the regional blocks work and how to make them work to the advantage of your business and being able to engage stakeholders at any level on any issue related to lubricants business in terms of market dynamics is something that I cherish. Interacting with professionals from diverse backgrounds provided opportunities to look at challenges from different angles and get multifaceted solutions. It also provided a chance to implement best practices across different markets.

5 Having worked in East and Southern African region, how would removing trade barriers between countries improve trade and more so in the lubricants industry?

Trade barriers are a necessary tool to protect investors in individual countries. However, once several countries enter into a pact to form a regional block, in the charter, the block is defined as a single market, which in my interpretation means that goods from member states should enjoy the same treatment in the entire region. However, this has not been the case, at least for the regional blocs that I have worked in. Therefore, removing trade barriers would level the playing field and benefit the citizenry of all member states. I recall that I had to lobby for a certain member state to start reciprocating preferential treatment of our lubes from Kenya because lubes from this member state was being exempted when imported to Kenya. Similarly, I had to find ways of ensuring that I was not charged. It is important that the member states respect these regional charters because they are designed to benefit the locals.

To foster better trade between African countries, removing trade barriers through forming regional blocs which are then defined as a single market is crucial. This would level the playing field and benefit the citizenry of all member states. It is key that member states respect these regional blocs because they are designed to benefit the locals.

6 You are a chemist, what is the importance 6 of lubricants formulation expertise, and do you think this is available in East Africa, and is there room for growth?

In a world that is changing technologically by day, I need not overemphasize on the importance of lubricant formulation. OEM’s, in their attempts to meet more stringent environmental requirements, keep on trying new stuff with their engines to stay ahead of the competition. Engines have become smaller with more power; this has obviously changed their lubricants requirements and the need for more environmentally friendly lubricants. However, while lubricant formulation is especially important in the performance of a lubricant, even with the best formulation, having the right quality components used in the blending is critical. This means that choosing the right components plays a critical and vital role in the performance of the blended product. It is therefore extremely important to engage the services of an expert in this area. This expert will remain the focal point to align with base oil and additives experts like Chevron Oronite, Lubrizol, Infineum or Afton. In my experience, it is also impactful to pass some knowledge about lubricant formulations and performance to the end user. I have come across end users who out of lack of knowledge have topped up engines with gear oil etc., obviously this was to the detriment of the engines. All lubricant marketers should have a program to promote knowledge in the downstream supply chain to avoid such incidents.

7 Looking at the lubes blending landscape in East Africa, what is your comment in terms of the number of blending plants available, are they fully utilized or underutilized? If underutilized, what can be done to ensure full utilization of these plants?

The overall size of the East African market is around 250KT annually serviced by around 13 blending plants, with various blending capacities ranging from 14KT to around 60KT annually. This number is growing rapidly, therefore existing players are expanding their existing investments while new investors are becoming interested in the lubricant segment especially after onboarding DRC into the East African bloc. Therefore, my response is that currently most of these Lubricants Oil Blending Plants (LOBPs) may appear to be underutilized but strategically, more may be required in the coming years especially with Africa becoming a key focus of investment across the globe. Whereas other markets are showing signs of shrinking, Africa is yet to attain its full potential in infrastructural developments. However, investors need to be encouraged to form Joint Ventures across certain markets especially for underutilized facilities across the region. This can even be made easier if trade barriers are further reduced to allow a fair playing field.

8 You were involved in setting up a laboratory for Shell in Ethiopia some years back, how important is a high-quality laboratory in terms of ensuring the lubricants quality that is produced by oil marketing companies?

It is essential that an excellent quality assurance process is set up in any manufacturing environment. LOBP’s provide an essential commodity that is required to run some very expensive investments especially in the aviation &mining sector. Therefore, it is crucial that the owners of LOBP invests in the essential equipment required to ensure that this quality assurance process should be incorporated in the production process and more importantly segregate the duties of the QC Manager from the Production Manager. It’s unfortunate that even with the right equipment, one still finds non-compliant products in the market simply because the QC Manager reports to the Production Manager which is clearly a conflict of interest. The Key Performance Indicators (KPIs) of the QC Manager are totally different from those of a Production Manager and therefore the 2 roles should report to a high office capable of making objective calls that will balance market demand as well as quality. Labs should not only act independently with the support of top management but must be seen to be doing so.

"It is essential that an excellent quality assurance process is set up in any manufacturing environment. LOBP’s provide an essential commodity that is required to run some very expensive investments especially in the aviation & mining sector.

"The big challenge that is faced by local oil marketing companies is the ability to afford OEM approvals as this is a very costly and tedious exercise.

9 The region has seen multinational companies exit the market and their space is being taken by local companies, what can be done to ensure that these companies perfectly fit the big shoes left by the multinationals in terms of product quality, technical offering, and strategies?

In my view, the local companies have fitted perfectly into the gap left by departing multinationals. One critical factor that they have done, given that I am currently working for one, is to ensure that the quality of lubricants is not compromised. Those I have interacted with prefer to use the same formulations and get technical support from the BIG 4 additive suppliers i.e Chevron Oronite, Afton, Lubrizol & Infineum. This is a plus for them since they are also able to interact with the technical experts from these suppliers. They also purchase and use specially selected base oils to blend the highest quality lubricants for their respective markets. The big challenge that is faced by these local companies is the ability to afford OEM approvals as this is a very costly and tedious exercise, as such there is need for OEMs to recognize this and try to support these local companies knowing that this also gives confidence of their equipment. Without this, the big brands that dominated these markets since pre-independence will continue being perceived as the only high-quality lubricants available, a notion that I highly dispute.

10 Counterfeiting is a big problem in many African countries, what measures would you recommend to tame this menace?

Indeed, counterfeiting is a major challenge having experienced this in 2 of my former companies. Unfortunately, there is no straight forward way to handle the menace. On one hand, you avoid engaging the counterfeiters directly fearing that the press will highlight this and give a perception that your brand is not genuine in the market (a brand killer). Second option is to take “Scorch earth policy” approach. This means employing scouts to identify the counterfeiting dens and making raids with the relevant authority, unfortunately, this poses a risk to the scouts, and they always spring back again even stronger. I believe that if lawmakers can be convinced to make much stiffer penalties in the line of “Economic sabotage” for counterfeiters, this may reduce this to manageable levels.