Petrol stations bleeding

Cape Town - Petrol station owners are struggling to keep their heads above water and the looming Eskom tariff hikes could sound the death knell for many.

This is amid the crushing effect of the recession with filling stations reporting 1% to 9% lower fuel sales.

But there are other factors applying downward pressure on petrol stations, said Peter Noke, national director of the South African Petroleum Retailers Association.

These are the use of credit cards to pay for fuel, and the sale of diesel at near-wholesale prices to commercial customers.

And owing to new legislation, the fees paid to the oil companies based on turnover from the added services, such as convenience stores and car-wash operations, are also hurting petrol stations.

Before the promulgation of the Petroleum Products Act, oil companies issued diesel cards enabling commercial customers to buy diesel at filling stations.

After promulgation of the act, however, agreements on diesel discounts for large commercial customers were rewritten. The outcome is that dealers now only receive a handling fee of 15c to 21c/litre, compared to their retail profit margin of 72.7c on petrol.

Although petrol sales have slumped in the recession and diesel sales are up because of the greater popularity of diesel vehicles, filling stations' profitability has declined because they make no profit on diesel sales.

Noke said the franchise fees that dealers have to pay to oil companies for the convenience shops or car-wash operations at their operations vary from 8% to 13% of turnover.

Looming electricity hikes would also seriously hurt filling stations. Noke said the July increases had already more than doubled some filling stations' electricity bills.

Filling stations need to have three-phase power. The biggest electricity guzzlers are the fuel pumps and the fridges in the convenience stores.

Noke knows of one Johannesburg filling station where the electricity account shot to R39 000 from R13 500 a month.

Owing to last year's power cuts, many filling stations have spent between R120 000 and R130 000 on generators, and some of the bigger ones as much as R400 000.

What is more, the three-year wage agreement with petrol attendants ends next year with fresh wage negotiations starting in February.

Although the retail fuel industry welcomes the increased use of electronic payments, since handling cash increases the risk of robbery, the use of credit and debit cards costs filling station owners more.

While the cost of handling cash varies around 0.8% of the petrol price, card-handling fees represent 1.7%.

Noke's organisation therefore encourages filling station owners not to accept credit cards until banks lower their fees.

Debit-card costs, however, are lower.

- Sake24.com

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