The rising levels of unemployment in South Africa that are now at a record high of 34.4 percent were compounding the fuel retail sector’s labour challenges in the industry that was already taking strain even before the pandemic, said the Fuel Retailers Association (FRA).

Announcing this month’s fuel price adjustment, the Minister of the Department of Mineral Resources and Energy (DMRE) approved a 5.7 cents per litre increase in the price structures of petrol to accommodate the wage increase for the forecourt employees, in line with the Motor Industry Bargaining Council (MIBCO) Agreement.

Reggie Sibiya, the association’s Chief Executive, said, as the hardships of the compromised retailer margins continued, retrenchments also continued to increase, and there were no clear strategies to address this problem from the government.

“Labour challenges have been compounded by rising levels of unemployment and retrenchments as a result of Covid-19 although the industry was taking strain even before the pandemic.

The sector had retrenched 3 658 employees during the pandemic period – a trend that is going to continue until government intervenes or the economy fully recovers,” said Sibiya.

The FRA said that it believed in the long-term sustainability of Bargaining Councils and played a major part in engaging with them, but added that the extension of the scope to non-parties was a serious threat, as in the absence of centralised bargaining, SMMEs would be forced to spend a lot of time dealing with trade unions. Sibiya said this was not desirable or productive as their focus must be on running their businesses rather than spending time on bargaining issues.

“We are expecting tough wage negotiations in view of Covid-19 and the very slow economic recovery,” said Sibiya.

The FRA said that Covid-19 impacted the industry significantly with volumes dropping by 80 percent which saw many operators pleading for rental relief from landlords, bank holidays and with very little or no support from the government.

It added that when the July riots and looting struck, the sector lost more than R300 million to looting and property damage. Sibiya said that the combined Covid-19 and looting cost the industry billions of rands in both revenue and tax collection through the fuel levy and Road Accident Fund(RAF).

The association said, in South Africa, fuel was a very strategic resource and fuel retailing was very capital intensive, due to the nature of its assets. Sibiya added that the sector was also very labour-intensive currently, employing more than 83 000 people and had 4 500 small medium enterprises running fuel retail operations.

“Margins are fixed, pump prices are increasing and change every month. With no relativity between fixed margin and the movement of prices, most of the operating expenses are linked as a percentage of the pump price, so when the pump price goes up, the operational expenses also go up, yet the margin is fixed annually. This leads to the erosion of the operational margin at the end of the day, which is not a good or healthy situation to be in,” said Sibiya.

The FRA, which is a registered employers organisation under the provisions of the Labour Relations Act, said the looming issue of the Fourth Industrial Revolution (4IR) and how that was going to impact the training of the labour force was another challenge.

Sibiya pointed out that Covid-19 has forced and fast-tracked this transition at a point when the industry was not ready for it. He said, that training young people for future 4IR jobs, when other jobs became redundant, was the challenge facing the industry.

An increase of 8.78 c/l (i.e. from 6.58 c/l to 15.36 c/l) was also implemented this month into the price structures of petrol and diesel in line with the Self-Adjusting Slate Mechanism rules.

Based on current local and international factors, the fuel prices for this month, petrol increased by 4c per litre while diesel decreased by 15.22 cents per litre and 14.22c per litre.

According to Sibiya, when the FRA held its annual conference in September 2019, the theme of the conference revolved around the ‘Changing Landscape’ and focused on the 4IR that was going to mark the turn of the decade. He said the presentation by international guest speaker, the National Association of Convenience Stores (NACS) director, Mark Wohltmann, focused on the big industry issues, the trends that would impact the sector and what the next big disruptors would be.

“We could see what was happening in Europe and the US, with total deregulation and the move to electric and hybrid mobility starting to become a reality. But we thought we had enough time to wrap our heads around how we would tackle the issues when they came our way. Little did we know that six months later we would have to fast-track to 4IR due to Covid-19 and the changing economic and consumer landscape,” he said.