Oiling the wheels of trade
Mbongeni Mguni | Wednesday September 13, 2023 11:42
Petroleum industry veteran and Kwa Nokeng Oil CEO, Mahube Mpugwa, says the citizen-owned company’s ambition is to see Botswana become the region’s most preferred trade and logistics route. In a region where governments are building infrastructure such as roads and bridges to attract more of the trade traffic and investment their way, private investors such as Kwa Nokeng are playing a key role.
Several countries frequently make the claim of being the region’s logistics hub, a coveted status that can be leveraged for investment and the growth of downstream activities.
“Our aim is to make sure that Botswana is the preferred route for the region,” Mahube says.
“For us, the question is how do we complete the country’s aspirations to be a logistics hub for the region?”
From its foundations in 1968 with a small service station in Machaneng, Kwa Nokeng has grown to become one of the country’s largest suppliers of fuel and lubricants, a citizen titan in an industry dominated by powerful multinational entities.
Mpugwa explains that from the single service station, the company grew to 11 depots targetted at haulage trucks around the country and located primarily at key border points. The depots provide value-add services such administration, maintenance and even payment of fines, on top of the fuel supply. In this way, Kwa Nokeng leverages on infrastructure to smoothen the logistics experience and thus, attract more traffic to Botswana, ahead of other regional routes.
“The real trajectory of the company happened when it built a truck stop in Martin’s Drift followed by another in Pandamatenga.
“Those were the origins of what you see today as the largest citizen-owned and independent oil company.
“Our main shareholder, Clinton van Vuuren, realised that there was a lot of traffic through Martin’s Drift going through Botswana to countries like Zambia, Zimbabwe and others and they didn’t need just fuel but services for their trucks such as weighbridge payments and others.
“Having an entity in the country to handle administrative issues, tyre punctures, payment of road fines and others; you want that peace of mind that the goods will arrive on time and someone can take care of them.”
In the regional logistics corridors running from ports in South Africa to the northern parts of the SADC region, Botswana often represents the longest stretch, presenting an opportunity to set up the one-stop depots that trucks can use to have a seamless experience. At a time when competing corridors in neighbouring countries are plagued by issues such as poor infrastructure, customs and police corruption as well as violence and safety issues, Botswana offers an attractive proposition for the long-haul traffic.
Each of the 11 depots features a tank farm with minimum storage capacity of 300,000 litres, a sizeable forecourt for trucks to fill up, as well as services such as roadside assistance for breakdowns, administrative services for payment of various fees, fines, weighbridge charges and others. Truckers travelling lengthy routes such as the Trans-Kalahari, can find an oasis to fill up, attend to a tyre, pay any fees required along the route, get fresh food supplies and continue their travel.
The opening of the Kazungula Bridge enabled Kwa Nokeng to establish its biggest depot to date in the area, catering for the high volume of truckers crossing the busy border. Over the years, the group has spent more than P250 million building up its network of depots and associated infrastructure.
“The Kazungula truck stop is the flagship and it can handle 16 trucks at a go, which is an example of how we complement the national objective of facilitating trade,” Mpugwa says.
Kwa Nokeng’s achievements in the oil industry fly against challenges other Batswana have experienced attempting to break into the sector. In Botswana, several large multinational entities dominate the oil industry, leveraging their large balance sheets and international linkages to muscle out citizen entrepreneurs.
Batswana attempting to break into any level of the industry have found barriers such as high capital expenditure, where the costs of a single service station can reach P10 million. More critically, however, citizens aspiring to enter the oil industry quickly encounter the requirement of strong operating capital or the deep pockets required to ride through price and demand fluctuations.
Kwa Nokeng navigated the challenge by focussing its attention on the wholesale side of the business, rather than the retail, tackling opportunities offered by haulage and related activities.
“This is the enterprising spirit behind the main shareholder, understanding where the opportunities are in the industry,” Mpugwa explains.
“We had multinationals which were focussed more on retail opportunities like service stations and big commercial customers, but there were these key routes that we felt were underserved especially the truckers who needed someone to provide not just fuel but add-on services.
“Our facilities are mainly dedicated to trucks and it is very convenient for them to use as opposed to retail sites.
“We took away that stress from the multinationals and said we will handle it.
“Securing that niche was also in line with the growth of trade in the region.”
The CEO says Kwa Nokeng has a deliberate citizen empowerment strategy in its operations, helping fellow Batswana secure and maintain a foothold in the oil industry and its affiliated sectors. The company contracts out the transportation of fuel to its depots to citizen-owned businesses as a way of building these up. Fuel is sourced through Botswana Oil, which has its own extensive citizen empowerment initiatives.
“The industry is difficult for citizen entrepreneurs and besides capital and operating expenditure, national consumption has remained flat at about 1.1 billion litres over the years, despite the increase in the vehicle population,” Mpugwa says.
“The question becomes to what extent the industry’s growth can sustain new entrants?
“We believe that despite these challenges, we must look at the value chain and see how citizen entrepreneurs can get in.
“Transport is one of the ways and it was previously dominated by multinationals.
“However, there is also the construction and maintenance of facilities and there is a small industry of citizen companies that have grown by providing this service. It’s actually a flourishing area that is overlooked.
“We have to also look at the back office, engineering, suppliers of things that are required by the industry and these areas need to be packaged and promoted to citizens.
“However, we have also seen citizens who have been bold enough to go in on the supply side of the industry as well.”
In the past few years, some of the major multinationals have exited the local market, mainly through transactions beyond the country, providing an opportunity for Batswana to test their strength in the industry. In addition, Botswana Oil has ramped up its citizen empowerment programmes, at various levels of the industry such as wholesale and provision of transportation services.
Last October, Botswana Oil Limited invited citizen-owned companies to submit proposals for the provision of bulk fuel transportation services to the Debswana mines, a tender that was part of an P8 billion deal the two organisations had agreed.
For Kwa Nokeng, Mpugwa says the focus will be on growing the business further into sectors such as mining, water projects, public infrastructure and others, as well as extending the reach of the lubricants division.
“When I’m driving across the country and see a truck carrying copper or whatever, the likelihood is that its fuel was filled at Kwa Nokeng.
“That gives me pride to know that we are contributing towards transforming our country and region to create opportunities for employment and improving standards of living for our people.”