9 minute read
HASS PETROLEUM
Servicing New Frontiers
HASS PETROLEUM GROUP CEO, MOHAMUD SALAT ON THE ENERGY FIRM'S QUEST TO SERVE NEW MARKETS
BY DIANA MICHIEKA ounded in 1997 by two brothers, the late
FAbdirizak Ali Hassan and Abdinasir Ali Hassan, Hass Petroleum Group has grown from an export reseller with a fleet of two trucks to an international oil marketing company with operations in 9 African countries. Group CEO Mohamud Salat has been part of this journey, serving as head of internal audit and head of finance before the big promotion came in 2019. As the company celebrates 25 years in the oil marketing industry, Mohamud is proud to share with CEO Business Africa what it takes to build an indigenous oil marketing company from the ground up.
STARTING FROM GROUND ZERO
When the Ali Hassan brothers came together in 1997, the oil market was dominated by multinational companies with little to no participation from local players. The oil market was anything but liberalized. The Kenya Petroleum Refinery Limited (KPRL) in Mombasa, whose pipeline ran from Mombasa to Kisumu, had a chokehold on the market with any new player made to pay a portion of a line field and also buy products from the refinery. "The cost of becoming an oil marketing company was so prohibitive, exorbitant, and was probably the only way to keep away competition," says Mohamud
Export reselling became a lucrative alternative at the time, as the Tanzanian market had just been liberalized. A strategic partnership with the then Caltex helped start the company off, as it provided both required resale products and additional trucking business for northern Tanzania.
With the Kenyan market shut, the company then known as AA Hassan, explored other markets in the Eastern Africa region and managed to set up operations in Tanzania, Uganda, DRC, and South Sudan markets.
In 2002, there was a new government in Kenya, which proved to be a game changer for the oil business. Instead of Kenya dealing with crude oil and refining, it started importing refined products. The company now rebranded to Hass Petroleum Group seized the new opportunity and shifted focus back to its birthplace, Kenya, where it registered as an oil marketing company, giving it access to the product via the Kenya Pipeline Company.
SUCCEEDING IN A CHALLENGING MARKET
The oil market business is not for the fainthearted. Hass Petroleum came in a period when the oil market was dominated by multinationals who controlled 90% of the market. Unlike their deeppocketed competitors, they had to figure out how to survive in a market characterized by security issues, unavailability of dollars, and currency devaluation. "The biggest challenge in Africa is the whole element of the fluctuation of the local currencies against the dollar. I hope one-day Pan-African countries will rise to a level whereby Africa has one currency that is very strong and very stable,” a hopeful Mahmud says.
The success of the company, however, came from the fact that it is a locally grown brand. “We are Africans. We know how we think. We know how we want to be served and the kind of products we want to be given.”
This knowledge has influenced the kind of
product that Hass Petroleum brings to the market. "If you look at our cylinders, they are unique cylinders. We call them composite cylinders. These are the only cylinders that are non-explosive and do not burst, which is one of the biggest fears [customers have]. They are very light and translucent; you can see the level of the gas."
The company also provides solutions and products that other companies may have not including transportation, storage, distribution, and marketing of diesel fuel, automotive gasoline, kerosene, jet fuel, Liquefied Petroleum Gas (LPG), and lubricants for industrial and automotive systems in all the nine countries where it is present.
In all these markets, another key to success has been the provision of high-quality services regardless of the market in which the company operates. Drawing inspiration from its motto, "Servicing new frontiers", the company gives a lot of priority to new frontiers and provides the same services, whether in Nairobi, Mandera, Marsabit, or Wajir. "In DRC, we are quite known for giving efficient service to the mining companies," Salat says. In South Sudan, Hass Petroleum is known to be the biggest oil marketer, having majorly expanded during South Sudan's celebration of independence in 2011.
The CEO is confident that this mode of operations can deliver success to any business regardless of size. "Even if a business owner owns a single petrol station, do what you do best and you will even exceed to a level of competing effectively with multinationals.”
TAKING CHARGE DURING A PANDEMIC
Being appointed as the CEO shortly before Covid-19 was declared a pandemic was one of the toughest challenges Salat has ever faced in his career. A few months into the position, he was expected to come up with new strategic leadership for the whole group. This was a particularly difficult task, as a cessation of all travels in and out of the country meant reduced business for Hass Petroleum. “When there's no movement between the borders of Kenya, Tanzania, and Uganda, the company’s product, which is fuel, is not moving, this brought a huge impact on the company’s business,” Salat says.
“But when we are faced with these kinds of challenges, it’s all about how you react to it, how you respond to it.” While some companies in his sector downsized and others sent their employees away with salary cuts, Hass Petroleum chose to adapt to the new working environment. His employees became a
priority, with most cuts being in the softer expenses such as marketing. “We made sure that employees are comfortable, safe, and sound and working from home,” Salat shares. Quoting British billionaire business magnate Richard Branson, Salat tells us that for him, “clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.”
With employees adequately looked after, Hass Petroleum managed to keep its oil service station open to continue serving customers. He commends the shareholder as they stood with the company and the people to make sure that there were no significant changes as far as the company was concerned.
Just as the effects of the pandemic were starting to wane in early 2022, Russia invaded Ukraine, causing Europe's largest refugee crisis since World War II, with around 6.9 million Ukrainians fleeing the country and a third of the population displaced. The war brought a new food and energy crisis to the world. Oil became a scarce commodity in the international market, forcing suppliers like Hass to review their pump prices upwards, further squeezing consumer budgets that were already hurt by decades-high inflation. Salat worries that consumers burdened by high commodity prices may scale back on petroleum consumption. “When a product price reaches a certain level, there will be a downward shift in the demand curve of a commodity such as energy products, induced by a prolonged period of high prices or constrained supply.”
“As a business leader in this sector, I feel like the prices are almost nearing this level of demand destruction whereby either the customers will reduce the total level of product they consume or the volume, or it will reach a time where they don’t even consume that product and resort to alternative means,” says Salat.
Not waiting to be caught flatfooted, Hass focused more on alternative products such as lubricants, and LPG gas for home users and taxi operators who have gas-powered and electric vehicles. The company has its auto-gas petrol station in Nairobi that fills gas instead of fuel and a charging port.
DOTTING AFRICA WITH THE HASS BRAND
With a presence in 9 African countries, Hass is no longer a small energy player. It's a force to reckon with within the African continent. In markets like the DRC, it’s the dominant player snatching away that opportunity from well-oiled multinational companies. Africa has 54 countries, and to be a truly African brand, the company has its eyes on each of those markets. To make this dream a reality, the company in 2017 partnered with Oman Oil, now known as OQT, a government-owned company that produces and refines fuel and lubricant products. The two companies had complementary needs that would be perfectly met by their collaboration. In Hass, OQT finds a downstream company to sell its product to new markets, while for Hass a reliable supplier of oilrelated products was found in OQT. “We are not just thinking of the nine countries where we are in, our
conversation with my shareholders and Oman is how do we make sure we have dotted Hass Petrol Station all over Africa?"
The partnership, which gives Hass a 40% stake in Hass, was timely as the African Continental Free Trade Area (AfCFTA) agreement came into operation in early 2021, removing the red tape that previously hindered trade between the 54 countries. An optimistic Salat explains to us that AfCFTA means that a product that is produced in Kenya has the capacity and ability to be consumed across Africa, creating a bigger base that would in the long run reduce the cost of doing business while improving the margins and profits that a business makes. “If we actualize it and realize it, that will be a game changer in Africa.”
As Hass prepares to embark on its pan-African journey, it has made investments to secure its current bases. In Tanzania, Hass invested in a 25 million depot capacity. In Kenya, Tanzania, and DRC, the company has also invested in trucks locally to make sure that its products are delivered to customers on time.
AN UNFORGETTABLE CUSTOMER EXPERIENCE
Looking at consumer behavior, Mr. Salat says that the company has seen a lot of transformation over the years. “A few years ago, when people went to buy groceries, they used to buy them at the shops right next to their homes, but now people are going to malls to buy groceries and even meet with their friends and relatives.”
To leverage this trend, Hass has partnered with major outlets, the likes of Papa John's and Chicken Cottage, to give their customers a one-stop shop customer experience. As they come to wash and fuel their cars, Hass is expanding offers to ensure that they can also meet with their friends and relatives, do some little shopping from the convenience store and also enjoy a meal together from the best food outlets in the world. “Whenever someone walks into a petrol station, let us not give them service. Let us give them an experience that they will remember forever and ever and come back again and again.”
For the close to 10 years that Salat has worked at Hass Group, he couldn't have been more proud of the company it has grown to become and the role he plays in this transformative journey. “I’m proud to lead a company that is majority owned by indigenous African and Kenyan. I look forward to challenging the multi-nationals while also mentoring the upcoming ones to be at their level or better.”
