What business lessons can we from the Closure of a Uganda petroleum products retailer, Engen

Engen Petroleum Company has closed its operations in Uganda, leaving scores of its employees jobless and confused.

Engen, a subsidiary company of PETRONAS (Petroliam Nasional Berhad), a Malaysian state-owned oil and gas company closed shop in Uganda to focus on its business interests in other Sub-Saharan Africa countries. In Africa, Engen is based in Cape Town, South Africa.

The company website; www.engen.co.ug, has also been pulled down and could not be accessed as of today (Thursday), New Vision observed. Engen Uganda began operations in January 2003 and six months later started marketing lubricants.

Although Tania Landsberg the Engen group communications manager announced that the closure was to enable them concentrate on other interests, sources said the company had failed to breakeven.

Rajni Tailor, the national fuel dealers’ chairman said the collapse of Engen was bound to happen due to the stiff competition in the oil market.

“Small agents are bound to wind up if government does not do anything. A dealer gets a maximum of sh60 while big dealers like City Oil can get as much as sh200 on every litre. We have held meetings with government on this matter but nothing has been done. So, the small companies like Engen have nothing to do but wind up and go to countries where they can break even,” Tailor said.

In December 2010, Engen Petroleum Limited closed deals in Malawi and Zambia even as it was concluding a deal to buy Chevron's assets in the two countries.

Engen Africa chief executive officer Nizam Salleh had in 2010 hoped that the company would expand beyond the gas service stations in 17 sub-Saharan Africa countries and export products to more than 30 countries.

By the time of its closure, according to a recent post on its website, Engen was operating five retail stations in the greater Kampala area.

However, one of the employees who did not want to disclose her identity said they were suing the company for abrupt termination of their employment and for benefits.

“It is true we are closing shop but we are going to court because the way the matter has been handled is very unfair to us,” one of the female employees said in a sad tone.

Sources said local oil firms like City Oil and Petrol Uganda have already expressed interest in buying the winding firm.

By Chris Kiwawulo
The New Vision Newspaper
08 July 2012