Hloniphizwe Mtolo – Chairman, Shell South Africa
Hloniphizwe Mtolo, chairman of Shell South Africa, discusses the company’s strategy during the recent challenging period for the industry and the importance of Shell South Africa, which owns, together with BP, the continent’s largest refinery, SAPREF. Furthermore, he highlights the growing strength of their retail business and their leading position to drive forward the nation’s transformation.
With the fluctuations in the global oil and gas markets, what have been your key priorities in recent times?
“South Africa is a country with great potential and an abundance of opportunities, with the business sector excited to be part of the nation’s transformation and build on our economic growth momentum.”
Our focus has been on the stabilization of Shell South Africa, while continuing to deliver towards the company’s overall profitability. This is despite it being a volatile period for the global oil price and from a local perspective the economy and political situation have been going through challenging times.
Another chief priority has been to focus on our health and safety performance. Also, we have been transforming the company by playing a larger role in the broader South African society, such as promoting entrepreneurship development and giving local suppliers a preference within our processes. Additionally, over the last year we became the first oil major to reach level-one Broad-Based Black Economic Empowerment (BBBE) accreditation. This is an important step in the country in terms of how large organizations are managed, and all these areas show our leadership towards delivering the nation’s transformation goal.
On a different level, we have directed attention to developing world class talent for the organization. This involves having Shell employees work abroad and come to us to promote knowledge transfer and skills development within the company and country. We have also focused on talent development with a number of initiatives for those that don’t get the opportunity to go on international assignments.
On a personal note, in my first ten months as Chairman of Shell Companies in South Africa, I have made it a priority to continually interact and be present in leaderships spaces with the external environment. This ensures Shell is visible and active as we are key contributors to the South African economy and society.
Which sectors have performed best during this first ten months of yours in charge?
The most successful areas for Shell South Africa has been the downstream sector, and within this a number of businesses have made us extremely proud. Our lubricants business has been very good in terms of delivering expectations, and our strong push to position ourselves within the retail space has resulted in it playing a key part of our revenue stream.
At our refinery, SAPREF, we have made some smart investments to ensure reliable and safe operations, and within our manufacturing process we are actively looking ahead to think about what the future holds in regard to energy requirements for OEM and cleaner energy provision.
What is the strategic importance of Shell South Africa within the regional context?
Shell South Africa is critical for the company, and it makes us proud to be a key global participant for downstream business and revenue, despite being classified as a developing nation. In fact, within the continent, Shell South Africa is the only downstream business for Royal Dutch Shell, as in other parts of Africa we come under licensing models.
How optimistic are you that the new government can turn a new page for the domestic business ecosystem?
Cyril Ramaphosa, since taking over the presidency of South Africa, has been sending the correct message and playing the right keys. Africa has a bad reputation as being a corruption hotspot, and he knows enough is enough and is striving to clean up unethical practices in South Africa and lead the way for this approach on the continent.
This is great for the economy and local currency, and already international investors are looking towards South Africa with renewed enthusiasm, resulting in all players performance equally improving across the board. South Africa is a country with great potential and an abundance of opportunities, with the business sector excited to be part of the nation’s transformation and build on our economic growth momentum.
Another aspect of a growing economy, is the fight against inequality. The National Development Plan aims to address the questions of how South Africa eradicates inequality, poverty and unemployment. An economy that fires on all cylinders can be a key element to answer all these challenges.
How has the company maintained a strong downstream presence over the last few years?
We are fortunate that our downstream business covers a wide portfolio of business classes that can feed off each other in terms of strength and performance. We ensure that we focus on end to end value creation across our integrated business. This is from manufacturing through to our trading and supply businesses all the way to the marketing businesses and eventually the end consumer.
The face of our business is our retail network and we have designed the model around not purely fuel, but food and drinks. Nowadays, people do not go to traditional garages, but go to more convenience centers, and this is what we have designed by partnering with global convenience companies and quick service restaurants, while offering on the go options. All these extras allow us to serve at least 130 thousand South African customers that visit our centers daily.
South African refineries are quite old, and the government has even proposed plans to invest into a new site. What must be done to see greater investments into the current refinery locations?
South Africa has an increasing demand for finished products, so it is imperative that the industry continues to invest into the refineries to make sure there is sufficient supply to counter the rising demand. For this to happen, the industry is looking for the right regulatory framework.
In the past, the country was strong in production in the certain areas, such as textiles, though this has been lost. Therefore, these refineries offer a rare opportunity for the hydrocarbon sector to develop manufacturing skills that are required across the nation’s engineering space.
Lastly the refineries are key to creating a sustainable nation as the economic contribution of the sector is huge. At the moment, some of the plants require large investments, especially as the world demands cleaner fuel. To be part of this process, Shell, along with other industry players, are in discussions with the government to determine the necessary steps to make this possible, so all stakeholders can benefit in the long-term.
South Africa refines more than 700 thousand barrels of oil a day, and the SAPREF refines 180 thousand barrels; therefore, this site is crucial for the country’s security of supply, together with other refineries in the country.
Where do you see the energy mix evolving in the future?
We cannot remain reliant on liquid fuels; therefore, the nation’s energy mix must change, and the refiners are a key element in determining the energy transition path South Africa takes in the future. Together with the government, the industry has constructed a key document, the Integrated Energy plan, to help build South Arica’s energy future. Other forms of energy including gas are part of the mix.
However, only when the regulation is at the right level will Shell invest further into the gas sector and we are keen to play a significant role in the creation of a gas industry in the country.
How does South Africa remain relevant to the eyes of HQ, so they continually look here for African investments?
Shell is a global company; therefore, if the investment environment is not right, the company will look elsewhere. In this regard, attracting HQ attention is related to our political landscape and the economic policies we develop as a nation.
At Shell South Africa, we must continue to deliver the company’s expectations on returns and push South Africa’s national transformation objective. This social footprint is a key part of Shell’s global voice, and we are active in carrying out this movement here.
Where do you see South Africa and the company in six-years’ time?
President Ramaphosa is sending the message that South Africa is open for business; therefore, we have to do our bit to contribute in the development and growth of our country. At a company level, we strive to expand our domestic footprint and, above all, we want to continue to be viewed by our commercial customers as the number-one preferred partner in the South African oil and gas industry.