Apr 22, 2020 Covid-19 impact on fuel retailers
Covid-19 impact on fuel retailers
Comment from Reggie Sibiya, CEO, Fuel Retailers Association
It is indeed unprecedented trying times for all South Africans. The COVID-19 epidemic outbreak has affected both citizens and businesses of South Africa who are in a dire state for survival and sustainability
The Fuel Retailers Association(FRA) as the major representative body for fuel retailers in South Africa has been working tirelessly with all major stakeholders including the Oil Companies, UIF and Small Business Department to call for immediate relief to assist with the sustainability of Fuel Service Stations who are currently providing a much needed essential service to the public at large and also to the other designated essential services like Ambulances and SAPS to ensure a speedy response to saving lives.
It is indeed not our intention to provide such an essential service at a profit but it is equally important that service stations themselves remain sustainable in providing this service as closure of service stations due to hardships will create another ripple effect in saving lives during this lockdown period and beyond.
Service Stations volumes have dropped by between 80% to 90% due to customers not visiting sites. The extended lockdown period, whilst supported fully by retailers, continues to burden their sustainability as the major source of their revenue comes from Fuel. This impact on their sustainability is sure to continue beyond the lockdown period and hence the various efforts to also look at a long term solution.
Whilst various Oil Companies are providing some form of immediate relief, it is very important to state that such relief is not on its own sufficient. Hence the Association has approached the Minister of Mineral Resources and Energy for a Fuel Margin Relief.
The various interpretations of the regulations by SAPS and some inspectors, regarding sale of Essential Goods around food types and lately cooked meals is already placing service stations under tremendous pressure for survival as selling food and in particular hot meals has been what is easing the burden to some extent. The Service Stations are obligated via contractual agreements with Oil Companies to operate 24/7 but they are also facing the regulations imposed by some municipalities for all businesses to close after a certain period. It is also important to note that service stations are the only well positioned businesses under essential services to provide readymade meals to other essential services working 24/7 hours like SAPS and Ambulances and also to the long distance truck drivers operating under essential services.
Wages also remain another huge expense as self-service is illegal and the FRA believes that it is the country's imperative to sustain jobs and all our members’ employees are themselves breadwinners. Electricity, equipment maintenance and security costs also remain high as service stations are operating 24/7.
Whilst FRA is tirelessly working with both UIF and Small Business departments, their systems are already clogged up with various demands especially from other numerous businesses that are closed during this period. This backlog in their systems will certainly carry throughout the remainder of this year and into 2021.
FRA has requested the Honourable Minister of Mineral Resources and Energy to also lobby with other Ministers in relevant departments to allow service stations to operate 24/7 where viable and to continue to provide prepared and hot meals.
FRA would also like to highlight to that both price decreases and price increases still affects retailers in two ways:
1. Price decrease - on the day of price change, majority of retailers are holding stocks bought at an old price and have to sell it at a new price which is lower than the old price, basically selling that stock at a loss.
2. Price increase – whilst the retail margin remains fixed at Cpl, the increased pump price linked operational costs like franchise fees, bank charges and insurance rise up as they are calculated as the percentage of turnover.
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