Petrol. (File Photo: IANS)
Petrol. (File Photo: IANS)

Independent fuel retailers say loyalty cards are pushing them out of business

By Given Majola Time of article published Jan 26, 2020

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DURBAN - Independent fuel retailers are planning to approach the courts to force the Department of Mineral Resources and Energy (DMRE) to protect small fuel traders from unfair competition unleashed by established companies in the industry.

The retailers’ body, Fuel Retailers Association (FRA) this week said the rise of loyalty cards was pushing small retailers out of the business.

Chief executive Reggie Sibiya said the FRA wanted the courts to order the government to intervene.

Sibiya said established retailers continued to increase their market share while small ones were slowly being eroded out of the industry.

He said existing legislation was not enough at it prohibited small retailers from offering conditional selling or loyalty programmes to customers yet it allowed oil companies.

Sibiya said: “This means that upcoming and independent retailers are discriminated against from competing at this level which means unfair competition created by the Department.”  

The DMRE said it would continue to engage small retailers.

Sibiya said there the rampant conditional selling within the industry, with wholesale licence holders concurrently retailing despite this being illegal under current legislation.

He says the situation has been made worse by the indecisiveness of the department.

He said loyalty cards did not increase the national industry volumes but shifted it from one brand to the other, adding that the cards came at a huge cost to industry profit margins.

Sibiya said that many trends indicated that fuel sales and consumption would continuously decline due to a number of reasons, which included the rise in fuel efficient cars, cheaper airlines, alternative modes of transport like Gautrain and most importantly rising cost of fuel and motorists using less and less.

The cost of  ULP 95 cost 31 percent  more than it was in January 2016. In November 2019 it rocketed to 38 percent of January 2016 price.  Diesel in Gauteng cost 46 percent higher in January 2020 than in January 2016.

Sibiya said that they had reports of serious volume declines over this festive season versus the 2018 around the Gauteng and Inland areas. He said that for this reason, he expected slightly negative results when they published the 2019 Q4 results in the coming months.

The FRA  said that comparing 2019 first 3 quarters with 2018 first three quarters, petrol consumption declined by 5 percent whilst diesel consumption only increased 1 percent..
He said unfair competition has forced independent retailers to go into illegal trading.

“Conditional selling is on the rise and motorists are not aware that it is illegal for a retailer to offer something in return for fuel purchases,” Sibiya says. “The disadvantaged group is in the minority but these are upcoming independent entrepreneurs with brands not yet well known and cannot secure loyalty programmes with any partner and were prevented by legislation to design their own for their customers and are losing their customers to big oil brands.” 

BUSINESS REPORT 

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