South Africa warned to brace for a fuel price increase in February. Picture: Neil McCartney
Oil companies are under pressure to come to the rescue of fuel retailers, who are suffering because of the additional expenditure they are incurring due to load shedding and losses on their fuel stockholding when petrol prices decrease.
The retailers claim they are also not fully compensated in the fuel price for the cost of debit and credit card sales.
Cassim Kharbai, who co-owns two Engen franchise fuel filling stations and sits on advisory panels for the dealer network, said an analysis of the impact on fuel dealers of running a generator in the past 13 months showed that this cost from about R145 000 up to R257 000 for the year.
Kharbai stressed these are new costs and there were also additional costs to maintain and service generators.
The gripe from the service station network is that although load shedding is a government and country problem, Engen and other oil companies benefit from stable or higher fuel sales but the fuel dealers are bearing the cost of running generators during load shedding, he said.
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“It’s an absolute loss to run a shift from midnight to 5am. There is nothing happening. That is what dealers are up in arms about. They [oil companies] aren’t giving us the option to close between those hours,” said Kharbai.
“However, it becomes a security risk if you are in total darkness and your site is closed.”
He added that discussions with the oil companies about sites remaining open 24/7 are ongoing.
South African Petroleum Retailers’ Association (Sapra) chair Henry van der Merwe on Monday confirmed that fuel retailers are under pressure because of generator-related costs, with the cost of diesel for generators and the running cost and service fees now being taken from the bottom line of service station owners.
“Due the nature of our business we are obliged to stay open as we supply fuel to essential services such as SAPS [SA Police Service] and security companies.
“Our electricity bill doesn’t decrease as a result of load shedding and I am not aware of any oil company that is remunerating their dealers to compensate for their loss,” he said.
“The dealer councils are having these negotiations with their oil companies.”
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Kharbai said fuel dealers are also disappointed with the approach of oil companies to solar energy at sites.
“Dealers are prepared to make the capital investment in a solar solution but the oil companies are reluctant [to let them] because they don’t own the property … the asset belongs to the oil companies.”
He added that many Shell and Engen sites have solar panels on the parking canopies but this results in minimal savings to fuel dealers, with the oil companies taking the full benefit of the solar energy saving on the basis that they made the investment and are therefore using it as another income stream.
“We are hot on their heels in that they should allow dealers to benefit from the solution if there is no relief coming from the oil company side towards funding the cost of using generators as they are they only ones gaining because fuel sales haven’t dropped but the cost to do business is borne totally by the dealer as opposed to the oil company,” he said.
Kharbai said these additional costs have added to the burden on fuel dealers because of losses ranging from R80 000 to as high as R200 000 a month on their stockholding when the fuel price decreases.
“The loss in December was R2.06 per litre, which is more than you make on fuel.
“On average dealers will make about R1.70 per litre on fuel. That is your dealer margin for a franchised site. For a non-franchised site it must be closer to R2.00 per litre.
“On diesel, the loss was as high as R2.81 per litre and December was the month when we really started feeling the impact of the load shedding and the generator costs to keep the sites running were R30 000 to R90 000 for the month.
“It’s good for business if the [fuel] price comes down but the cost to do business at the moment is what is really taking its toll on the network,” said Kharbai.
Van der Merwe confirmed that the decrease in fuel prices in December and January had a serious impact on dealers because they had to sell their fuel stockholding after the price decrease at a loss.
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“Depending on the turnover of individual sites, they get one to two deliveries a week. The dealer has to sell fuel at a loss from the first Wednesday of the month until [their] next delivery.
“The oil companies will take action if you run dry before your next delivery. The solution is that oil companies should do price forwarding and reduce the price earlier before the first Wednesday of the month or stock on consignment, then the oil company takes the risk.
“The problem for dealers is that when it is stock on consignment the dealer earns less margin in terms of the regulatory accounting system [RAS],” he said.
Attempts to obtain comment from Engen, Shell and Astron Energy, the new brand name for Caltex, and from the Fuel Retailers Association (FRA) were unsuccessful.
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SA Petroleum Industry Association (Sapia) executive director Fani Tshifularo said these issues have not been brought to his attention and believes this is because Sapia primarily deals with wholesalers, not retailers.
Kharbai said the commission charges on debit and credit card transactions is another major issue negatively impacting dealers.
He said this cost depends on the dealers’ turnover but on average a small site will pay R25 000 commission a month on these transactions.
Van der Merwe said the credit card cost is a huge outstanding issue but nobody seems to want to get involved in resolving it.
He said the issue is that dealers are not remunerated in terms of RAS for debit and credit card transactions and Sapra is involved in discussions with banks, the Reserve Bank, and the Department of Energy.
“Dealers are paying a percentage of the fuel price as a cost to banks. The defence of the banks is that it is the interchange fee of Visa and Mastercard and they can do nothing about it.
“But I am of the opinion that the banks are making unfair margins and that is where they are getting the money for their loyalty programmes,” he said.
Van der Merwe said the solution to this issue is that consumers should pay the cost if dealers are not remunerated in terms of RAS or the dealer should pay a fixed transaction cost per transaction and not a percentage of the cost of the transaction.
Tshifularo said Sapia is aware that retailers have been raising the issue of credit card costs that are not fully reimbursed.
“The DMRE [Department of Mineral Resources and Energy] has been promising to do something about it but it’s not an issue that we will be dealing with at Sapia level.”
This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.
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