Fuel credit card transactions, which currently attract a cost of 42 cents per litre (cpl) against a 31cpl allocation for profit before tax, were disastrous since they were not covered in the retailer’s margin, Fuel Retailers Association (FRA) chief executive Reggie Sibiya said yesterday.
The association that represents the interests of fuel service stations is hosting a two-day FRA conference, which started yesterday.
He said the FRA understood the convenience of carrying a payment card rather than cash and fully aligned with the new consumer trends.
“It is not the motorist’s fault, but that of the regulator DMRE (Department of Mineral Resources and Energy) which introduced these payment regulations, but are just refusing without any good reason to provide for these costs recovery,” Sibiya said.
He said when motorists swiped their Mastercard or Visa card, the retailer paid back to these institutions what is called a merchant service fee, which included the interchange rate of 1.75 percent for every credit card transaction.
“So when pump prices go up, one pays more. This has become the most single transaction that is stifling retailer margins, rendering them unprofitable.”
Giving his address at the conference, Sibiya said that FRA conferences always looked into the future and called for the industry to unite to mitigate against what had happened, to have conversations about the unknown and the unpredictable future.
For this reason, this year’s theme called for unity in action as well as developing new capabilities to deal with the changing landscape and the future.
The FRA said the sector faced a changing landscape with changing regulations and legislative framework, greater non-compliance/illegal trading and a proliferation of sites, rising consumer complaints about fuel prices leading to calls for deregulation, the government and public putting pressure on retailer margins in the entire value chain as well as 4IR with its new ways of doing business.
The organisation said this led to reduced volumes, compromised margins, unsustainable transformation for new entrants, unsustainable small, micro and medium-sized enterprises and unsustainable jobs and job losses.
Sibiya said that charting the way forward was about building new capabilities, “power or ability to do something”, collaboration, protecting industry margins instead of fighting each other and letting the government be a winner that takes it all, upskilling local youth and empowering them for future skills and entrepreneurship opportunities.
It was important to understand customers and see them as people on the move with various needs, instead of drivers coming to fuel up -requiring new capabilities.
FRA president Mike Motsoane said: “As fuel retailers, we need to unite and recognise that unless we become a bigger voice, our interests will be left unattended.”
Absa Business Development manager for the automotive sector Thami Letsoalo said the transactions that went through the filling station were a cost to the business on a margin that did not go up and down on a monthly basis.
“As South Africa, we are have become a very cash lighter industry, so most of our payment in the filling station comes from cards (more than 60 percent). On that royalty points are starting to come in or feed into filling stations with other alternatives that the filling stations and oil companies are looking at to make sure that they profit,” Letsoalo said.
He said they had engaged with different businesses, for example in Ghana, where there was a special (interchange) rate made for fuel stations and it was very low.
“It makes it more competitive and is very important for the industry because they do understand how these numbers work and the direct impact on them. We engage with different countries to understand how they do their interchange rate and for us internally to look at what it is we can continue to do to assist the industry,” Letsoalo said.
He said the government and industry needed to address the RAS (regulatory accounting system) margins as soon as possible to ensure profitability for the businesses.
NACS Global director Mark Wohltmann said that the fuel retail and convenience stores would have to put convenience at the centre-stage going forward.
“Fuel and c-store footfall drivers have mostly been product-driven for car repair services, newspapers and magazines, cigarettes, etc. Future footfall will have to be hospitality and experience-driven,” Wohltmann said.
He said these businesses could offer a 24/7 professional work environment, multi-generational living spaces and become product-design and technology innovators.
BUSINESS REPORT