Complex regulations are a hurdle for new entrants in fuel retailing
A MYRIAD regulations underpinned by various legislations, contractual agreements, South African Bureau of Standards, bargaining councils and recent Protection of Personal Information Act were making the fuel retailing sector a challenging area for upcoming entrepreneurs to navigate, said industry body.
At the recent Franchise Association of South Africa (FASA) conference, Fuel Retailers Association (FRA) chief executive Reggie Sibiya said with regards to legislation, there was no other industry that was as complex and as challenged as the fuel retailing sector.
Sibiya said the Petroleum Products Act and its regulation challenges included the proliferation of service stations and the rampant illegal trading which threatened the sustainability of existing service station businesses.
The FRA said the Consumer Protection Act, now in place for some time, also had many codes and for a sector that operated multi-faceted businesses, posed a challenge of figuring out where it belonged.
On the other hand, while the transformation sector code was under way, the FRA lamented it for proving to be slow in delivery. It said certain peculiarities unique to the sector, such as how fuel turnover was measured was a major concern.
Sibiya said while other unregulated businesses were measured per turnover excluding VAT, fuel turnover was inflated by the fuel levy, the Road Accident Fund levy and other levies. He said as an association, the FRA needed to deal with such issues to ensure that the categorisation of all these fuel retailing entities were properly allocated in terms of the threshold revenues which excluded such things as levies.
In South Africa, fuel is a strategic resource and fuel retailing is very capital intensive due to the nature of its assets. It also currently employs over 83 000 people and boasts 4 500 SMMEs running fuel retail operations.
Nedbank senior manager for Franchising Karen Keylock said most industries were subject to varying degrees of regulation. “In respect of oil, globally, historically it has been shown that it can either create wealth and sustainability or lead to a divide between rich and poor,” said Keylock.
Keylock said sometimes the processes were cumbersome and could lead to a loss of income or trade. “As an example, a licence application to operate takes six months to be approved.”
She added during this period the fuel station may not be run effectively, resulting in a drop-in service and subsequently a drop in sales.