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Deregulation is driving change in Uganda petrol retail and fuel
distribution sector, but the authorities are not matching the change
with appropriate organisation and standards.
It is now estimated that there are 72 registered petroleum companies
involved in fuel importing, distribution and retail. The
number of fuel dealers has grown from 18 about 10 years ago. Mr
Peter Ochieng, Kobil’s marketing and operations manager said
“Liberalisation is good and we all agree because it brings competition
and improves quality of services but if you liberalise a market without
control then that is a recipe for disaster.” The market,
according to Mr Ochieng is rampant with unserious players “who have no
brand name to protect”.
The main brands that are well known in the country are Engen, Gapco,
Kobil, Shell and Total who all happen to be international
players. According to industry sources and local media,
among the many new small independent players are
opportunistic entrants who are creating a bad reputation for the
industry. This includes fuel smuggling, under-declaration, poor
quality products, tax evasion, meter tampering, unnecessary price cuts
and importing Jet A1 oil tax free and selling it as fuel for
motor vehicles.
Oil companies are key tax payers in the country. Last financial
year, fifteen of the leading industry players contributed a total of
Shs606.4 billion compared to Shs199 billion collected from the entire
industry in 2000/01 financial year. This means the industry tax revenue
contribution has grown and become a major source of government revenue.
If the government does not act fast to avert a possible industry
meltdown, genuine investors might find the market less attractive.
“It is becoming a health, environmental issue and life threatening,” Mr
Ochieng said referring to service stations constructed in unsuitable
locations or not having appropriate standards.
Small retail petroleum companies have changed the branding game by
erecting ‘market battle fronts’ on streets, residential areas and along
highways eating into major players’ share by over 40 per cent according
to market sources.
“Major players have fixed costs they must meet because of their
capacity; they manage depots, employ more people, carry out regular
safety and security checks,” Mr Ochieng offered.
The Petroleum Act requires independent fuel wholesalers and dealers to
have enough operating capital based on the size of venture, Other
important requirements include National Environmental Management
Authority (NEMA) licence assessing the Environmental Impact (EIA),
Kampala City Council license for architectural approval, a trading
license from URA and a standards licence from the Uganda National
Bureau of Standards. These are the basic minimum
requirements for entering and operating in the fuel distribution
business.
PetrolWorld 230909
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