“I’m continually watching the price of oil,” says Basilio Makendengue, co-founder and general manager of Equatorial Guinea-based services company NomeX.
The drop in the oil price over the past two years – from over US$100 a barrel to around $45 today – is heavily impacting the industry in West and Central Africa, including companies such as NomeX. Since its launch in 2002, NomeX has built its business by providing products and services – such as human resources, maintenance and safety equipment – to oil and gas companies that include Mobil Equatorial Guinea, Hess, Marathon, Total, Noble Energy, Ophir Energy, Schlumberger and Baker Hughes.
In response to the slump in oil and gas activity, Makendengue – a former ExxonMobil employee – is diversifying the company’s client base and moving into new business lines.
In a recent interview with How we made it in Africa, he discussed his business journey as well as the reasons for the company’s success over the past one-and-a-half decades. Below are some of the major takeaways from the conversation.
1. Ensure you can compete with the best in the world
International oil companies (IOCs) often prefer to contract service providers they also work with globally, making it difficult for local players to enter the industry. However, Makendengue says African companies shouldn’t complain that they are not getting work from IOCs or that the government is not doing enough to promote local content; they should instead ensure the quality of their work is on par with global standards.
“You need to constantly upgrade yourself to get to a level where your client will stop looking elsewhere and concentrate on you,” he explains.
2. Respond to changing market conditions
Makendengue describes the downturn in the oil price as “very bad”. In 2016 NomeX was scheduled to conduct maintenance on eight oil rigs, but most of these projects have been cancelled or put on hold.
However, to counter the current situation, NomeX is diversifying by servicing other industries – including aviation and telecommunications – and entering new business lines, such as providing cleaning and maintenance services to offices and households.
“We are diversifying as quickly as we can, and one of the good things about this slowdown in oil and gas activities is that it has made us sit down and consider what other lines of business we can go into to survive.”
3. Put profits back into the business, especially in the early stages
Makendengue says often when entrepreneurs find some initial success, they “get crazy” and go overboard with personal spending, thereby putting the business at risk. He advises against this, saying entrepreneurs should manage a young company’s finances conservatively by paying themselves a fixed salary, and investing additional profits back into the business.
“Discipline yourself, pay yourself a salary, and whatever other revenue you generate, put it back into the company. Do this for at least the first five to eight years before you start looking to buy a Lamborghini,” he notes.
4. Don’t take existing clients for granted
Entrepreneurs must never take their long-standing clients for granted, and should continue to invest time in them. This is however often easier said than done as a business grows and it becomes more difficult for the founder to make time for each individual client.
Makendengue says one of the mistakes he has made was to delegate client visits to his employees, instead of going himself. “It is not the same thing. Your client wants to see you, the boss, because they know you… You have to take care of your client, you have to pet him, you have to run after him.”
5. Put everything in writing
Another lesson Makendengue has learnt is the importance of having all agreements in black and white. Verbal agreements might be sufficient if you have a good relationship with a client, but that person can easily leave the company, and his replacement might not honour a deal if there is no contract place.
The same goes for disciplinary actions against staff. When an employee crosses the line, Makendengue gives him or her a warning letter outlining the transgression. The employee’s response is also kept in writing. This way, when an employee is let go, the company can prove to the authorities that all processes were followed, and that the employee wasn’t unfairly dismissed.
6. Be friendly but firm with employees
It is important to be friendly and respectful to one’s employees but at the same time maintain discipline within the company.
“I never call anyone my subordinate… to me everyone is a colleague,” says Makendengue. It is his aim to get to know all employees on a personal level, and to learn the names of their spouses and children.
However, these warm relationships shouldn’t stop an employer from being firm with staff when their work is not up to scratch. “These are people who we mingle with, who we chat with, who we play with, but when it comes to discipline, we don’t play. Otherwise we will not be able to provide the high-quality service expected from us by the clients.”