Rocco Strydom Speaks With Global Business Reports

Selected quotes from the interview with Rocco Strydom, Director, Elegant Group, Elegant Fuel As a leading independent in the fuel distribution market, can you provide us with a brief overview of Elegant Fuel and your rationale entering into a market previously dominated by major players? In partnership with my father we saw a gap in the downstream market. The oil majors were retreating and leaving room for smaller players in the fuel distribution business and this led to the formation of Elegant Fuel. We started the business by looking after the smaller users of petroleum that had been neglected by the oil majors and we received an excellent response from the communities. Each year we became more successful and grew the company from there. Our current operations span across the country with the exception of the Western Cape, Kwazulu-Natal and the Eastern Cape. We built our business around the largest refineries in the countries, which explains our footprint. Moving beyond the borders of South Africa, what expansion opportunities exist for Elegant Fuel? There are opportunities in the near future to expand into other provinces. The independent market is excited about the new projects that will open up the whole Western Cape corridor. We always look for synergies outside of South Africa, but at this stage we are comfortable growing our volumes in South Africa as we have many opportunities to reach our own potential here. Moving outside of South Africa is not without its challenges but we will evaluate any opportunities strategically. How would you describe the legislation and regulatory framework for the fuel distribution industry in South Africa? The fuel industry in South Africa is highly regulated. There are great barriers to entry and shrinking profit margins. The industry remains robust and provides incredible investment opportunities to diversify and grow the business as many of the oil majors are selling off equipment and infrastructure. In South Africa we have seen new market entrants and we at Elegant Fuel welcome the competition. New players level out the playing field, create sustainable jobs and empower local people, an area we are passionate about. What has led to your success in securing strategic partnerships with the oil majors in South Africa? We have strong communication with all of our business partners and this has been key to our success and our ability to create the necessary synergies to ensure we meet our customers demands. For instance, Elegant Fuel does not have storage capacity but we can leverage our relationship with the oil majors to ensure that we always have product available. These high level relationships have taken time and nurturing and we can confidently say that we are in partnership with all the oil majors and we can uplift at any depot or refinery. We leverage the whole network, which gives us a major competitive advantage. Reaching a level 3 BEE initiative how does that influence business and how difficult is this for local players to achieve this rating? There are price structures relating to BBBEE infrastructure. However beyond pricing, there are many benefits for companies to achieve these qualifications. Many people ask what will a level 3 do for them, but rather ask what it will do for the country. Elegant Fuel is in the process of completing our new scorecard and we are adapting to the new standards. If you have the will, it is easy to achieve these levels. Companies need to be able to adapt to the requirements of the government in order to be successful. Elegant Fuel prides itself on achieving the highest environmental standards and contributing to the communities in which you operate. Can you highlight some of these key achievements? Elegant Fuel is a member of SAPIA, which means we adhere to strict environmental regulations, which is a pre-requisite for all fuel distributors to attain their wholesale license. Similarly, working with any of the oil majors you have to adhere to very stringent international regulations. Elegant Fuel started a BBBEE initiative called Project Themba (HOPE in Zulu). This project trains skilled and unskilled workers to become artisan welders, installers and technicians in the petroleum sector. We pay for the training and we incorporate them into the business and we empower them with the skills to work with any of the majors in the future. We have seen tremendous success in the program. Elegant Fuel has partnered with Faith Wheel tankers for your transportation needs, what opportunities exist for Elegant Fuel to run your own transportation fleet in the future? When Elegant Fuel began our operations every oil company was buying their own fleet, but we realised that putting the transportation into the hands of an expert would be the best solution. We began the joint venture with Faith Wheel tankers with only two tankers. We recently purchased four new state of art European specification tankers, and we were one of the few independent oil companies that actually bought those tankers from GRW, along with the oil majors. Now we have grown our fleet to 33 tankers. The outsourcing works well for Elegant Fuel and Faith Wheel tankers, it is a synergy between two companies allowing us to give unparalleled service. What has led to your success as an independent fuel distributor as competition increases and profit margins decrease and how important is it for the business to diversify into other business streams? Our ability to diversify and to innovate has contributed to our success. If you are not going to diversify your portfolio you will not last as an independent. For instance, we have developed innovative algorithms for the way we distribute fuel. We were one of the first independents that used an algorithm for deliveries, to determine the demand requirements and make sure the product is where it is needed. You cannot just be a fuel wholesaler, the margins are diminishing, the market is congested and the pie is not getting any bigger. Two years ago we started a maintenance and construction division which focuses on pump maintenance and tank installations as well as turnkey solutions for a filling station. We partnered with Easigas and we built the largest Liquid Petroleum Gas (LPG) depots in Limpopo. This is a 79 Cube LPG tank and we are distributing throughout the province and looking to expand into other areas. This speaks to diversifying our market share, a necessity of being an independent. How do you foresee the development of the industry and Elegant Fuel in the medium term? Companies need to use creativity as a competitive edge. Original contracts signed with the majors and retailers were based on a twenty-year term and many of those are reaching their end. However, to leverage those you need to have a strong hold in the industry and Elegant Fuel has built itself by being about the people, creating sustainable jobs and exceptional customer service.

Selected quotes from the interview with Rocco Strydom, Director, Elegant Group, Elegant Fuel

As a leading independent in the fuel distribution market, can you provide us with a brief overview of Elegant Fuel and your rationale entering into a market previously dominated by major players?

In partnership with my father we saw a gap in the downstream market. The oil majors were retreating and leaving room for smaller players in the fuel distribution business and this led to the formation of Elegant Fuel. We started the business by looking after the smaller users of petroleum that had been neglected by the oil majors and we received an excellent response from the communities. Each year we became more successful and grew the company from there.

Our current operations span across the country with the exception of the Western Cape, Kwazulu-Natal and the Eastern Cape. We built our business around the largest refineries in the countries, which explains our footprint.

Moving beyond the borders of South Africa, what expansion opportunities exist for Elegant Fuel?

There are opportunities in the near future to expand into other provinces. The independent market is excited about the new projects that will open up the whole Western Cape corridor.

We always look for synergies outside of South Africa, but at this stage we are comfortable growing our volumes in South Africa as we have many opportunities to reach our own potential here. Moving outside of South Africa is not without its challenges but we will evaluate any opportunities strategically.

How would you describe the legislation and regulatory framework for the fuel distribution industry in South Africa?

The fuel industry in South Africa is highly regulated. There are great barriers to entry and shrinking profit margins. The industry remains robust and provides incredible investment opportunities to diversify and grow the business as many of the oil majors are selling off equipment and infrastructure.

In South Africa we have seen new market entrants and we at Elegant Fuel welcome the competition. New players level out the playing field, create sustainable jobs and empower local people, an area we are passionate about.

What has led to your success in securing strategic partnerships with the oil majors in South Africa?

We have strong communication with all of our business partners and this has been key to our success and our ability to create the necessary synergies to ensure we meet our customers demands.

For instance, Elegant Fuel does not have storage capacity but we can leverage our relationship with the oil majors to ensure that we always have product available. These high level relationships have taken time and nurturing and we can confidently say that we are in partnership with all the oil majors and we can uplift at any depot or refinery. We leverage the whole network, which gives us a major competitive advantage.

Reaching a level 3 BEE initiative how does that influence business and how difficult is this for local players to achieve this rating?

There are price structures relating to BBBEE infrastructure. However beyond pricing, there are many benefits for companies to achieve these qualifications. Many people ask what will a level 3 do for them, but rather ask what it will do for the country. Elegant Fuel is in the process of completing our new scorecard and we are adapting to the new standards.

If you have the will, it is easy to achieve these levels. Companies need to be able to adapt to the requirements of the government in order to be successful.

Elegant Fuel prides itself on achieving the highest environmental standards and contributing to the communities in which you operate. Can you highlight some of these key achievements?

Elegant Fuel is a member of SAPIA, which means we adhere to strict environmental regulations, which is a pre-requisite for all fuel distributors to attain their wholesale license. Similarly, working with any of the oil majors you have to adhere to very stringent international regulations.

Elegant Fuel started a BBBEE initiative called Project Themba (HOPE in Zulu). This project trains skilled and unskilled workers to become artisan welders, installers and technicians in the petroleum sector. We pay for the training and we incorporate them into the business and we empower them with the skills to work with any of the majors in the future. We have seen tremendous success in the program.

Elegant Fuel has partnered with Faith Wheel tankers for your transportation needs, what opportunities exist for Elegant Fuel to run your own transportation fleet in the future?

When Elegant Fuel began our operations every oil company was buying their own fleet, but we realised that putting the transportation into the hands of an expert would be the best solution.

We began the joint venture with Faith Wheel tankers with only two tankers. We recently purchased four new state of art European specification tankers, and we were one of the few independent oil companies that actually bought those tankers from GRW, along with the oil majors. Now we have grown our fleet to 33 tankers.

The outsourcing works well for Elegant Fuel and Faith Wheel tankers, it is a synergy between two companies allowing us to give unparalleled service.

What has led to your success as an independent fuel distributor as competition increases and profit margins decrease and how important is it for the business to diversify into other business streams?

Our ability to diversify and to innovate has contributed to our success. If you are not going to diversify your portfolio you will not last as an independent. For instance, we have developed innovative algorithms for the way we distribute fuel. We were one of the first independents that used an algorithm for deliveries, to determine the demand requirements and make sure the product is where it is needed.

You cannot just be a fuel wholesaler, the margins are diminishing, the market is congested and the pie is not getting any bigger. Two years ago we started a maintenance and construction division which focuses on pump maintenance and tank installations as well as turnkey solutions for a filling station. We partnered with Easigas and we built the largest Liquid Petroleum Gas (LPG) depots in Limpopo. This is a 79 Cube LPG tank and we are distributing throughout the province and looking to expand into other areas. This speaks to diversifying our market share, a necessity of being an independent.

How do you foresee the development of the industry and Elegant Fuel in the medium term?

Companies need to use creativity as a competitive edge.

Original contracts signed with the majors and retailers were based on a twenty-year term and many of those are reaching their end. However, to leverage those you need to have a strong hold in the industry and Elegant Fuel has built itself by being about the people, creating sustainable jobs and exceptional customer service.