The making of a multimillion dollar business …how GOIL survived divestiture scare to become a national pride

Despite a rocky start in the early 1990s, the Ghana Oil Company Limited (GOIL) has fruitfully weathered its own version of corporate storms to now emerge an enviable company worthy of emulation by competitors and state-owned enterprises (SoEs) in the country.

After a historic acquisition in 1974 made the government a majority shareholder, the company has gone through various turbulent times, including surviving a divestiture scare in 2000 and subsequently listing on the Ghana Stock Exchange (GSE) in 2007, to now become the number one oil marketing company (OMC) in the country.

Although currently a household name, GOIL’s past was tortuous; the company was held down by limited reinvestment, rising debts and poor corporate governance practices. The decision to list in 2007 was, therefore, opportune. It brought with it new energy, hope, good corporate governance and fresh funds for reinvestment.

The Patrick Akorlie factor

Five years after going public, GOIL’s board and management decided to rebrand the company.

In the process, it successfully shook off its distressed and old self to usher in a new and exuberant oil marketer with new values, passion and a strong commitment to offering high customer service and value for shareholders. It also achieved ISO certification and ratification as a further endorsement of the quality of its products.

In 2012 too, the board appointed Patrick A. K. Akorli as Managing Director. An astute accountant, Mr. Akorli was elevated from his previous position of finance manager to MD to help lead the new phase of the company.

His previous association with the company meant that he was well-aware of GOIL’s challenges and prospects. “I had been the chief accountant, controller, treasurer, chief internal auditor and then finance manager,” he recounted in an interview.

In the years that followed, Mr. Akorli and his team led GOIL’s transformation from a third placed OMC to number one, expanded into the BDC business and endeared the brand to all consumers.

Thanks to growth in market share and diversification, gross revenues resumed a growth trajectory, resulting in handsome profits and dividend payouts to shareholders. From 2011 onwards, GOIL regained its momentum in a direct reversal of its pale self, prior to the listing in 2007. Since then, the company has not looked back.


Around 2013, most BDCs were debt-ridden, forcing them to insist on cash from OMCs in return for products delivered. This affected GOIL, which was then the largest off-taker.

Mr. Akorli recalled that management “realised that it was becoming difficult and the rebranding project in 2012 will be unsuccessful if we had to continue being at the receiving end of the BDCs.”

GOIL’s response was strategic: Set up GO Energy as a BDC subsidiary.

Fast forward to July 2015, deregulation took off, making it possible for market forces, not the National Petroleum Authority (NPA), to determine prices of refined petroleum products. It was the first of its kind in the country.

Driven by the fruition of the rebranding exercise and previous investments, the coming onboard of GO Energy and some strategic decisions, GOIL moved from third position to number one in terms of market share and brand appeal.

Credit to staff

As these positives took hold, the fruits started showing. Thus, little by little, the board and the Mr. Akorli-led management started revamping GOIL’s finances. As of 2014, the company’s revenue had strengthened to GH¢1.6billion, assets were GH¢340.8million and net profit had peaked at GH¢20million.

Market share also almost doubled to 20percent for the oil marketing business and 21percent for the bulk oil distribution business, making the GOIL Group a leader in both sides.

Thanks to the consistent posting of profit, dividend payments became an annual affair and GOIL’s share price begun to strengthen. This endeared the company and its MD to shareholders. The result was a rejuvenated GOIL that gave competitors a run for their money.

On these positives, Mr. Akorli insists they are the result of team work that speak volume of the competences of GOIL’s human capital. “I won’t say I brought anything new but because I was an internal person, I knew that we had technical expertise; one of the most competent workforce in the downstream industry,” he said.

Beyond that he said it shows that Ghanaians are capable of building strong companies when given right opportunity.

Growth in assets

Today, the health of GOIL’s balance sheet and the strong growth in market share give credence of what foresight, focus and a clear sense of purpose can do for an indigenous company in the country.

Its total assets soon strengthened from GH¢81.3 million in 2007 to GH¢121 million in 2011. Market share also improved to around 11percent, placing GOIL on number three, behind Shell (now Vivo Energy) and Total. Now, it is evident that GOIL is rubbing shoulders with the big names in the subsector.

But unlike competitors, the group has a stronger balance sheet on which to fall on for any future big-ticket transactions.

As of December, last year, its total assets had risen to GH¢1.03billion, funded largely by a 140 percent growth in stocks from GH¢47million in 2016 to GH¢114 million in 2017. Liabilities were kept under control at GH¢669.4million within the period. Revenues, which were GH¢4.1billion in 2016, also grew by 14.6percent to GH¢4.7billion in December 2017.

Net profit remained strong at GH¢65.1million, up by 22percent from GH¢53.4 million in 2016. With this and a competent workforce, the company can continue to serve as an opportune stabiliser in a volatile and deregulated downstream petroleum business.

Benefit to shareholders

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The company’s enviable transformation over the years signals good times for shareholders. As growth surges, on the back of a resilient management and costs remain under control, increased revenues will lead to strong profit.

This should translate into additional value to shareholders in the form of share price appreciation and annual dividend payouts.

In fact, since going public in 2007, GOIL has maintained an enviable record of year-in, year-out dividend payouts. Except 2016, when dampened revenues on the back of subdued sales caused the company to maintain its 2015 dividend of GH¢0.25 per share, the company has habitually grown its annual dividend from GH¢0.0085 per share to GH¢0.028 per share in the 2017 financial year. This makes it one of the few listed companies with a consistent dividend payment culture.

Earnings per share has equally strengthened; it rose from GH¢0.019 in 2007 to GH¢0.166 last year. This means that the company’s profitability has more than quadruple twice within the two decades.

Patrick Akorli, Group CEO

Challenges to strong growth

Despite being on solid grounds, GOIL has been a victim of the generally costly nature of the business environment in the country and in the particular, the downstream petroleum subsector.

Its situation has been worsened by the peculiar nature of the business, the minimal returns in the subsector and its strong exposure to state institutions, especially the security services.

While the cost of operations and high levies erode the group’s revenues, the lagged payment for supplies depresses liquidity, resulting in heavy reliance on and strong exposure to throat-cutting bank overdrafts.  In 2017 for instance, the group’s cost sales payment for customs duties and levies rose to GH¢4.49billion from GH¢3.9billion in 2016.

As result, GOIL’s gross profit margin in 2017 was a far cry of five percent, way below other companies with similar financial might. What this means is that about 95 percent of the company’s revenues are sapped by payment to suppliers, duties and levies. Although depressing, the weak margins reflect the bearish nature of returns in the downstream petroleum business.

Kwamena Bartels, Board Chairman

Also, GOIL’s cashflow position has been constrained by weak collections, a general reflection of the company’s strong exposure to the nation’s security services.

Due to their strategic nature, GOIL is unable to cut supplies to them and other big institutional customers despite their habitual delay in payment. This strains the group’s liquidity position, forcing it to rely on overdrafts to be able to meet statutory payments of custom duties and levies to the Ghana Revenue Authority. The result is a rise in interest expense.

GOIL’s Chief Operating Officer, Alex Josiah Adzew, blames the strained liquidity and low margins development on the tight nature of returns in the downstream petroleum subsector. “Liquidity is a challenge because cost of doing business in Ghana is still high. For an industry that thrives on very tight margins, then you run into a lot of problems,” he said in a separate interview.

“The other factor is if we don’t get paid, then it begins to affect our cashflows. If you watch our accounts, you realise that the cashflow went into negative and it is all because a chuck of the supplies is to the security services and other state agencies and the hardly pay on time,” he added.

Also, despite a strong growth in retail outlets to more than 300 stations currently, the group only owns about 100, as the majority of the outlets are owned by private individuals that are seeking to profit from the strong GOIL brand. This reduces the amount of gains GOIL can make from these stations.

These aside, GOIL’s success over the years speak volume of what a competent board, hardworking and visionary management and innovative staff can do for an indigenous Ghanaian company listed on the Ghana Stock Exchange.

Why we should celebrate GOIL

While at it, the point needs to be made forcefully that GOIL’s meteoric rise to the top should be celebrated for three key reasons: A strong GOIL is testament of the Ghanaian ingenuity; it discourages collusion and price taking by consumers in the petroleum downstream business and also retains capital as a cure to all the challenges associated with capital flight.

As a market leader, its existence and sway is not just critical for the country but opportune for all the good reasons. The key among them is the balancing off of foreign dominance in blue chip sectors of the economy.

This is how:

Last year, an average of 9,500 tons of refined petroleum products was consumed daily by individual, residential and commercial consumers.

With national consumption ending 2017 at 3.46 million tons, it was not surprising that oil imports for the year firmed up to almost US$2billion, representing 15.7percent of the value of the year’s total imports.

For an economy that is projected to enjoy annual growth rates of above five percent in the medium-to-long-term, more refined petroleum products will surely be needed to help fuel additional cars and ships, power industries and keep thermal plants running for existing and new factories to operate.

Although a good prospect, the projected strong demand for refined petroleum products begs the question how much of the resulting returns will return directly into the local economy. Better put; what will be the share of indigenous firms in meeting that demand?

At the heart of that question are the ownership structure and the market share of current bulk oil distribution companies (BDCs) and oil marketing companies (OMCs) – the firms that offtake, wholesale and retail the products to end consumers in the country.

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Given that the strong growth will translate into better gains for businesses in that value chain, having minimal and/or weak companies in the subsector reduces the benefits to the country, raises capital flight and exposes the pricing of petroleum products to vulnerability.

This makes GOIL’s sway in the subsector strategic. Its commanding nature also means that the dominance of foreign interest in key sectors of the economy is absent in the downstream petroleum business.

Since time immemorial, a critical mass of Ghana’s promising economy has been resigned to foreign interest, with the telecommunication, mining and now petroleum subsectors virtually becoming the sole prerogative of majority foreign-owned firms.

While no local company currently operates in the multibillion dollar telecoms industry, the few ones in the extractive sector are at the periphery and best known for their support service roles. This is injurious in the economy as it promotes capital flight and reduces the real benefit of the strong growth in the sector to the nation.

Alex Josiah Adzew, Chief Operating Officer
Ben Torkornoo, Head of Operations

The banking subsector is another victim. Of the 30 banks currently in operation, more than half – 17 banks – are majority foreign-owned. The minority domestically-controlled banks are fragile – less capitalised and altogether, control less than 40 per cent of the industry’s business.

Given that these are the blue-chip areas of the economy, locals being on the periphery marginalises the entire country. GOIL’s clout in the downstream petroleum business therefore symbolises national pride that should be protected and jealously guarded.

Erasmus O. Sarkwa, Head of Finance

It is, therefore, in the national interest to keep the strategic alliance between GOIL and GO Energy flourishing for the ultimate good of the country and the consumer in particular.

This is critical in ensuring that prices of petroleum products, which is a key determinant of the cost of living in the country, remain stable. Because GOIL is the largest retailer of the products, reverting to the old system when it relied on private BDCs for supplies will mean that GOIL will be exposed to the dictates of such suppliers.

That makes it easier for GOIL to experience product shortages as was the case and/or raise prices to contain similar increases by its supppliers, which will ultimately affect the ordinary consumer. The alliance between GOIL and GO Energy, therefore, creates a complete company that can continue to be an opportune stabiliser.

Looking ahead

As has been case, GOIL has often exhibited foresight in the choice of its investments. Key among them is the 13.5million litre marine gas oil tanks at the Takoradi Habour in the Western Region. The facility makes it easier for GOIL to service ships transiting or discharging cargo in any of the country’s twin ports.

This foresight is also reflected in the proposed establishment of the Bitumen Plant at Tema and the three LPG gas plants at vantage points nationwide.

With these, GOIL will be cementing its role in the subsector for future prospects. And with the strong balance sheet, the company is empowered to continue to diversify into adjoining areas to help maintain growth in top and bottom line. The beneficiaries will be shareholders, the economy and the country at large.

While doing that the company needs to strengthen its collections to help reduce the strong exposure to overdrafts. The company must also strongly sweat its current assets to avoid the temptation of a bloated growth in stations in a bit to keep growth strong and that could return to hurt it in the long run.

In the midst of this, GOIL needs to prioritise cost control measures to help ensure that its strong revenues are not eroded but retained to help bolster profit for dividend payments to continue to be strong.  The company can do this by weeding off frivolous expenditures and continuing to prioritise value for money in every venture it engages in.

GOIL in upstream business?

In all this, one key question that time and corporate vision will answer is whether or not GOIL will venture into the upstream petroleum business.

Its strong balance sheet, enchanting brand and desire to diversify places the company on a strong pedestal to be able to make a proper entry and meaningful impact in an area that is virtually resigned to multinationals.

Whatever the case, GOIL’s CEO said the group’s focus in the coming years will be to exemplify its brand icon and boxing legend, Prof. Azuma Nelson. A great boxer of international repute with numerous laurels to his credit, Prof. Nelson is a national pride whose discipline, modesty and general appeal endears him to millions of people in and out of Ghana.

As a firm believer that the downstream petroleum business, just like any other retail, should be reserved for locals, Mr. Akorli said GOIL has chosen the path of discipline in its match to national glory. “Like Azumah, we want to be giants in our own corner but humble, discipline and responsible. We want to let it be known that it can be done here in Ghana and by Ghanaians,” he said.

Pull quotes

  1. It is, therefore, in the national interest to keep the strategic alliance between GOIL and GO Energy flourishing for the ultimate good of the country and the consumer in particular
  1. Whatever the case, GOIL’s CEO said the group’s focus in the coming years will be to exemplify its brand icon and boxing legend, Prof. Azuma Nelson
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