HEADLINE:   Petrol dealers    

PUBLICATION: Cape Argus  

PAGE NUMBER: 7

AUTHOR:     Zubeida Jaffer

DATE:       2001-03-19 06:09:00

Big squeeze on small petrol dealers

50% of filling stations countrywide are in the red, university study finds

When the petrol price leapt by 10c per litre earlier this month, it was not only those who buy who felt the pinch but also those who sell. 

Small petrol stations are in trouble. Not only must the dealer fork out cash for wages, petrol delivery and rentals, but an increase in the price also sees consumer resistance. 

"We see an immediate drop in sales", said Vanguard Estate dealer, Kader Parker. "People park their cars and use the trains. We will soon have to buy bicycles," he said.

A Potchefstroom University study flashed the warning lights when it recently found that at least 50% of filling stations countrywide were in the red. There are about 4 850 garages employing more than 45 000 driveway attendants. 

More than half are on their way out of business, said Hennie Kriel, the director of the SA Fuel Dealers Association.

Particularly affected are those small dealers who have not diversified.

"As profit declines, dealers have to add car washing, convenience stores and workshops to be profitable," said Kriel.

Local dealer Marcella Poultney, who is also chair of the Fuel Retailers Association, said: "When the petrol tanker pulls into the forecourt with a fresh load of petrol, the dealer has to have cash in hand. A full-load can be as much as R100 000 at a time. We pay cash before we sell.

"When the price goes up, our overdraft goes up."

Three years ago, when the petrol price was R2.27 a litre, the profit margin was 10,225%. Despite this month's increase, the profit margin has dropped to about 7,58%.

Kriel said: "Prices and profit margins are set by the government. There is a provisional tax, or regional services levy, calculated on turnover and wages paid by operators. "This is levied despite less money or profit being made on fuel sales.

"The Minister of Mineral and Energy, Phumzile Mlambo-Ngcuka, has brought temporary relief to cash-strapped dealers by increasing the profit margin by 1,5c this week. 

"We see a small light at the end of the tunnel but we don't know if the train is coming."

But taken together with the 10c increase in the price, the interim increase in the profit margin has not increased the actual profit percentage. In fact, it has dropped from 7.59 % to 7.58%. 

"The biggest problem is that these increases often come a year too late," said Poultney. "By the time the dealers get the benefit, it is too late." 

Most dealers would like to see the government set a fixed profit margin which would be at least 9% or more comfortably, at 12%. This would decrease the constant uncertainty and also allow for improved wages to be paid to their employees. 

Petrol attendants earn a basic wage of R186 for a 45 hour week. This averages at just over R4 an hour, compared with the R10 an hour paid to university students for casual work.

Small dealers suspect that they are being squeezed out of the market. A number of those interviewed were reluctant to go on the record, saying they feared victimisation from the oil companies. 

"We are caught between a rock and a hard place," said one dealer. 

"Every time our margins increase, our rentals increase too," he said. "If we close down, so many workers will lose their jobs.

"Consumers will be left with the impersonal mega-garage where the ready helping hand will become a thing of the past."

While the 1,5c increase in the profit margin did not make any difference in real terms to dealers, it does send out a signal that the mineral and energy minister is seriously considering the plight of the dealers. The petrol price has also been on a decrease trend since December having dropped by at least 13c. 

"Our problems are on the table," says Poultney who is taking part in ongoing talks with the government. 

"I feel positive that by the end of the year, there will be more help to rescue the small dealer - but this may be too late for a lot of people."

By June the government will conclude an investigation into the retail profit margin.

Mineral and energy spokesman Kanyo Gqulu says the minister wants to find a solution but cannot only act to the benefit of the dealer. 

"The minister wants to bring petrol down for the consumer," he said. "Much as we have sympathy for the dealers, there is a dilemma. We cannot just respond to pressure without considering all parties concerned." 

Gqulu said that the Potchefstroom survey had also found that about 60% of the dealers were inefficient in the way they ran their business. 

In negotiations with the dealer organisations, he said the minister would want to see some effort from dealers to correct the inefficiencies. 

"The minister will make a move but she has to see something in return."

But it was not only the low profit margins putting the squeeze, said Gqulu. "The bigger guys are squeezing the smaller guys and that is something we do not have control over."

"There is no law preventing oil companies from building big petrol stations where there are already smaller ones. One can only appeal to their sense of decency," said Gqulu. 

"What is needed is moral condemnation from society  because in the end, the small garages are being squeezed out. They just cannot survive."