Sacoil, the South African based independent African oil and gas company, said on Monday that it had acquired a 71% interest in Afric Oil Group, one of the largest independent fuel distributors in South Africa.

Following completion, Sacoil’s portfolio will consist of operated production activities in Egypt, exploration in Democratic Republic of Congo, Malawi and Botswana, a crude trading allocation with Nigerian National Petroleum Company and fuel distribution operations in Southern Africa.

Afric Oil distributes more than 30-million litres of fuel product (diesel, petrol and paraffin) monthly to a diversified client base that includes local and national government, parastatals, blue chip mining and industrial customers and other nonrefinery wholesalers of fuel products. A recent acquisition is expected to contribute an additional 16-million litres per month of fuel products.

Dr Thabo Kgogo, Sacoil’s chief executive, said the “truly transformational” deal was in line with Sacoil’s strategy of diversifying operations into the downstream segments of the African oil and gas value chain and underpinning the business with low volatility and predictable revenue streams.

The statement added that the acquisition was in line with Sacoil’s strategy to become a fully integrated, pan-African industry player across the oil and gas value chain in Africa.

Sacoil said it remained focused on delivering energy for Africa using the continent’s own resources to meet the significant growth in demand expected over the next decade.

The statement added that the acquisition of its first operational footprint in South Africa would also enable it “to play a meaningful role in the socioeconomic development of the country”.

Sacoil is acquiring Phembani Oil, which owns the 71% interest in Afric Oil, from Gentacure and its holding company, Moopong Investments Holdings, for a total of up to R200-million in cash and shares. This consists of an initial consideration of R147.3-million and another up to R52.7-million depending on Afric Oil’s performance this year.

The remaining 29% of Afric Oil is held by the Compensation Fund, a fund managed by the Public Investment Corporation (PIC).

Afric Oil, which was established in 1995 as South Africa’s first 100% black-owned oil company, reported turnover for the year to the end of December 2015 of more than R3 billion. Its operations are predominantly in South Africa, but it has an operating presence in the wider region including Zimbabwe, Zambia and Namibia.

The acquisition in February of this year of certain operating assets of Big Red Investments, Redlex Investments, Turquoise Moon Trading 477 (collectively know as the Big Red acquisition) and the fuel distribution business Forever Fuels will expand Afric Oil’s regional footprint and provide access to a stable higher margin business.

The Big Red acquisition will further enhance Afric Oil’s distribution capabilities with ownership of a fleet of 32 product distribution vehicles and a fuels depot facility, including on land in Randfontein, Gauteng. The Big Red acquisition is expected to contribute an additional 16-million litres per month of fuel products and approximately R1.8-billion of revenue a year.

The statement added that the “experienced, stable and highly credible executive team” of CEO Tseke Nkadimeng and CFO Isaiah Mutandiwa would continue to manage the Afric Oil business after the acquisition.

Sacoil’s Kgogo added: “We see great potential to scale up the Afric Oil business and we are excited by the growth opportunities.

“Furthermore, as a South African-based business, we are pleased to be establishing a meaningful operational footprint in our country, and look forward to playing an important role in distributing fuel products that drive the key industries that are at the heart of our nation’s economy.”

The deal is subject to the fulfilment of certain conditions including approval from the competition authorities of South Africa and Zimbabwe. It is expected to complete before the end of May.