Download - Portfolio Committee on Energy “Downstream Liquid Fuel Sector” SAPRA - Gerrie Lewies 24 July 2013
Agenda
Retail Fuel Industry Overview Challenges Facing Fuel Retailers Financial Impact on Fuel Retailer
Our Way Forward Our Strategic Intent
Agenda
Retail Fuel Industry Overview Challenges Facing Fuel Retailers Financial Impact on Fuel Retailer
Our Way Forward Our Strategic Intent
Retail Fuel Industry Overview
Highly Regulated Industry Regulatory Accounting System(RAS) to be
implemented by December 2013 Approx. 4200 Service Stations
Approx. 6000+ retail licenses issued Competition is Brand Based
High Price Volatility Importance of Security of Supply
Retail Fuel Industry Overview
Diesel not regulated Use of Diesel Cards – vertical integration
Fuel cross subsidisation 20% Increase in price per litre
Price increase results in decrease in sales Retail margin is 7,5% of price per litre
Currently large focus on convenience – not regulated
Retail Fuel Industry Overview
Approx. 60% of sites are Oil company owned
These account for about 70% of the volume
NB - RAS developed for Retailer owned sites
Approx. 56 000 attendants Approx. 17 000 other staff
Very high employee turnover Constant investment in training
Retail Fuel Industry Overview
Fuel Retailer most of the time on receiving end
Regulatory lag with margin increases
Fuel Retailer is the collection agent
Service station (24/7/52) not a normal business
Agenda
Retail Fuel Industry Overview Challenges Facing Fuel Retailers
Financial Impact on Fuel Retailers Our Way Forward
Our Strategic Intent
Challenges Facing Fuel Retailers
V&SM
BMR&CM
SA&LM
OPS/MHCM
I&TM
A&FM
Labour
StakeholdersH, S & S
Competition
Government
Global & LocalEconomy
Financial Institutions
ServiceStation24/7/52
CultureRelationships
Leadership
Values
Global & Local Economy Increasing cost per barrel of oil
Weakening of Rand/Dollar exchange rate Increase in Repo Rate
Increase in CPI/PPI Average cost per fuel drop = R400 000
Average 8 drops per month = R3 200 000 Increasing cost to do business
Financial Institutions
Rising interchange costs as a result of different methods of payment
Rising insurance costs Excess insurance payments
High overdraft charges Increasing finance costs
Increasing cash deposit fees
Labour Increase in labour unrest
Unintended consequences of strikes Unreasonable Union demands
High unemployment Increase in shoplifting
Increase in armed robberies
Stakeholders Inconsistency with RAS implementation
Increase in vertical integration Increase in cross subsidisation
No guarantee on security of supply Bank guarantee to cover 1-2.5 drops Tenure not adequate to secure ROI
No standard “Business Valuation” model No security on goodwill
Retailer to insure Oil company equipment
Health, Safety & Security Increase in cost of health, safety &
security standards & requirements Cost of contamination and/or spillage
Unemployed target service stations for life support
Financial impact of armed robberies
Competition
Financial impact of new sites on current sites
Oil companies compete with own brand Regulated environment prevents
conditional selling Cost of marketing constraints
Cost of Oil Companies competing
Government
Administration barriers in the start up and running of a service station Cost of non compliance
Lack of regulation enforcement Increase in rates & taxes
Margin erosion Cost and/or safety of zone differentiation
Agenda
Retail Fuel Industry Overview Challenges Facing Fuel Retailers
Financial Impact on Fuel Retailers Our Way Forward
Our Strategic Intent
Financial Impact On Fuel Retailers
Security of Supply - Standing dry on 6 000 litres per month for 12 months @
.992cpl = R71 424 per annum
Financial Impact On Fuel Retailers
Fuel Price Changes - R1 increase in price per litre @ 40 000lt per delivery = R40 000
extra for next fuel delivery and an increase in the fuel
guarantee
Financial Impact On Fuel Retailers
Different Payment Methods - The use of Credit Cards have changed the cost of cards by approx. 200%. On a 300 000 lt service station the
real increase is approx. R11 000 to R33 000 per month as a result of
the use of credit cards
Financial Impact On Fuel Retailers
Armed Robberies - One major armed robbery could close the doors for 2 weeks
= R170 000 loss in income
Financial Impact On Fuel Retailers
Armed Robberies - One major armed robbery
could result in an actual loss in fuel sales of 50 000 litres per month =
R600 000 loss in income per annum
Agenda
Retail Fuel Industry Overview Challenges Facing Fuel Retailers
Financial Impact on Fuel Retailers Our Way Forward Our Strategic Intent
Our Way Forward
First of all we would like to take this opportunity to thank the Government Officials for their dedicated effort and hard work with the implementation of
the Regulatory Accounting System
Our Way Forward
To continue to work closely with Dealer Councils and Government
Officials to implement the principles of RAS to help fuel
retailers to secure their future
Our Way Forward
To engage positively with all Stakeholders to develop win-win
solutions to address the challenges facing the fuel retailers
Our Way Forward
To work closely with all Government Departments to
address the barriers to do business to ensure speed of
service delivery
Our Way Forward
To engage the Setas, Stakeholders, Government,
Service Providers and the SA Fuel Retailers’ Network to continue to
utilise service stations for the employment of the (18.2)
unemployed, training & education and placement in the Fuel Industry
Value Chain
Agenda
Retail Fuel Industry Overview Challenges Facing Fuel Retailers
Financial Impact on Fuel Retailers Our Way Forward
Our Strategic Intent
Our Strategic Intent
To make a difference to the Fuel Industry Value
Chain to unleash the power of potential of the
SA Economy