Feasibility Analysis on How to Start Your Own Profitable Wholesale Petroleum Products Business in Tanzania
The current market of petroleum products in Tanzania is $1.77 billion, growing at the annual rate of 15 percent.
With continued economic activities in Tanzania, this growth rate is likely to accelerate in the near term.
Although there has been series of natural gas discoveries in the past 10 years and small gas production in Tanzania, the demand for energy is growing fast and this demand can’t be covered by liquefied natural gas (LNG), new natural gas field development or alternative energy initiatives.
The best way to meet Tanzania’s huge energy demand is the combination of these sources of energy, including petroleum products.
So, no matter how much is imported, more is needed to meet the ever-growing energy need in the country.
The wholesale petroleum products business is so lucrative that aspiring entrepreneurs who are passionate about benefiting from petroleum product wholesaling can jump in to sell to an already available market.
The best part of selling petroleum products in Tanzania is that you are not cajoling people to buy products they don’t intend to buy like multi-level marketers do.
You are serving people who can’t do without your products.
What is Petroleum Products Wholesaling and How does it Work?
Now that you know that there is a huge and profitable market for petroleum products in Tanzania with endless potential growth, let us have a look at what petroleum products wholesaling business is and how it works in Tanzania.
The wholesale petroleum business is nothing new in Tanzania.
Well-know oil brands like Total, Puma Energy (previously Oil BP) etc. are all petroleum wholesalers (popularly known as oil marketing companies). These companies are all foreign.
Over the last few years, several great brands that are owned by Tanzanians started to emerge in the market. You already know brand names like Lake Oil , Afro Oil, and many more.
These companies engage in importing, storing and trading petroleum products to commercial consumers as well as to end users through their retail petrol stations outlet. There is a large upfront investment needed to get tanks, trucks, training, certification and products if you pick to follow these route.
However, there is an exiting and profitable market for independent petroleum wholesalers who operate without their own specific retail brand name.
These wholesalers sell petroleum products to transport companies, mines, farmers, colleges and schools, factories and to some unbranded or privately-owned petrol stations. Some independent wholesalers trade petroleum products to land-locked countries such as Burundi, DRC Congo, Rwanda and Uganda.
The best part of this is that Tanzanians can now actively participate and reap rewards from petroleum products wholesaling. As an independent petroleum wholesaler, your task is to go out and look for customers. Once you get an order, you will relay the order to suppliers and arrange delivery from the supplier’s depot to customers.
I would strongly recommend you target large customers who have the financial muscle to pay you in advance before the delivery.
Also, you have to negotiate with suppliers.
Profit Analysis (How much does independent petroleum wholesaler make in Tanzania?)
There is no limit to the amount of money that you can make in the wholesale petroleum business. It depends on your efforts, commitment and your marketing skills or creativity.
Since the wholesale petroleum products price is regulated and like any other commodity, petroleum products price tend to fluctuate regularly due to exchange rates, international benchmarking or fluctuating oil price in the global market.
Therefore, this tends to affect the profit margin in this business.
But a realistic profit margin that independent petroleum wholesalers make is TZS 60 to 67 per liter.
That means for only for only 100,000 liter per month, a petroleum wholesaler will be able to earn around TZS 60 x 100,000 liters = TZS 6, 000,0000.
Keep in mind that the transportation cost (distribution cost) are added in the price.
How to Become a Petroleum Products Wholesaler in Tanzania
Business Plan:
The wholesaler petroleum products business needs strategic planning to start.
To be completely transparent with you, most Tanzanians do not understand the value of a business plan. They only request for business plan when they want bank loan or they engage in business competition.
While it is vital to prepare a business plan before you start business in market, the emphasis of business plan is essentially as a plan to enter the oil and gas industry.
As an independent petroleum wholesaler, you will compete with wholesale petroleum companies that have huge financial capacity and highly specialized and technical staff.
Your wholesale petroleum business plan will act as a roadmap to reach your business objectives and give you a clear picture on how to compete well in the market.
Register your company:
Get your limited liability company registered with the Business Registration and Licensing Agency (BRELA).
Get EWURA Approval:
The Energy Water and Utilities Regulatory Authority (EWURA) is the government agency that regulates the downstream petroleum product sub-sector in Tanzania. You have to get a wholesale petroleum license that allows you to sell petroleum products to bulk customers.
Keys to Success
Merging:
To ensure a good profit margin, pick a supplier who will offer you high-quality products at competitive rates
Marketing Skills:
As I mentioned earlier, you compete with petroleum wholesalers who have huge financial muscles and talented technical team.
So, employing the best marketing strategies will help you to compete well in this industry.
