Fuel retailers say outlook is bleak
DURBAN - THE FUTURE of fuel retailing is bleak if the Department of Mineral Resources and Energy does not take drastic and immediate action to curb illegal fuel trading from wholesalers, the Fuel Retailers Association of Southern Africa (FRA) said.
FRA chief executive Reggie Sibiya said in an interview that the alarming growth in illegal trading and conditional selling was a major concern, as wholesalers that were trading illegally were taking away volumes from fuel retailers.
By law, wholesalers are not allowed to sell fuel to the public in order, to protect the business of fuel retailers.
“The law also does not allow someone to have both a retail and wholesale licence for this purpose. The challenge is that the Department of Energy has admitted that they do no have capacity to deal with these rampant non-compliance issues, as they are the only regulator empowered by law to effectively deal with these issues,” said Sibiya.
The Department of Mineral Resources and Energy failed to respond to repeated requests for comment.
“FRA is continuously to a point of being unpopular for making noise around these critical issues. We have the legislation (Petroleum Products Act) and its regulations well drafted to protect fuel retailers, but the lack of implementation is just as deadly as not having any legislation and regulations,” said Sibiya.
He said the fuel industry could not predict the outlook for the year ahead, as the industry has been volatile and unpredictable.
"The slow start is due to various reasons, including the slow economic activity due to lockdown restrictions amid an already tough economic climate. Even though the fuel industry has remained operational through the Covid-19 pandemic, retailers have been hit hard.
“Most retailers have made use of business assistance for staff costs through the Ters fund and many have also reduced their workforce. Retailers have requested rent relief from landlords and oil companies, extended bank overdrafts, and some, especially independently-owned ones, significantly cut back on stock, which adversely impacted on the ability to service customers effectively and efficiently,” said Sibiya.
Retailers were under tremendous pressure due to pressure on sales and concerns about employees’ risk of being exposure to Covid-19.
Sibiya said although FRA did not have numbers of how many people were exiting fuel retailing because of the economic pressure exacerbated by the pandemic, based on the increasing number of new trading licences issued by the Department of Energy, it was evident that the mounting pressure had resulted in the selling of sites or terminations for non-performance.
He said although there was a view that transformation was the driver of this change of hands, there was no data to support it.
“FRA’s view is still that the driver for exchange of hands is the economic pressures. Also, service stations’ walls hardly come down. The walls remain whilst there is exchange of retailer ownership. Oil companies focus on overall market share gain, so a 200 000 litre pumper adds to oil company volumes and margins, while the operator of a 200 000 litre pumper can hardly make ends meet and hence most hands exchange in low volume sites,” he said.
Sibiya said the industry was overtraded and objections to new service stations were on the rise. Retailers were rather opting to refine and build on current offers to increase their business.
“There are more partnerships growing for added value services like quick service restaurants and convenience shops with established brands like Woolworths and Wimpy and others, even though margins in both shops and restaurants are just as thin as the fuel margins.”
The sector said it would continue to focus on the 4th Industrial Revolution, which was changing ways of doing business with customers in order to retain them and remain relevant.