South Africa: Independent Petrol Retailers Struggle For Profits

Peter Noke, national director of the South African Petroleum Retailers Association states that there are other factors that also affect the independent petrol retailers.   These include the use of credit cards to pay for fuel, and the sale of diesel at near-wholesale prices to commercial customers.  New legislation that incorporate  the fees paid to the oil companies based on turnover from the added services, such as convenience stores and car-wash operations, are also hurting petrol stations.

Before the Petroleum Products Act, oil companies issued diesel cards enabling commercial customers to buy diesel at service stations. After the act was put into law, agreements on diesel discounts for large commercial customers were reviewed. The outcome is that dealers now only receive a handling fee of 15c to 21c/litre, compared to their retail profit margin of 72.7c on petrol.

Although petrol sales have slumped in the recession and diesel sales are up because of the greater popularity of diesel vehicles, service stations' profitability has declined because they make no profit on diesel sales.  Peter Noke said the franchise fees that dealers have to pay to oil companies for the convenience shops or car-wash operations at their operations vary from 8% to 13% of turnover.

The three-year wage agreement with petrol attendants ends in 2010 with fresh wage negotiations starting in February.  Although the retail fuel industry welcomes the increased use of electronic payments, since handling cash increases the risk of robbery, the use of credit and debit cards costs service station owners more. The cost of handling cash varies around 0.8% of the petrol price, card-handling fees represent 1.7%.

The South African Petorleum Retailers Association  organisation therefore encourages service station owners not to accept credit cards until banks lower their fees.

PetrolWorld 091109