Botswana’s preeminent fuel supplier, Engen Botswana Limited, is witnessing a significant erosion of its market share within the fuel industry. This downturn is attributed to a governmental mandate that urges state departments and state-owned enterprises to procure fuel exclusively from suppliers that are 100 percent citizen-owned.
The Botswana Stock Exchange (BSE)-listed entity has expressed concerns regarding the increasingly challenging operating environment for both multinational and domestic fuel importers. This is primarily due to the government’s decision to amplify the market share of fuel imports allocated to Botswana Oil.
The recently released integrated annual report by Engen Botswana Limited, unveiled by the BSE this week, highlights a notable reduction in supply to parastatals and other governmental entities. In 2023 alone, the company’s fuel sales volume to the commercial segment plummeted by 32.6 percent, from 142.7 million litres in 2022 to 96.6 million litres in 2023. Concurrently, retail segment sales dipped by 1.6 percent, from 199.7 million litres to 196.5 million litres. Overall, total fuel sales volumes declined by 49 million litres, from 342 million litres to 293 million litres during the same period, culminating in reduced sales revenues and profits for the leading fuel supplier. For the fiscal year 2023, the company’s revenue plunged by P600 million, while net profit after tax dwindled by P152.7 million.
Engen derives the majority of its revenues from the sales of petroleum products and lubricants through retail pump stations and commercial supply contracts with government-owned entities and private companies across diverse sectors such as mining, construction, logistics, and agriculture. Additional revenues are generated from the sale of miscellaneous products at convenience stores located at fuel pump stations and property rentals. For the year 2023, Engen reported sales revenues of P3.5 billion, down from P4.1 billion in 2022. Net profit after tax stood at P113.4 million, a stark decline from P266.1 million in 2022. Segmental reporting indicates that for the year 2023, petroleum products generated the highest revenue at approximately P3.4 billion, followed by lubricants (P70.2 million) and miscellaneous products from convenience stores (P15.2 million).
Engen’s management has attributed the decline in sales volume and financial performance to the government’s initiative to bolster support for citizen-owned fuel suppliers, among other challenges. “In a very challenging trading environment, the Group registered a decline in profit after tax from P266.1 million in 2022 to P113.4 million in 2023. The decline was largely due to reduced commercial volumes. There was a 32.6% decrease in commercial volume performance in 2023 due to the government directive for fuel to be purchased from citizen-owned suppliers.”
The management further noted that the company’s performance was adversely impacted by subdued economic activity, elevated international oil prices, and foreign exchange challenges. “The retail network continues to be affected by depressed economic activity, and this has resulted in the average fill-per-service-station declining compared to the same period in 2022. Retail volume declined by 1.6% over the reporting period, largely due to a reduction in consumer purchasing power, continued high inflation, and the relatively high cost of fuel.”
Additionally, the management observed a 7% decline in lubricants sales volume in 2023. “The underperformance was due to high international prices, which affected our cost of production, coupled with foreign exchange challenges that made it financially attractive for our commercial customers to take advantage of exchange savings and to purchase directly from South Africa.”
Engen Botswana’s Acting Managing Director, Brian Sameke, stated that the company has revised its strategic objectives in light of the evolving operating environment. “Our strategic goals have shifted with the changing operating landscape, and we have placed a partial moratorium on new service stations due to the agglomeration of service stations, as the increased number of service stations drives down market share and negatively impacts return on investment.”
