FRA pushes for companies to pay goodwill
Johannesburg - The Fuel Retailers Association (FRA) wanted oil companies to pay their retailers goodwill when their contracts come to an end, FRA chief executive Reggie Sibiya said on Friday.
This comes against the backdrop of simmering tensions between Chevron South Africa and a number of its retailers over franchise agreements. The retailers accuse Chevron of unilaterally terminating the agreements, while the company has claimed that the agreements are coming to an end.
“If retailers’ contracts are terminated, they have to be allowed to leave with goodwill. The exit must be fair and reasonable. Retailers work hard to build goodwill, in some cases for 20 years and more. You cannot expect them to walk away empty-handed,” Sibiya said.
He said the Consumer Protection Act made provision for equity in contractual agreements. “We are not saying these relationships should continue forever. It is about fairness. Somebody built the goodwill for years. These incidents have been happening in isolation but at an increasing rate across all companies.”
Two KwaZulu-Natal fuel retailers, who declined to be named, on Friday related their frustration at the prospect of walking away from their fuel stations empty-handed.
“If you want to re-enter into new agreements with an existing retailer, recognise that there is already goodwill built by the retailer and it would be unfair to ask someone to buy it back,” Sibiya said.
Chevron SA executive chairman Shashi Rabbipal last week said the negotiation of new contracts depended on several factors, including the firm’s transformation goals.
Chevron and other major oil companies are expected to comply with the Petroleum and Liquid Fuels Charter which, among others, required them to achieve a 25 percent black ownership. The charter was signed in 2000.
“As FRA we are for transformation. But if you want people to exit, be open and fair about it. If you are not paying goodwill, you are working against transformation as there is no incentive to encourage people to participate meaningfully in the process,” Sibiya said.
Caltex said last week that it had entered into new 15-year franchise agreements with its retailers from around 2001.
Contrary to claims by several retailers, Chevron said the retailers were aware that their existing contracts would end and that new contracts would have to be entered into from this year.
FRA also lamented the plight of fuel retailers and specifically took issue with fuel margins which are set by the Department of Energy.
“Wholesalers get a return on assets for every litre sold. This basically covers their return of fuel investments. They also get a share of the retail profit margin. Over and above all this they still want to charge exorbitant franchise fees and renewal fees.
“This is absolutely marginalising fuel retailers to nothing else, but glorified managers, as they are kept out of the investment return chain. Fuel retailers, before building goodwill, they start by buying it from the exiting retailer and current investment range from R6 million upwards for a mere five-year tenure. If not addressed now this same behaviour will catch up with the incoming BEE (black economic empowerment) retailers in the future once they are in the system.”