Pierre-Yves Sachet – CEO of South Africa and Executive VP of Southern Africa, Total
Pierre-Yves Sachet, CEO of Total South Africa and executive VP of Total Southern Africa, discusses the company’s E&P ambitions as they lead this segment in South Africa, as well as opportunities that exist in growing the downstream segment of the business. Furthermore, he touches on the importance of social transformation for Total and the country and the steps needed for future success.
What falls under the responsibility of your position?
“There is no development without energy and meeting the continent’s growing energy needs will definitely be a challenge, that is why Total is committed to giving access to energy to everyone, everywhere.”
I wear three hats. One as the CEO of South Africa, which is the downstream segment of the company that includes our partnership with Sasol in the NATREF refinery. The second as the Group country chair for South Africa as well as for Botswana, Namibia, Swaziland which entails coordinating activities such as government and stakeholder interactions as well as the Group communication on behalf of the different divisions of the Group present in the country (E&P, Gas Renewable & Power, Refining, Marketing & services). Thirdly, I am the executive vice-president for the downstream affiliates in Southern Africa, including TotalGaz, which is located in South Africa.
You have experience working in many other African markets. What are your impressions of the Southern African region?
The Southern African market is very developed and mature, and it is very much like a European environment when it comes to consumption and demand. This creates greater responsibilities for companies like Total, as people have greater expectations of quality and level of services we must deliver.
What have been your key priorities during this challenging period?
In South Africa, the main priority was to reorganize the company in such a manner that would prepare us for the future, and ensure we are stronger and more resilient. We organized our business sectors in a better way, and worked on developing our staff, while onboarding new employees. Furthermore, we worked on costs, strategy and our understanding of the present and future market trends.
This was quite important as the industry in general was facing a crisis, in South Africa and abroad, while the South African mining sector was also facing difficulties likened to the prices of commodities. This, coupled with the political climate that raised market uncertainty, were large challenges. So far, our strategy implementation is paying off and we are witnessing positive commercial dynamics from a Total perspective.
When we met Patrick Pouyanné he mentioned the five key elements of Total’s future; value, renewables, safety, gas and Africa! On this note, why is Africa so strategically important for the company and how does South Africa fit into this approach?
Total has the ambition to become THE responsible energy major, and despite that oil and gas will clearly remain our core business for the next 20 to 30 years, we need to move towards shifting the global energy mix. To reach its ambition, Total must be able to successfully face three main challenges:
Firstly, the need to fuel the global growing energy demand which is first driven by demographics. We know that by 2035 the world’s population will be roughly nine billion people, with two billion coming from Africa. There is no development without energy and meeting the continent’s growing energy needs will definitely be a challenge, that is why Total is committed to giving access to energy to everyone, everywhere.
Secondly, climate change. As a global energy major, we are part of this problem, so now it is our responsibility to be part of the solution. This can be done by better production, more efficient energy utilization and education of consumers, while in the meantime moving to reshape the global energy mix to areas such as solar and gas. If we want to meet out climate target, this energy shift is a crucial step.
The last challenge being the evolution of the customer’s expectations which are evolving very rapidly. This is also true for the African markets. In South Africa specifically, the market is already extremely digitalized and developed, and the expectations of our clients, be it B2B or B2C, moves very quickly and are quite demanding.
All in all, these three challenges are very much a representation of Africa, and the continent is one of the company’s strategic pillars, along with Europe. Total has been in Africa for nearly 100 years, and in South Africa since 1954. Despite other majors leaving the region over the last few years, we are committed to Africa in the long term and we are here to stay.
Total is leading the way for South African E&P. What has prompted you to focus on exploration in the country?
Total is a global specialist in exploration, and we believe that there is a reasonable likelihood that we make a discovery in South Africa. Our initial campaign started in 2014 and had to be suspended due to technical issues as the conditions are quite harsh in relation to currents, depths, weather and location. We are now ready to relaunch an exploration campaign in Q1 2019 and are hopeful that it will be a success.
Low cost and high margins are becoming the name of the game in the oil and gas world, and this is none truer than in the downstream sector. How do you ensure Total reaches its downstream targets?
In South Africa, size matters, because it is a big market. You must be excellent in safety and operations, optimize your logistics and have the right controls to mitigate costs and protect margins. You must also understand your market and develop all segments of the business in order to meet your customers’ expectations. In this regard, we are focusing on strengthening our network of 550 stations to our goal of 800 over the upcoming years. This will be done though organic growth, as well as partnerships or acquisitions; we are very open to any process.
In B2B we are developing three segments. Firstly, mining, an important market for us in which we are leaders and looking to reinforce this strength. Secondly, general trade businesses, such as transportation and agriculture amongst others. And finally, resellers, as they are playing an increasingly large role in the South Africa landscape, as potential partners, customers and competitors. In this regard, we recently acquired a 30 percent share of Gulfstream Energy, one of the largest and fastest growing player in its class and a 100% black female owned company.
What process goes in deciding the best options for a possible partnership or acquisition?
We can not work with partners who do not adhere to our high levels of safety and business ethics; therefore, this brings a certain level of expectation to work with Total. This is the initial common ground, though the deal must obviously also make sense from a business perspective.
The balance between refineries and storage is a discussion currently in South Africa. What is your opinion on this topic?
You need to take a step back and have a larger perspective. There are a number of large refineries in South Africa, but there is still a need to complement their production with importations of refined products to meet the nation’s energy demand. The refining industry represents five thousand direct jobs and contributes to some 70 percent of the 700 thousand directly, indirectly and induced jobs in the oil sector of the economy through its downstream linkages into the economy. It is also an anchor tenant for the specialized engineering and construction industry for maintenance and replacement infrastructure thus supporting a significant skills base which necessarily requires specialized training from institutions such as colleges and universities.
In addition, the refining sector contributes to the security of supply of liquid fuels since crude oil imports (and its subsequent conversion to product) is less susceptible to unplanned interruptions of whatever nature than the import of finished product. For all these reasons, we believe in the future of this industry, even if we are aware of the large need for refiners to adapt and upgrade. This is what we have already undertaken at our refinery, NATREF, which for instance has been producing exclusively low Sulphur diesel fuels for the last three years.
To summarize, to find the balance between refining and importation is challenging but must be done to facilitate the nation’s long-term energy needs whilst preserving its social environment.
Social transformation is an idea Total is very much dedicated towards. Could you elaborate on how the company contributes on this topic?
The entire South African oil and gas sector has been a pioneer in social transformation. Total specifically on boarded its first BEE partner in 2003, and now after a lot of work has reached level-2 B-BBEE this year, even after the stricter regulations were put in place.
Total really wants to differentiate itself from the pack through the development of young people. We are identifying young talent with entrepreneurial mindsets from modest backgrounds and promoting them to dealership positions, financing them throughout the entire process. In my view, this is a very direct and efficient contribution to true broad transformation and employment development.
We are now committed to reaching as soon as possible a level 1 B-BBEE, even if we are very much aware of the challenge and the effort that represents moving from level 2 to level 1.
Are you optimistic the appointment of President Ramaphosa will create a more conducive business environment?
As we can observe today, it is clear that there is more confidence throughout the business community. Furthermore, only after the change in presidency have we witnessed the approval of new projects, especially looking at areas such as renewable and alternative energies. This is all welcome news and we are positive for the future that lies ahead.
What will determine Total’s success in the future?
People. We need to have the right people and grow and develop them in order to prepare them properly for their future responsibilities and new challenges. This includes sending South Africans abroad to be exposed to other environments. The South African business framework is at a good level, and we must ensure our people are ready for the opportunities that exist in the market.
Where do you want to take Total South Africa over the next five years?
We want to be one of the leaders in the market and be recognized as such, particularly when it comes to areas like innovation, transformation and bringing new products to the market.