INSTITUTE OF CHARTERED ACCOUNTANTS, GHANA

NOVEMBER 2024 EXAMINATIONS

(PROFESSIONAL)

LEVEL 3

STRATEGIC CASE STUDY

(PAPER 3.4)

PRE-SEEN INFORMATION

 Candidates will NOT be allowed to bring the results of their work on the
pre-seen information into the examination hall

 Pre-seen plus additional information will be made available to candidates

in the examination hall
BLUE OIL & GAS MARKETING LIMITED (BOGML)

The Birth Story of BOGML

Although BOGML has business interests in other sectors of the Ghanaian economy, its primary
area of operation is in the petroleum industry, with a specific focus on the downstream
(distribution and retailing of petroleum products) segment of that industry. Close observers and
participants in Ghana's (downstream) petroleum industry can attest to the fact that it is a highly
challenging sector to operate in. There is a cocktail of underhand dealings, manipulations and
opacity of transactions in this sector. Perhaps, this is not peculiar to Ghana but a common
denominator running through Africa, and perhaps the global petroleum industry. This assertion
is buttressed by Aliko Dangote, one of Africa’s foremost industrialists. During a panel
discussion at the 31st Afreximbank Annual Meetings held in Bahamas, Aliko Dangote, the
owner of Dangote Oil Refinery, Africa’s biggest oil refinery, shared the key lessons he learnt
during the process of building the refinery. This was reported by GhanaWeb, Accra based
online news portal, as follows:

“According to Dangote, one of the main lessons during his journey was finding out that there
was a cartel that runs the oil industry in Africa. He mentioned that this cartel, which has long
existed in the oil industry for decades, has blocked Africa’s efforts at developing its own
refinery for oil production. Dangote said, “I knew there would be a fight, but I didn’t know
that the mafia in the oil industry was stronger than the mafia in the drugs industry”. The
link to the story: 'The mafia in the oil industry is stronger than the mafia in the drugs industry'
- Aliko Dangote (ghanaweb.com).

Therefore, securing the necessary approvals and scaling regulatory hurdles to commence
operations as an oil marketing company (OMC) and a Liquefied Petroleum Gas (LPG)
Marketing Company (LMC) can be a daunting task if not a Gordian knot. It is within this
context that the current sole shareholder of BOGML, Dr. Ayimadu Baffour (referred to as the
shareholder), and also the Managing Director (MD), embarked on the mission to operate in the
downstream petroleum sector.

From the outset, the shareholder sought to obtain fresh OMC and LMC licences but was
unsuccessful after two years of trying. Sooner than later, the shareholder came to the realisation
and from reliable sources within the sector that the faster route to obtaining the licences was
for him to acquire already issued licences which are readily available for sale. Following
background checks and searches, the shareholder finally managed to acquire an existing licence
for BOGML for USD400,000 (both OMC and LMC) in January 2017. The officially approved
fees for new licences for OMC and LMC are GH₵200,000 and GH₵12,000 respectively.

After acquiring the necessary licenses, the shareholder, became a 100% owner of BOGML and
began operations. The company has maintained its indigenous identity and has been leveraging
its resources, competencies, and strategic capabilities to achieve steady growth, despite facing
headwinds from domestic and international economic factors. The shareholder, now in his mid-
forties, holds a Bachelor of Science degree in Business Administration (Accounting Option)
from Kwame Nkrumah University of Science and Technology (KNUST) and has been a
member of the Institute of Chartered Accountants, Ghana, for over ten (10) years.

After completing his first degree, the shareholder began his career in a reputable foreign bank
in Ghana, initially joining through national service and later securing a permanent position in
the Internal Audit Department. After ten (10) years, he transitioned to an indigenous bank as

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Head of Internal Audit. However, ethical concerns surrounding sensitive financial and
operational matters led him to resign after two years. Following this, he took up the role of
Head of Finance at an indigenous OMC, where he witnessed significant regulatory and ethical
violations which led to loan defaults and the sale of the company’s collateralised assets. He felt
as though he had gone from the frying pan into the fire, moving from ethical challenges at the
bank to an even worse situation at the OMC.

His experience in the sector sparked a desire to start his own business in the petroleum industry.
He realised that many locally-owned OMCs, especially small to medium sized ones, were
failing due to poor management practices, despite the fact that the industry is generally
profitable, driven by the inelastic demand for petroleum products. In January 2015, with the
vision of transforming the narrative around local OMCs and building a multinational
downstream petroleum company, he resigned with the intention to start his own business. His
long-term goal is to develop a successful indigenous oil and gas marketing and distribution
company that can compete with multinationals like TotalEnergies, Vivo Energy, and Puma
Energy. Despite the challenges facing local OMCs, some, such as Goil Plc, Star Oil, Allied
Oil, and Yass Petroleum, are performing well, offering hope for the success of locally-owned
firms in the sector.

THE PETROLEUM INDUSTRY OF GHANA

Contribution of the sector to economic development of Ghana

The petroleum industry in Ghana is the backbone of the nation’s economy, encompassing a
broad spectrum of activities from exploration and production (upstream) to transportation and
refining (midstream), and finally to distribution and marketing (downstream). Since the
discovery of oil in commercial quantities in June 2007 and commencement of commercial
production in December 2010, the industry has contributed significantly to Ghana’s Gross
Domestic Product as well as tax revenue. The 2024 Budget Statement of Ghana estimated a
total contribution of oil and gas taxes to tax revenue from 2016 to 2024 to be GH₵166.08
billion and GH₵89.64 billion in nominal and real (i.e. measured at constant 2013 prices) terms
respectively. The contribution of the petroleum sector to direct and indirect employment
opportunities in the country cannot be discounted. In the absence of a reliable data on the
number of jobs created, at a minimum, it is generally estimated that over 100,000 Ghanaians
are employed in the entire value chain of the petroleum industry, directly or indirectly.

Regulation and liberalisation of the petroleum sector

In the 1980s and 1990s, Ghana's downstream sector was heavily regulated, with state-owned
companies dominating the market. However, economic reforms in the 1990s, led by the
government's Economic Recovery Programme (ERP), led to the liberalisation of the petroleum
sector, allowing private companies to participate in the distribution and marketing of petroleum
products.

Since the 1990s, the downstream petroleum sector has undergone significant transformation,
evolving from a state-controlled system to a more liberalised market. In 2005, the petroleum
pricing structure was deregulated, intended to allow market forces to determine prices.
However, this policy was never fully implemented. The National Petroleum Authority (NPA)
was established in 2005 to oversee the deregulation process. It was not u finally and fully
implemented petroleum price deregulation by allowing the Bulk Import Distribution and
Export Companies (BIDECs) and the OMCs to price their own products. With the
deregulation, private companies entered the market, driving competition in distribution and

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retailing of petroleum products. Further, with the deregulation, OMCs have the opportunity to
expand their retail networks, especially in underserved rural areas. The downstream sector can
explore synergies with renewable energy sources, particularly in distribution and retail, to meet
Ghana’s energy transition goals.

There is no gainsaying the fact that the petroleum sector as a whole, because of the sensitive
role it plays in national development, can present a national security threat if it is not properly
managed. Hence, it is one of the sectors in the country that is heavily regulated to protect its
integrity, safety and prevent any systemic threat that may arise should anything go awry.
Consequently, a number of the state agencies coalesce to regulate the petroleum sector. The
agencies include National Petroleum Authority (NPA), Ghana Standards Authority (GSA),
Energy Commission, Environmental Protection Agency (EPA) and Ministry of Energy.

Ghanaian downstream petroleum industry report

In the 2023 annual report of a leading multinational competitor in Ghana's downstream
petroleum sector, dated May 30, 2024, the board chairman of the competitor, addressed key
sector developments. His statement highlighted notable changes and trends within the industry.
Portions of the said statement are reproduced below:
Ghanaian Petroleum Industry
The downstream petroleum industry continues to be the cornerstone of the country’s
economic development. In 2023, the industry was positively impacted by the Government of
Ghana’s Gold-For Oil (G4O) Program which helped to curb the rising ex-pump prices in the
market for the benefit of the motoring public with a rippling positive effect on the general
economy. It further addressed the forex challenge hitherto faced by players in the industry,
and thereby enhanced fuel supply in the country. The Government’s plan to scale up fuel
supply under the G4O Program from 30% in 2023 to 50% of national consumption will
potentially enhance product supply further and promote competitive pricing in the market.
Also, the introduction of Sentuo Oil Refinery, the first private oil refinery in the country, is a
major boost to ensuring a consistent supply of fuel in the market. This will not only reduce
dependence on imported refined products, but also reduce the industry’s susceptibility to the
impact of international market trends. Competition remains keen in the downstream
petroleum industry and continues to drive innovation and efficiency.

In pursuit of energy sustainability, the Ghanaian downstream petroleum industry is gradually

transitioning towards diversified and cleaner energy sources. This includes embracing
renewable energies such as solar, wind, and hydroelectric power generation to mitigate the
environmental impact of fossil fuels. In line with this, the President of the Republic of Ghana
launched the Electronic Vehicles (EV) Policy Framework in November 2023 to guide the
country’s transition into the use of EVs. This paradigm shift will potentially shape the
direction of the industry in the medium to long term as players adapt their operating strategies
to the changing needs of the market.

Opportunities, Prospects and Challenges in the Downstream Petroleum Industry

Following price deregulation in the downstream petroleum sector in 2015, there has been an
intense price-based competition among OMCs where each company tries to undercut the price
to attract consumers. This situation has been described as “price war” amongst the OMCs.
Information on prices is readily available to customers for comparison. While price wars can
benefit consumers in the short term by providing lower prices, they can also have negative

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consequences on OMCs particularly and industry as a whole in the long-run. In some cases,
OMCs may resort to unsustainable pricing strategies that can lead to financial losses and even
business failures. Additionally, price wars can disrupt the market and make it difficult for
companies to invest in infrastructure and improve their services. Although the industry is said
to be profitable, the margins are generally low. High sales volumes are key to profitability, so
OMCs compete aggressively for customers to drive volumes, leading to intense market rivalry.

There are many operators in downstream petroleum sector. These include BIDECs, OMCs,
Storage Companies and LPG Marketing Companies. Based on NPA statistics, there are 53
BIDECs, 208 OMCs and 24 Storage Companies.

According to statistics from the NPA and the Energy Commission of Ghana, the total demand
for petroleum products in the country has risen significantly, increasing from 1,846 kilotonnes
(1,846,000 metric tonnes) in 2000 to 4,931 kilotonnes (4,931,000 metric tonnes) in 2023. The
petroleum products making up the demand include Gasoline (i.e. Petrol), Gas Oil (i.e. Diesel),
Aviation Turbine Kerosene (ATK), LPG, Kerosene, Dual Purpose Kerosene (DPK), and
Residual Fuel Oil (RFO). Ghana’s growing population and expanding transportation and
industrial sectors will continue to drive demand for petroleum products. The forecast predicts
that the demand for petroleum products will keep growing for the foreseeable future.

The demand for finished petroleum products is satisfied by a mixture of locally produced and
imported products. Over the years, local production of petroleum products significantly
declined while imports increased drastically due to non-functioning of Tema Oil Refinery
(TOR). In December 2023, Sentuo Oil Refinery Limited (SORL) established a privately owned
oil refinery at Tema and began local production of finished products. As a result, the decline
in local production is expected to end and rather start increasing in the near future. According
to the NPA Petroleum Downstream Statistical Bulletins for Q4 2023, Q1 2024, and Q2 2024,
an estimated 149,594, 169,786, and 142,348 metric tonnes of petroleum products were refined
domestically in each respective quarter. This development, in the long run, should reduce the
country’s import bill and the demand for foreign currency for imports. However, this is likely
to negatively impact BIDECs whose core business involves importation of finished petroleum
products. The understanding by the industry watchers is that some BIDECs are already
struggling due to increased domestic production.

Table 1 below highlights the growth in the demand for petroleum products.
Table 1: Demand for petroleum products 2000 - 2023
(in kilotonnes - (kt))
2000-2009 2010 – 2019 2020 – 2023
Combined Imports and Local Production (10 years) (10 years) (4 years)
Total (kt) 21,142.00 36,970.00 18,247.00

Another development is the proposed plan by Petroleum Hub Development Corporation

(PHDC) to build about three oil refineries in Ghana between 2030 to 2035 with a total capacity
of 900,000 bpsd (barrel per stream day) and expandable to 1.5 million bpsd. These refineries
will be located in the Western Region of Ghana. OMCs will have access to more products at a
cheaper cost and demand by consumers is expected to increase as well.

Ghana’s location makes it a strategic hub for the export of refined petroleum products to
neighboring countries, especially the land-locked countries in West Africa. OMCs can take
advantage of this to participate in the export business.

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There is an increasing demand for LPG as a cleaner alternative to biomass for cooking, creating
new opportunities for distribution companies. Indeed, there remain a large number of
households in peri-urban and rural communities who still depend on charcoal and firewood as
their main sources of energy for cooking and heating. As Ghana’s oil production continues,
there is potential for developing petrochemical industries that use refined petroleum by-
products.

Fluctuations in crude oil prices on the global market directly affect the cost of petroleum
imports, which can lead to price instability. The depreciation of the Ghanaian cedi increases
the cost of importing petroleum products, impacting pricing and profitability. Illegal
importation and sale of petroleum products undermine the formal market and lead to revenue
losses. Changes in government policy, taxes, and levies in the petroleum sector have negatively
affected business operations and profitability.

Globally, OMCs model of doing business is to operate 24/7 throughout the week.
Unfortunately, due to several instances of armed robberies, especially at night and sometimes
broad daylight robberies at the filling stations, most OMCs in Ghana are not operating 24/7
round the clock. OMCs have lost millions of Ghana Cedis as well as precious lives. Companies
that have continued to operate 24/7 have made huge investment in in-house and outsourced
private security to provide protection for its workers. In some cases, huge sums of monies are
paid by OMCs to the Ghana Police Service to provide their workers with security and
protection. It is estimated that millions of Ghana Cedis in revenue is lost annually by the
companies that are unable to afford security to operate at night. These OMCs operate from 5am
to 9pm. Insecurity remains one of the major challenges for OMCs and the State is yet to find a
permanent solution to the menace.

Another challenge that has and continues to plague downstream petroleum sector, and which,
particularly, affects the indigenous small to medium sized (SME) OMCs is the issue of
adulteration of fuel sold at the stations. Unsuspecting and innocent motoring public have
suffered consequences of damaging their car engines after buying fuels from some of these
local OMCs. This has contributed significantly to affecting customer confidence in indigenous
SME OMCs. This has clearly affected the demand for petroleum products from indigenous
OMCs even for the genuine ones. This is a major challenge confronting the indigenous SME
OMCs which, unfortunately, the regulators have not been able to successfully nib in the bud.

Cylinder Recirculation Model (CRM) Policy

The Government of Ghana through NPA has introduced LPG Cylinder Recirculation Model
policy to replace the current model where consumers take their cylinders to LPG stations for
refilling. The government is pushing the LPG Cylinder Recirculation Model to enhance safety
standards and increase LPG penetration rate in the country. The Government is concerned with
the safety of most of the existing LPG stations due to past fire explosions in the communities.
It is estimated that about 89 persons died or got injured from reported cases involving LPG
explosions between 2007 and 2017. In 2016, there were LPG explosions at Trade Fair, Accra,
and Tinga in the Bole District of the Northern Region of Ghana. The year 2017 also recorded
the Atomic Junction gas explosion that wrecked major havoc in the catchment communities.
Under the CRM policy, consumers are not required to own cylinders. Filled cylinders would
be made available at some identifiable exchange points for customers to pay for the gas and
pick up the filled cylinders. This is expected to eliminate LPG Stations located within major
communities and permanently avoid gas explosions that have occurred in the past as well as
increase LPG usage rate in the country.

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The CRM programme was rolled out in September, 2023 in Accra and Kumasi and would
gradually spread across the country. The CRM is expected to run side by side with the current
distribution model until it is phased out completely at a future date yet to be determined by
NPA. NPA has stated that the implementation of the CRM was to ensure that at least 50 per
cent of Ghanaians have access to safe, clean and environmentally friendly LPG by 2030. The
statement concerning CRM policy is contained on the website of NPA and same is accessible
via this link - https://npa.gov.gh/npa-to-commence-cylinder-recirculation-model-in-
september/.

The LPG Marketers Association of Ghana (LMAG) are vehemently opposed to CRM policy
on the bases that millions of dollars of investment made in their LPG stations would go down
the drain and that, thousands of Ghanaians being employed would be made redundant. The
LMAG has stated that the LPG sector is a critical provider of employment for over 10,000
Ghanaians, including 8,000 direct and 2,000 indirect jobs. In a press statement, LMAG
underscored the fact that their members have invested over $400 million in the industry, with
around 60% financed through bank loans. Should the policy be implemented, most of the loans
will become bad and this will have dire implications for the survival of the affected banks. The
non-performing loans of the banks will increase significantly and this may create systemic
problems in the banking sector. Credit to the private sector may be cut back by the banks
thereby denying businesses critical funding for growth and employment.

THE GLOBAL PETROLEUM INDUSTRY

The global petroleum industry is constantly in the state of flux as new technologies are
emerging with disruptive potential and the recently heighten fear of all-out war in the Middle
East between Isreal and Iran, one of the major members of Organisation of Petroleum
Exporting Countries (OPEC). Since mid-November 2023, Houthi rebels in the Middle Eastern
country of Yemen have been attacking shipping in the Red Sea, firing drones and missiles and,
in some cases, boarding and seizing vessels. The Houthis, who are backed by Iran, say the
attacks are in solidarity with their Palestinian allies in Hamas. The attacks on the Red Sea route
have forced shipping companies to use longer alternative routes for transporting goods across
the world. These alternative routes will add thousands of miles and days of travel time to their
journey, costing companies millions of dollars in extra fuel and other costs. This situation is
seriously affecting the prices of imported refined petroleum products in many countries that
depend on imports to satisfy domestic demand.

Emerging markets, particularly in Asia and Africa, provide growth potential for downstream
operators. With rising populations and urbanisation, the demand for transportation fuels and
other refined products is expected to remain robust, allowing companies to expand their
refining and distribution capacities in these regions. The global energy transition towards
renewable energy sources poses a major threat to the downstream petroleum industry. This
may affect the OMCs that are unresponsive to the movement towards cleaner energy sources.
As countries increasingly prioritise the reduction of carbon emissions, stricter environmental
regulations are being imposed on refining operations, thereby increasing operational costs. The
push for electric vehicles (EVs) also threatens long-term demand for gasoline and diesel,
particularly in developed markets, as EV adoption accelerates. This will soon be the situation
in the developing countries as well.

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THE COMPANY - BLUE OIL & GAS MARKETING LIMITED (BOGML)

The Company - Humble beginnings

Since the company launched unto downstream petroleum sector scene in 2017, it has made
modest gains albeit below the expectations of the shareholder who also doubles as the
Managing Director (MD). Despite the challenging business climate and tough terrain in the
downstream petroleum sector, the dedication, commitment and passion of the MD have
ensured that the company has survived the business journey so far. Again, the combined
experiences in the banking and downstream petroleum sectors have proven extremely useful
in maneuvering through the labyrinth of the oil business. At the start of the company, the
shareholder was mindful to set the tone and practices that will endure and put the company on
a sound path to success. Therefore, he did not compromise on certain values and principles
which he believes would shape the success or failure of the company in the future. These values
include strict adherence to and respect for time, strict respect for deadlines, working
exceptionally hard and for long hours, and enforcement of strict discipline by adhering to
directives. He believes in the military mantra – “obey before you complain”. Perhaps, this may
be traced to the fact that Dr. Ayimadu Baffour is the son of a retired senior military officer of
the Ghana Armed Forces and he was raised in Burma Camp under military values.

The shareholder began business with 4 pioneering workers recruited on full-time basis, and the
staff strength gradually increased to a little over 100. Of the 4 workers who began the company,
3 have resigned. The pioneering team of workers began addressing the shareholder as
“Commander in Chief”, not because he has had any career in the army but because of his zero
tolerance for indiscipline and deviation from acceptable standards. That title has become
famous about the MD as new workers of the company are told about the militaristic approach
adopted by the shareholder to work. He usually reports to work latest by 6am (even sometimes
5:30am) and closes normally after 8:00pm, even though the normal working period is from
8:00am to 5:00pm. In the early years of the company (especially the first 4 years), he usually
went to the front desk where the attendance book is kept to ensure that employees who reported
to work after 8:00am recorded the right time. Employees who reported late to work were
required to provide on the spot explanation. If the explanation given does not satisfy the
shareholder, he imposes a penalty in the form of a deduction from the salary of the affected
worker at the end of the month. He prevented workers from leaving at 5:00pm by assigning
additional tasks or scheduling meetings after that time, often extending the workday until
8:00pm. His intent was to ensure that no one finished their workday before 7:00pm. Those who
managed to sneak out and their absence noticed by the shareholder after 5:00pm were
reprimanded the following day. Although this approach helped the company to grow, it caused
high labour turnover as workers who resigned cited long hours of work as one major reason for
their exit. High labour turnover was even worse among married female workers who were not
happy staying away from home for long hours.

The shareholder clearly felt a strong personal attachment to the company as it grew and
achieved modest successes. He made employees to believe that without him, BOGML would
not survive, implying that the company's future depended entirely on him, with workers merely
there to support his efforts. This attitude upset many employees, as they felt their contributions
and roles were not recognised. As a result, staff motivation declined, and a sense of
despondency spread within the company.

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The company initially located its head office at Tema, but in January 2024, moved its
operations to Accra. The company used the first year, 2017, to acquire various licences from
NPA and local assemblies to enable it start operation. One major obstacle that the company
faced was acquisition of land within the Greater Accra, Western, Volta and Eastern Regions
for citing its filling stations. There were issues of land litigations, astronomically expensive
land at vantage or prime locations and, due to limited financial resources, the company could
not afford to acquire and construct its own stations. The company, therefore, decided to rent
already existing filling stations which appear to be reasonable and affordable. However, this
model is fraught with uncertainties for the company. The practice is that new entrants into the
OMC space would usually approach the owners of these existing stations to offer higher
amount. Once this happens, the owners do not renew the tenancy agreement or sometimes
terminate it. The company is forced to cease operations of the affected stations. In its almost 8
years of existence, the company has suffered this fate with some of its stations. The benefits of
the investment in the rented stations are not fully recovered and sales affected until a new
station is found.

Company’s products and services

The main petroleum products sold by the company are Gasoline (also known as Petrol), Gas
Oil (also called Diesel), LPG and Kerosene. These products have posted varied degrees of
performance over the years. The other services on offer at the various filling stations are Mini-
marts, Lube Services for servicing of cars and Washing Bays. These services are assessed
separately or are considered as strategic business units.

The company has also diversified into other businesses in other sectors. The company provides
commercial transport services (it has about fifteen (15) mini-buses popularly known as trotro
in the local parlance) and real estate construction business where it constructs apartments for
both renting and outright sale to potential home owners. There are separate senior managers in
charge of each of these businesses.

The strategy and operations

Fully aware of the intense competition in the downstream petroleum sector and the challenges
of penetrating the market, the shareholder adopted a simple strategy by offering its products at
prices slightly lower than those of the market leaders, particularly GOIL and Star Oil.
Furthermore, to address the perception among consumers that indigenous small and medium
sized OMCs adulterate their products and thereby compromising the quality, the MD ensured
that quality was adhered to. He issued stern warning to the workers at the various stations not
to contemplate adulterating the products on his blind side. In this regard, he had a trusted team
of inspectors who regularly pay unannounced visits to various stations to collect fuel sample
for testing for any trace of adulteration. In fact, he also sent mystery customers (or shoppers)
to various stations to buy fuel and provide feedback on a sign of adulteration. The company
has also invested in a monitoring software that monitors the activities of the workers/fuel
attendants at the various filling stations. One challenge with this system is the unreliable
internet connectivity that results in frequent downtime thereby impacting on the data gathered
by the system. It is also believed that workers are unhappy with the monitoring system and
sometimes attempt to tamper with it to prevent it from working as intended. Indeed, the
shareholder has indicated that as a result of the measures and controls put in place, there has
not been a single customer complaint either to the company or to the regulator. The MD
believes that the strategy is gradually yielding result as sales from various existing stations
continue to see an average annual growth of not less than 10%.

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As a result of penetration pricing strategy adopted, the company is contending with reduced
margins and in response, it is extremely strict on cost control. The shareholder keeps close tap
on the administrative, station and staff costs. The company has maintained low salaries and
wages for the permanent and contract workers respectively despite agitation by workers for
salaries to be increased. The company ensures that it recruits from within the localities where
the stations are located and tend to select people who are living closer to the filling stations.
This is to avoid paying huge transportation allowance. Over 70% of the attendants at the filling
stations are hired on contract basis, usually 6-months renewable contracts. The packages
offered to contract workers are 40% cheaper compared to that of permanent workers. After all,
the company has a large pool of curricula vitae from which it is able to fill any vacancy that
arises quickly. The shareholder admits that unemployment rate in the country is high. The
downside of this arrangement is that the company has observed a trend of high rate of stealing
among the contract workers. On the part of the permanent employees, both at the head office
and at the stations, the shareholder says that he can feel a visible sense of low staff morale.
However, he indicates that under the circumstances of low margins and for the company to
survive, the company cannot afford any significant increase in the salaries of the workers. The
shareholder adds that he needs money for further investment and cannot afford to start dishing
out money to workers when he has not received dividend so far. The labour turnover is roughly
30% and 60% among permanent and contract workers respectively.

Since 2018, the company has successfully operationalised 12 outlets across four regions,
Greater Accra, Eastern, Volta and Western Regions. The three main constraints restricting the
opening of more stations have been limited financial resources, finding suitable existing
stations in terms of locations, and slow pace with which regulators grant licences and
approvals. The ultimate objective of the company is to be able to acquire litigation free lands
through long-term leases and construct its own stations. The company also has 4 LPG stations
located across the same regions. Again, the company runs Mini-marts, lube services (servicing
of cars) and washing bays attached to some of the stations depending on their locations and the
demand by customers. Mini-marts, lube services and washing bays are staffed with contract
workers under the direct supervision of the stations managers. All the stations are leased under
various contracts ranging between 3 to 10 years. As stated earlier, the company has previously
lost 3 stations to its rivals. Since location is very important for the distribution and retailing of
fuel, the company has always been very meticulous and patient in selecting filling stations to
lease or rent. Invariably, the company believes that given the sales performance of each of the
stations, the locations have contributed significantly to its modest success, especially in the
face of stiff competition. It is not surprising that the new entrants are always trying to lure the
landlords into terminating existing agreement in favour of the rivals.

Each of the stations is manned by a Station Manager, who is always a permanent staff. Initially
the company adopted 24/7 round the clock operations not being oblivious to the danger of
armed robbery. The company was eager to maximise its revenue as much as possible.
Unfortunately, the company recorded two incidents of robbery in 2022 involving an amount in
excess of GH₵200,000 which was recovered under insurance. Consequently, the company
decided to change its operating hours to between 5:00am – 10:00pm. LPG stations operate
from 7:00am – 7:00pm.

Depending on the size of the filling station, the number of workers typically ranges from 5 to
10. This staffing level compares favorably with that of direct rivals, reflecting the company's
focus on maintaining low costs. Workers directly attached to the filling stations and Mini-marts
run shifts by working 24 hours and going off every other day. All the contract workers are

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provided the company prescribed uniforms with their names inscribed in them. This policy also
applies to permanent station workers below certain grade. On the contrary, permanent workers
at the stations above certain grade are free to use dresses of their choice. This segregation has
been questioned by the affected workers who visibly appear not to be happy, especially
permanent workers, but so far nothing has been done about it by the company.

Despite limited financial resources, the company successfully acquired two petrol tankers and
one LPG tanker using finance lease in 2021. This solved the problem of depending on
unreliable outsourced tankers for transporting products to various filling stations. Most peer
companies continue to depend on third party tanker services. The company generates some
additional income by transporting products for other OMCs when the tankers are not engaged
by the company. Because the tankers are new, their performance has been excellent and they
have also contributed to reducing the transportation cost by 30%. The tankers are equipped
with the state of the art tracking system and devices to prevent any possible diversion by
drivers, as it is usually the practice in the industry. The industry is the seat of many
unscrupulous individuals who are eager to take advantage of any lapses in the system.
Diversions attract severe sanctions and penalties from the regulator, NPA.

A Financial Analyst who has followed the investment portfolio of the Shareholder, has openly
expressed his unhappiness about the MD’s consistent failure to conduct detailed financial
feasibility studies in making investments in the stations. Analyses such as payback period,
accounting rate of return, net present value and internal rate of return were not carried out to
determine whether the investments will maximise the shareholder value. The analyst concludes
that this practice is not appropriate.

Due to the regulated nature of OMCs operations, the company has meticulous standard and
well defined work processes at all the filling and gas stations. Every worker is required to
follow the standard operating procedures dogmatically without question. These procedures are
largely sanctioned by the regulator and are also intended to secure maximum safety at all times
because of the high risk of fire and explosions at any least mistake. Any deviation from the
standard procedure attracts sanctions including dismissal since such violations are considered
as gross misconduct.

Finally, the company holds regular operations meetings every Monday to review the previous
week’s activities, and every Friday to plan for the coming week. These meetings have proven
useful to the success of the company. After Friday meetings, the MD personally organises pork
party for the members of operations to wind down the week.

Financial performance of the company

Despite the passion and effort put in the business by the shareholder, the company is yet to
break into the top 20 companies with leading market share. The company’s overall market
share as an OMC is just below 1% as compared to the market leader with 11.68% as at the end
of 2nd quarter of 2024.

Financially, the company has seen a cocktail of good, average and bad performances in the
areas of profitability, liquidity, efficiency and gearing. The company made net loss after tax in
the first two years of its operations (2017 – 2018). Subsequently, it made marginal net profit
of GH₵400,000 in 2019 and GH₵700,000 in 2020. The 2020 profit performed below the
expectation because of Covid-19 negative impact on demand as a result of restrictions on the
movement of people and goods. In 2021, the company earned GH₵2 million net profit after

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tax. The improved performance was due to new stations and recovery from Covid-19 negative
effects. The best of the company’s performance came in 2022 when it posted a record net profit
after tax of GH₵3.5 million due to four stations that came on board at the beginning of 2022
and other cost cutting measures adopted during the year.

The biggest financial setback for the company came in 2023 when it recorded a loss after tax
of GH₵3.2 million. The loss came about because of impairment of an asset of GH₵6.5 million
owed to the company by the previous owner. This debt was discovered following National
Security investigations into OMCs that have failed to pay taxes and margins owed to the State.
NPA wrote to the company in 2020 about the debt. Subsequently, the company recognised the
debt in its books as a Receivable and Regulatory liability respectively. During 2020, 2021 and
2022 audits, the auditors propose to make impairment allowance for the Receivable but the
company persuaded the auditors that the previous owner of BOGML was willing to pay the
debt but he has failed to do so. In 2023, auditors proposed an impairment allowance of GHS6.5
million but the MD disagreed. Auditors then issued a draft qualified opinion. To avoid a
qualified opinion, the MD, who was very reluctant to accept the auditor’s view, subsequently
allowed the impairment allowance to be passed in the Statement of Comprehensive Income
resulting in the stated net loss after tax. The MD is furious about this whole situation and
believes that the auditors do not appreciate his hard work. He has decided not to renew the
auditors’ appointment. He states that “you do me I do you” as it is said in local parlance, to wit,
“tit for tat”. He knows the auditors will be losing an audit fees of GH₵80,000.

Meanwhile, in 2020 the company entered into payment agreement with NPA to clear the
GH₵6.5 million owed the State by the end of 2022. The company has so far paid GH₵2 million.
NPA is threatening to revoke the trading licence of the company yet auditors said nothing about
this either in their management letter or in their opinion.

The shareholder is confident that the company will bounce back with a big bang in 2024
regarding its financial performance and position. A summary of key financial ratios is provided
in the table below:
BOGML Key Financial Ratios
Ratio 2023 2022 2021 2020 2019
Gross margin 22% 16% 10% 4% 2.50%
Net profit margin -10.% 8.60% 4% 1.5% 0.50%
Return on Capital Employed -7.50% 11% 6% 2.50% 1.70%
Current ratio 2.2:1 4.5:1 5:1 6.5:1 8:1
Quick ratio 0.4:1 0.9:1 2:1 2.9:1 4:1
Asset turnover 3.5x 5x 6.5x 6.8x 7.2x
Debt/Equity Ratio 90% 30% 50% n/a n/a
Note: Despite the net loss after tax in 2023, the shareholder’s funds remained positive.
The Corporate Purpose – vision, mission, values, critical success factors and KPIs

In developing the purpose of the company in terms of its vision, mission, values and strategic
objectives, the shareholder was mindful of the critical success factors that underpin competitive
advantage in the downstream petroleum sector globally. He had a management consultant who
assisted the company in developing its corporate purpose. The details of the corporate vision,
mission and values as well as the critical success factors (CSFs) and Key Performance
Indicators are outlined below:

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 Vision Statement: To be the leading Mission Statement: We are committed to delivering
energy solutions provider, delivering high-quality petroleum products safely and sustainably,
safe, sustainable, and innovative oil and focusing on reducing environmental impact, improving
gas products while contributing to a energy efficiency, and enhancing customer satisfaction
cleaner, greener future for generations through operational excellence and innovation.
to come.

Corporate Values
 Safety First: We prioritize the safety of our  Customer-Centric Approach: Our
employees, customers, and communities. Every customers are at the heart of
decision and action we take is grounded in our everything we do. We listen,
commitment to health, safety, and environmental understand their needs, and
protection. consistently deliver high-quality
 Integrity and Accountability: We conduct our products and services that exceed
business with transparency, honesty, and respect for their expectations.
all stakeholders. We are accountable for our actions  Sustainability and Environmental
and committed to upholding the highest ethical Stewardship: We are dedicated to
standards. sustainable practices, reducing our
 Innovation and Continuous Improvement: We environmental impact, and protecting
embrace innovation and continuous improvement to the planet for future generations.
remain at the forefront of the industry. We are Innovation in clean energy and
adaptable, leveraging technology and new ideas to responsible resource management is
drive efficiency and growth. central to our operations.

These values serve as guiding principles that shape the company’s culture, operations, and engagement
with stakeholders, ensuring alignment with its vision and mission.

Critical Success Factors (CSFs) Key Performance Indicators (KPIs)

 Health, Safety, and Environmental (HSE)  Intensity of customers’ satisfaction
Compliance  Sanctions by regulators per year
 Operational Efficiency  Severity of injuries to employees and
 Customer Satisfaction and Loyalty property
 Sustainability and Environmental Stewardship  Seriousness of the risks facing the
 Innovation and Adaptability company
 Employee Satisfaction  Carbon emission reduction rate
 Happiness level of employees

Please note that the KPIs were developed solely by the shareholder.

Management and Organisational Structure

At the inception of the company, all workers reported directly to the shareholder. He personally
allocated roles and responsibilities to workers and directly supervised their work. The
pioneering workers were not given any designated official titles and they were not provided
with any job descriptions. In fact, they were interviewed and employed by word of mouth.
They were not provided employment contracts but were told their monthly salary. The
shareholder’s approach was more focused on getting work accomplished through teamwork. It
does not matter who does the work so long as the work gets performed is his philosophy. He

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was the only boss in the company, all other workers were coequals. Some workers were
unhappy because they felt that the MD only cared about the work and not their well-being.
They believed they could have contributed more if the MD had provided them with a bit more
motivation and attention.

The MD took exclusive control and responsibility for all matters relating to the company’s
finances, including preparation of monthly management accounts and year-end financial
statements. He maintains and manages the general ledger using Microsoft excel. However, over
the years, excel has become inadequate due to increasing volumes of transactions but because
of cost control, he does not want to invest in an automated general ledger system. In fact,
external auditors flagged this issue in the management letter that due to the manual nature of
excel, there were numerous errors in the financial statements for which audit adjustments were
raised.

Since 2017, the number of employees has grown to over 100. It is evident that the shareholder
is finding it difficult to provide effective direction, leadership and control for both the head
office staff and those spread across various filling and gas stations throughout the country.
Reluctantly, in 2022 the MD decided to introduce some modifications to the organisation
structure while ensuring that he retained, as much as possible, control and power for decision
making consistent with the approach adopted since the inception of the company. He created
the positions for Head of Operations, Head of Human Resources and Head of Finance. He
promoted the only remaining pioneering staff to Head of Operations and gave him direct
responsibility of all the stations. The stations managers’ report directly to Head of Operations.
He also promoted one of the long serving employees who has been assisting him with HR
issues to the position of Head of HR. However, in keeping with his long held view, he appointed
himself as Head of Finance while promoting a lady to the position of Deputy Head of Finance
whose responsibilities, among others, include posting transactions, preparing bank
reconciliation statements and other routine financial transactions. He continues to be
responsible for all approvals of all payments, preparing financial statements and management
accounts. Overall, as MD, the shareholder ensures that all major decisions in the company are
made exclusively by him and where necessary, seek expert advice. He believes the downstream
petroleum sector is fluid and dynamic and, therefore, decisions need to be made quickly for
results to be achieved.

Recently, the Head of Operations complained of too much workload which is causing some
operational lapses. This issue has reached the board, which was put in place recently. In this
regard, the board is proposing appointment of managers for each of the regions where the
company operates – Regional Managers. These managers would be assigned the sales
performance targets and they should report to the head office through Head of Operations. The
board believes that this will create higher sense of ownership, responsibility and clear
accountability among the managers. Head office functional units would provide support for all
regional managers. The MD is currently not enthused about this proposal by the board as he
fears losing control over the operations of the company. He is the “Commander in Chief” of
BOGLM and it must remain so.

Finally, the company does not have an internal audit unit and a risk unit due to the cost cutting
strategy. The functions of internal audit and risk units are currently being performed jointly by
Operations and Finance. The MD believes that his audit and finance background will allow
him to manage some of the audit and risk functions.

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The Board and Corporate Governance Matters
The board, recently appointed by the shareholder, consists of six (6) members of which there
are 5 non-executive directors (NEDs) and one executive director, the sole shareholder who also
serves as the MD. All the NEDs were appointed by Dr. Ayimadu Baffour, the Board Chairman.
All the NEDs, except one, are his close associates both in and outside the petroleum industry
of Ghana. That NED, Dr. Halimatu Sadia, who happens not to have any prior relationship or
association with the shareholder, is a director appointed based on advice he received from
Ghana Institute of Directors after he approached that body for assistance in that direction. Dr.
Halimatu Sadia is an acclaimed and an astute Petrochemical Economist who has contributed
immensely to the success of leading indigenous OMCs in Ghana.

Another Board Member, Mr. Stanley Amenuveve, is a lawyer by profession who has
specialised in energy and petroleum law in Ghana. He has served as advisor to several clients
over the years. He has 10 years’ experience in his area of specialisation. The remaining three
NEDs are bankers occupying middle level managerial roles in Finance and Accounting,
Corporate Banking and Internal Audit respectively.

Board decisions are typically unanimous, though on the rare occasions where there have been
dissenting opinions, they have consistently come from Dr. Halimatu Sadia. For instance,
recently the MD tabled a proposal to expand the company’s operations to Arusha, Tanzania
and Cape Town, South Africa in 2026. All the directors supported the decision except Dr.
Halimatu Sadia. The reason for her dissension was recorded in the board minutes as follows:
“I am of a strong opinion that the proposed expansion should be put on hold because of current
financial constraints, unfavourable global economic conditions as well as the fact that the MD
did not support the proposal with financial analysis, such as net present value analysis (NPV),
to determine the viability of the expansion”.

The board has two sub-committees, namely: Audit Committee and Risk Committee. Their
membership and functions are shown below.
Committee Membership Functions
Audit 1. Mr. Stanley Amenuveve The audit committee is responsible for
Committee (Chairman) overseeing the integrity of the accounting
2. Dr. Ayimadu Baffour and financial reporting system and reporting
(member) to the Board on these matters.
3. Dr. Halimatu Sadia
(member)
4. Mrs. Mavis Nana Ama
Clinton (member)
Risk 1. Dr. Ayimadu Baffour The risk committee shall review the risks
Committee (Chairman) facing the company, assess the importance of
2. Mr. Owula Bleoobi each area of risk to the company’s strategy
(member) and objectives; assess the extent to which
3. Mrs. Ama Dede (member) risks shall be accepted, be subject to
4. Dr. Halimatu Sadia mitigation or removed; consider the
(member) effectiveness of risk mitigation measures;
and make recommendations to the Board on
its risk management strategy

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The Board met at least 6 times during the year of their appointment (2023) and the committees
meet at least 4 times in that year. Board members receive GH₵20,000 and GH₵10,000 per
plenary and per committee meeting respectively.

Following completion of the 2023 statutory audit, the auditors issued a management letter to
the management and those charged with corporate governance. The following are the key
issues arising from the said letter:
1. The following directors – Mr. Owula Bleoobi, Mrs. Ama Dede and Mrs. Mavis Nana Ama
Clinton attended and received board allowances for 2023 but their names were not officially
registered with the Office of Registrar of Companies and two other directors officially
registered did not attend the board meetings in 2023. Recommendation is for the company
to take steps to update the official records.
2. The company has not appointed a secretary to the board and the evidence shows that the
MD, Dr. Ayimadu Baffour was the person who took minutes of the board meetings for
2023. Recommendation was for the board to immediately appoint a secretary to the board.
3. Payment of board allowance without appropriate tax being withheld and paid to Ghana
Revenue Authority. Recommendation is for the company to withhold and pay appropriate
taxes to GRA.
4. The company has significant corporate income taxes outstanding which is attracting interest
and penalties that may pose significant business risks to the company. Auditors recommend
that the company take steps to pay all the outstanding liabilities.

Environmental and Social Considerations

In line with the global trend towards transition to cleaner energy sources, the company has a
medium term plan to diversify its business away from fossil fuels (i.e. petroleum products).
The company plans to enter solar energy market by providing the service to domestic and
commercial consumers. The company also intends to build electric vehicles (EVs) charging
stations in readiness for expected increase in demand for EVs. These proposed businesses are
capital intensive and would require huge commitment of funds to achieve the dream. The
company plans to use a mixture of debt and equity to finance these new business lines. The
company plans to diversify its business into cleaner energy sources and take advantage of the
government’s tax policy. This policy includes a five-year tax holiday and an exemption from
Value Added Tax on imported materials and equipment for cleaner energy projects.

The company has been giving back to the society some of its profit by offering scholarships to
very brilliant but needy children in its catchment areas. The company also donates cylinders to
households who cannot afford to buy as part of its contribution in reducing the use of charcoal
and firewood which will reduce the rate of deforestation and promote sustainability agenda in
Ghana.

International expansion of the company

As part of fulfilling his ambition of building a multinational OMC, the shareholder has decided
to expand to Arusha, Tanzania and Cape Town, South Africa by 2026. The shareholder has
chosen the two cities because he loves their cold weather. The board, by majority decision,
approved this expansion plan. The shareholder has stated that he is working on raising
necessary funds and obtaining regulatory approvals in those countries. He intends to start with
two stations each in the two countries.

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