Namcor gears towards future sustainability
By Hilary Mare and Shallot Mohutege
AFTER unveiling the first truly Namibian-owned service station at the Hosea Kutako International Airport late last year, the National Petroleum Corporation of Namibia (Namcor) has not only broadened the capacity of the local fuel sector but has also provided greater scope for more opportunities for economic empowerment.
In an exclusive interview with Confidente this week, Namcor Managing Director, Immanuel Mulunga reiterated that the fuel retail market has always been part of Namcor’s mandate as defined in the Petroleum Exploration and Production Act of 1991, and the time has arrived for NAMCOR to make its entry in the retail space.
“We have always played a role in the downstream commercial sector; where we have been selling to various commercial clients; such as mines, Government and transportation companies. We made a strategic decision to enter the retail market because firstly, the margins are better and secondly, in order to diversify our revenue stream,” Mulunga said before addressing a key myth that Namcor seeks to unfairly compete in the fuel retail sector by running its own establishments.
He explained that Namcor does not operate its own service stations and therefore does not compete with other private service station dealer, but rather operates on the same business model like other fuel retail firms such as Engen, Vivo, Puma and Total.
“All that they do is that they construct these service stations themselves or enter into some sort of arrangement with the dealers, where the dealers build and operate these service stations, and then they just provide the fuel and a franchising opportunity. So this is exactly what Namcor is doing.
“Namcor does not directly compete with private service station operators but we are adding new dealers into the market by building new sites.” he explained.
Confidente has it on good authority that while speculation is rife that Namcor will provide cheaper products by virtue of its position, this is false, as prices, both at the wholesale and retail level, are controlled by the Ministry of Mines and Energy. In essence, Namcor does not have the authority to charge customers at the pump in a manner the company chooses, but is rather obligated to charge customers at government prescribed prices at its service stations in the various towns.
With this level playing field, Mulunga says Namcor’s participation actually enhances the Namibian fuel market.
“Firstly, it provides an opportunity, not only to compete but to create an alternative brand in the market that every Namibian can identify with; ensuring that profits are retained in the country instead of it being repatriated, as is the case with other oil marketing companies. What we need to also understand is that for us, our entry into the retail space was a well thought-out strategy. We decided to enter with a very superior product, our service stations look much better than all our competitors and that was done purposefully with a view to give ourselves a competitive edge. We believe we are already providing superior products and services at our service stations and this provides better options for the consumer,” Mulunga further stated.
Indeed, the filling stations have created and will create additional employment in the various towns they will be located. By his own admission, Mulunga expressed that when a service station is set up, it is bound to create employment for about 20 to 30 people in those communities.
“This is good for the economy because whoever the dealer operating that specific service stations, he or she will be creating additional employment. Because Namcor is growing, more jobs are bound to be created in the entire petroleum value chain; from upstream, midstream, and downtstream.. So you also talk about distribution, storage, dealers and other employment opportunities created as a result of these service stations.
“It goes without saying that as a company we are obviously expected to pay the various levies and taxes, during our operations,” Mulunga said adding that: “So when we do make profits we are expected to make contribution to the fiscus because we are a state owned company. We have been creating value for our shareholder; for example,in the past five years, our balance sheet has grown from about N$600 million to N$1.2 billion which is added value to the state.”
However, Mulunga also acknowledged that the wrath of Covid-19 has been felt at Namcor owing to the fact that because of the lockdown, Namcor was unable to sell as much fuel as budgeted for with the company only selling roughly 50 percent of what it had budgeted in the first quarter. In this regard, Mulunga acknowledged that Namcor needed to respond aggressively and to make sure that even its operational expenditure is reduced to counteract the impact of reduced revenues.
“Fortunately we had extra resources to cushion us against this shock, which avoided us having to go back to our shareholder for a bailout. However we are slowly making up lost ground and the situation should improve as the year progresses.”
Looking ahead, Mulunga explained that he sees Namcor as a multi-billion dollar revenue generating entity creating more value for all its stakeholders. Most importantly, he looks forward to steer Namcor into financial independence, without any support from the motorists.
“I see Namcor participating in the production of oil and gas in other parts of the world, while we await for an oil discovery on our own shores. Just because you operate in a country that doesn’t have oil and gas, it doesn’t mean that you cannot have access to production elsewhere in the world. Our aim is to become a fully integrated national oil company (NOC), playing a role in the exploration, production, storage, distribution and sales and marketing of petroleum products… We have an ambitious short term target of a revenue base of N$5 billion over the next two to three years. We are proceeding as such with a view to wean ourselves from the levy that we are receiving from the National Energy Fund (NEF).
Speaking about the importance of the board of directors to support management in the attainment of the organisation’s goals, Mulunga said that there has to be one common vision.
“In Namibia, historically, in the SOE sector, the relationship between the shareholder, board and management has not always worked to the benefit of the specific SOE. I don’t think people have understood corporate governance very well. Lately however there is a glimmer of hope with the creation of the Ministry of Public Enterprises and the transparent appointments of Boards of Directors of SOEs. There is hope that we are getting Corporate Governance right in Namibia.”
In conclusion, Mulunga explained his secret to success stems from the fact that that success is predictable and so is failure.
“One of the most important things we have exhibited at Namcor is our leadership pedigree, meaning you have to have a leader with a clear vision able to provide leadership to a mixed group of various executives. A pack of lions led by a sheep will always be defeated by a flock of sheep led by a lion. You have to find a way to bring in competent people in your organisation who can come and assist you with the realisation of your vision; this we have successfully done,” concluded Mulunga.