Load shedding knocking fuel retail businesses

Load shedding knocking fuel retail businesses. File photo

Load shedding knocking fuel retail businesses. File photo

Published Dec 19, 2022


Ongoing load shedding remains a threat to fuel retailers, forcing their costs to rise, says Fuel Retailers Association (FRA) chief executive Reggie Sibiya.

Fuel service stations had to continue operating 24/7, which meant an increase in the amount spent on diesel to power generators, which “has been overwhelming and is likely to continue”, he said.

South Africa has faced unprecedented load shedding this year as Eskom battles to keep the lights on with its ageing infrastructure. The utility has also been slow to increase the capacity of its power grid.

Sibiya said margins were tight for convenience businesses, especially on fuel margins, and the FRA were now focusing on growing convenience retailing in partnership with the National Association of Convenience Stores, a global player in this space.

The FRA was taking the lead in this regard for the sake of future sustainability of businesses.

A major threat to fuel retailers was also global geopolitics, involving oil production and supply.

"The US and Europe says Opec Plus is using oil as a weapon of war. Opec Plus says they are cutting production because of economic reasons. They are predicting surplus due to [the] global economy shrinking, and therefore seeing a future of high stock holdings... needing to be financed due to low demand. Whatever the real reason or the decision by Opec and/or Opec Plus, it will have major impact on both petrol and diesel prices," Sibiya said.

The FRA said the hearing of their long-standing legal matter with the Department of Energy on the "unfair treatment“ of the profit margin that was due to the fuel retailers under a regulated petrol pump price stood out for them this year.

The matter was heard on October 28 and 29, and a judgment had yet to be announced.

Sibiya said FRA’s lowlight this year was illegal fuel trading, which significantly reduced fuel retailers sold volumes.

Retailers also faced reducing nett margins due to increasing usage of credit cards and loyalty programmes linked to credit cards.

He accused the Department of Mineral Resources and Energy (DMRE) of refusing to reimburse the costs associated with handling credit cards in the form of interchange and merchant service fees.

Sibiya said these were real costs incurred, yet the DMRE was now directing them to go and fight with banks.

However, the regulatory mechanism dictated that all expenses incurred on a regulated margin were the responsibility of the regulator.

"The South African Reserve Bank is the regulator of the banking cards interchange fees, and the deputy director-general is not asking them as another government department to resolve the matter. While this blame and responsibility shifting is playing off, retailers are bearing the loss of every credit card cost at 46 cents per litre (cpl), which was higher than the 32cpl profit provision per litre of petrol," Sibiya said.

Looking ahead, Sibiya said the pressure on consumer spending and new ways of doing business would continue to exert pressure on fuel retail businesses next year.

This as many people continue to work from home, or partly from home, after Covid-19. This had lead to fewer motorists on the roads, and people cutting their spending on fuel.