The South African government has signalled its intention, through new legislation currently before Parliament, to cap the number of retail petrol outlets based on consumption levels.
This emerged in discussions on Monday morning between the Minerals and Energy
Department and members of Parliament serving on the National Assembly minerals and energy portfolio committee on possible amendments to the Petroleum Products Amendment Bill.
It is envisaged that the cap would be based on actual — or potential — consumption. This would be contained in a framework governing the industry contained in the Bill, which could then be implemented through regulation.
The government is keen to place a cap on the retail sector as it is estimated that about 2 000 of the existing 5 000 outlets are already unsustainable.
Deputy director general Rod Crompton indicated that government wished to avoid a proliferation of retail outlets in what was already an overtraded market — ahead of the pending entry of Sasol, South Africa’s synfuels manufacturer, into that market by the end of the year.
Noting Sasol’s intention to do so when an upliftment agreement ends, Crompton said if Sasol got a higher price for its product, the question would arise whether Sasol would indeed, want to go into the retail industry.
“What would incentivise them to go there?” he asked.
Answering his own question, he said this would depend on “the attraction of
the retail market … the slice of the action in the retail margin”.
But he said it also followed that the higher price they could get at their refinery gate “the less incentive there is to go into the piece of action in the retail industry”.
He hinted that there was evidence that such an agreement — of a higher gate
price — was on the table.
Conversely, there was a greater incentive to go into the retail market, the lower the price at the gate was.
“So there is a balancing act to be struck here,” he said, which he noted was in private hands at the moment.
He also noted that his department had stayed out of the negotiations “around this main supply agreement”.
At present crude oil producers are required to buy Sasol’s synfuel product from the Natref refinery at Sasolburg. In exchange Sasol is restricted until the end of December from operating in the retail market.
Inkatha Freedom Party MP Eric Lucas asked about the inconvenience to a rural consumer in particular if, for example, licensing for a retail outlet was based on consumption of 400 000 litres of fuel a month at a site.
This would mean that retail outlets would be further apart. Crompton agreed that this would be a trade-off in keeping prices down. — I-Net Bridge