The majority of South African fuel service stations were just barely making it to survive with the significant drop in volumes in the face of the Covid-19 imposed national lockdown. Photo: IANS
The majority of South African fuel service stations were just barely making it to survive with the significant drop in volumes in the face of the Covid-19 imposed national lockdown. Photo: IANS

Retailers realise significant drop in fuel volumes from last year

By Given Majola Time of article published May 19, 2020

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DURBAN – The majority of South African fuel service stations were just barely making it to survive with the significant drop in volumes in the face of the Covid-19 imposed national lockdown.

The Fuel Retailers Associations (FRA) chief executive Reggie Sibiya said that the latest volume drop snapshot survey to FRA members indicated that April 2020 fuel volumes versus April 2019 have dropped by between 80 and 90 percent.

“Some sites though few have shown an improvement to levels around 60 to 70 percent drop with the introduction of the level 4 regulations. Even 60 percent volume drop is not a sustainable picture as the majority of service stations revenue comes from fuel. The snapshot survey shows a similar trend also on shops turnover decline as the fuel,” said Sibiya.

FRA said that they were however not certain as to how many of the people who have been released to work under level 4 actually owned vehicles. Sibiya said that their suspicion was that the majority of people owning vehicles were still at lockdown at home as they had means to work online and through virtual meetings.

According to the FRA, the curfew restrictions impacted on their members' usual 24/7 businesses leading to night shift costs escalating as they had to remain lit at night and also pay wages while there was no business.  The association said they were still servicing a few essential services workers during these very unproductive hours. This sector’s other Covid-19 lockdown imposed challenges included reduced volumes and fuel revenue, down shop revenue and non-operational businesses like car washes. 

FRA said the exclusion of hot meals and cigarettes had also significantly impacted their potential revenue as the two items tended to bring more traffic to service stations due to their 24/7 operations. Once the customers were in the forecourt, Sibiya said they were inclined to fill up fuel or buy other additional items in the shop. The same was the case with the exclusion of purchase of Lotto tickets which also drew people into their stores.

Sibiya said that in the short to medium term, however, the drop in businesses would have a serious and major impact on their sustainability. He said this would also threaten the sector's transformation  ideals as the new entrants who were still owing large sums of money to banks would find it difficult to survive with such reduced volumes and shop turnovers if they did not receive any assistance from the government. 

The FRA said that the Namibian government was subsidising retailers with 50cpl margin increase in recognition of reduced volumes and to keep fuel service stations sustainable. The association said that it had since made a similar request to the Minister of Mineral and Energy Resources Gwede Mantashe even prior to the Namibian government implementation. Sibiya said that they were still hoping for a positive response.

The association’s chief executive said that the Government had to prioritise the sustainability of SMMEs in this sector to save not only its businesses but also its jobs. “If no meaningful assistance comes through we are anticipating huge employment reduction in the sector which currently bolster over 80 000 jobs. This is unfortunately the reality which will go beyond the current UIF intervention,” said Sibiya.

The Automobile Association’s spokesman Layton Beard said that the FRA’s volume drops made sense adding that the biggest concern was the revenue that South Africa was losing when looking at what the government had budgeted for in this year. “ The country may have lost between R6blln to R7blln in April and between R3blln to 4 blln in May. The general fuel levy lost would amount to around R6blln to R7 blln,” said Beard. 

University of Zululand’s  deputy dean for Research in the Commerce faculty said that the FRA’s latest volume drop survey was sensible considering the drastic reduction in the global fuel price. “It is for these reasons that there was strong lobbying from the society of economists appealing to President Cyril Ramaphosa to hasten to relax the levels of the lockdown and open up the economy. “It is not only the fuel industry that is suffering but also many other small businesses to the extent that they were putting workers on rotation as they could not afford paying staff and the UIF payments were not enough,” said Kaseeram. 

The economics academic said that the government was faced with a very difficult choice in South Africa considering that many people were living below the poverty line. He added the government was faced with balancing between the country’s health and economics. 

BUSINESS REPORT

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