Kenya boasts more than 70 oil marketing and importing companies, though most people know ‘the big five’.These companies are Gulf African Petroleum Corporation, Total Kenya, Vivo Energy, Libya Oil Kenya(Which is rebranding btw) and KenolKobil. So you’ll agree that it would take quite a bit of courage and a healthy sense of risk to decide to play in this arena as a young businessman.
But that’s exactly what Simon Kirima of Awali Group is doing. Awali Group is an oil marketing company that owns seven independent petrol stations nationwide and three dealerships, and supplies fuel to independent fuel stations, hotels, hospitals and other industrial outfits.Simon takes Hustle through the journey that’s built him a multi-million-shilling business.
What does an oil marketing company do exactly?
In simple terms, an oil marketing company is one that imports oil into a country, usually regulated by government tenders, and then resells the oil to other oil companies or institutions at a profit.
It’s been said that the oil industry is a closed industry, why?
The main reason is the high capital investment needed, coupled with the high-risk factor due to stiff competition and potential for losses in daily operations.
How much capital did you put into your business starting out?
My path into the oil industry started in 2013 with a petrol station. My start-up capital was Sh7 million, which I recouped within two years, and I acquired three more stations in this time.
Take us through how you got to the point where you could raise Sh7 million. What’s your background?
It’s something I don’t like talking about because my life as a young man was messy. I grew up in Ruai, Eastlands. My parents were business people, so we didn’t struggle for finances but many of my peers did. I think because my mind couldn’t come to terms with that, I ended up rebelling against the system. I got into a lot of trouble.I was admitted into one of the top national schools, but I had difficulties following all the rules. My mother gave me a rosary and told me that no matter how much I rebelled, God would never give up on me. Her acceptance of who I was made me realise I wanted to be more and do better, for her. So I did.
How did you end up in oil?
After university, in 2003, I joined the banking industry. Ten years later, in the run-up to the 2013 elections, I decided to go into politics. I took leave from work to campaign and lost. I hadn’t informed my employer about my intentions but they found out, so when I got back to work, I was demoted. I decided to quit the job.At the time I was earning Sh400,000 a month, but I’d spent more than Sh3 million during the elections. I was stuck.A friend approached me with a proposal to go into the oil business and I jumped at the opportunity.
So how did you raise Sh7 million?
Ironically, I used my networks in the banking industry and borrowed against property, including the home I was living in. One of my good friends and business partners also used his own house as security for financing.That was quite a risk, considering you were new to the industry.Yes, which is also what pushed me to succeed. I remember starting from the very bottom because I wanted to learn the ropes. My first eight months I worked as a pump attendant at my own station – the employees had no idea who I was.
What are some of the lessons you learned from your staff?
This will sound funny, but they taught me how to steal – from oil deliveries and from the cash register.I played along because, unknown to them, they were revealing the loopholes in the business. You lose oil at the depot because of the cartels involved, you lose oil in the trucks because the drivers siphon it enroute, you lose oil when it arrives at the station because what is recorded is different from the actual amounts delivered, and you lose oil on sales due to theft from attendants.
Is there a solution for this?
I tried many options. For instance, there was a time I decided to follow a truck whose driver I suspected was stealing from me. I tracked him to a plot in Nairobi’s Industrial Area, but I was shot at by unknown characters. That was one of the scariest moments in my life.I reported the matter to the police but nothing came of it. That’s when I decided I couldn’t fight these thieves physically, but I could thwart them with technology.
What kind of technology are we talking about?
I partnered with a friend from high school who ran a company called Empire Microsystems, which deals in automating oil distribution from depot to customer, using intelligent systems.A chip is embedded into every carrier of fuel from the tanks in the depot, the trucks transporting the fuel, the tanks at the stations and the fuel pumps.These chips digitally record the volume of fuel passing through these carriers and remit the information to our head office.That means we know exactly how many litres left the depot, how many litres are in the truck, how many litres are deposited into our station tanks, and how many litres are sold to customers. In case of loss, we can accurately trace where it occurred.
Has it worked in reducing your losses?
Many fuel stations and oil marketing companies will record a loss of 4 per cent, while the acceptable rate of loss is 0.5 per cent to maximise on profits. We are currently at 0.2 per cent using our intelligent stations and depot system.This has helped us maximise our returns to the point where we could raise Sh120 million to become an oil marketing company this year.
Is this system exclusive to your stations?
Our individualised system is, yes, but we are in talks with some of the big companies to automate their oil distribution, including intelligent depots.
How much does it take to buy and implement this technology?
To digitise a station would cost approximately Sh3 million. To digitise a depot would depend on the size of the depot, but would cost approximately Sh20 million – this would include putting a weigh bridge solution that weighs trucks as they enter and exit the depot.
You went from owning one fuel station to being an oil marketing company, to seeking to revolutionise how oil is distributed in this country. What do you think is behind all your success?
Finding the gaps, and being a part of the solution. It’s really that simple. Just because something has always been done in a certain way doesn’t make it the best method. Always change, always find a better way.
First published here