Calls for fuel price deregulation are ‘unknown’, the retail industry said

Posted on

Deregulation of fuel prices will not lower prices but will hurt fuel retailers that are already marginalized, the industry said.

“Right now there’s pressure for us to really cut the boundaries over competition, which is absolutely impossible,” said Reggie Sibiya, CEO of the Fuel Retailers Association, when opening the association’s 2022 conference on Wednesday.

The retail margin is R2.28. If removed, BBM retailers will not survive, he said.

“People who are asking for deregulation don’t know. They think that the margins for many retailers have to be shared. There is nothing to share. Actually, we need more to maintain our business,” Sibiya said.

The comments come as the government faces strong pressure to reduce high fuel costs, which are hurting consumers. Now the state has temporarily eliminated general fuel tariffs.

While some see deregulation as a possible fix, Sibiya said other deregulated markets are still suffering the effects of high oil prices, adding that the price of petrol in London is now equivalent to R32 liters compared to R23.52 in South Africa).

“So it’s not just us, it’s all done, and now we need to know that there are a lot of things that can’t be controlled,” he said.

Sibiya said some regulations have affected fuel retailers negatively over the years.

For example, a credit card transaction cost of 42 cents per liter is absorbed by the fuel retailer and is not part of the margin provided through the fuel price structure.

He said regulators should share the appropriate cost in the price of the pump so that retailers can be profitable and return a fair investment.

Illegal fuel trade, where wholesalers sell directly to the public without the required license, is also a matter of which Sibiya said it “got its hands on” and stole sales volumes from retail service stations.

Deregulation cannot happen before the transformation of the sector, as cutting margins will hurt newcomers who are already very active and have struggled to meet their needs.

“Price has everything to do with transformation because the fuel business is about margins and volume. If you bring in new participants and cut margins, you’re really disrupting transformation,” Sibiya said. “That’s why … black people … can’t make it because of the high gearing they have, which can’t be accommodated on the edge.”

He noted how a KPMG study commissioned by the association in 2016 showed fuel retailers were recovering less than 12 cents per liter at the time.

Fuel retailers are an important employer in the country, with 83 000 jobs.

“So the government needs to know that if it cuts margins, then it will have an impact on employment as well,” he said.

Get the biggest business story sent an email to you every day of the week.

Go to it Fin24 home page.

Leave a Reply

Your email address will not be published.