Oct 26, 2021

Long Road to Transformation in the Fuel Retail Industry of South Africa

Fuel Retail is on the journey of ownership transformation. PetroCONNECT has years of experience in this environment, forging successful partnerships for both new entrants and existing dealers. Read our take on the current state of affairs.

Since the advent of BBBEE legislation in South Africa in 2005, businesses ownership and management has been in the spotlight, the fuel retail industry notwithstanding. Policy and charters have been put in place to move the needle towards more equitable ownership of fuel stations to foster transformation in the fuel industry, but sadly not much progress has been made. Major fuel brands desire more equitable ownership in their networks but are battling to achieve it fast enough. At PetroCONNECT, we aim to close the gap between current dealers, fuel brands and potential new owners. We pride ourselves on forging successful, sustainable ownership transformation that benefits all parties.

In the year 2000, a white paper (the Liquid Fuels Charter) was signed by all majors committing to specific targets for transformation in the fuel retail industry. The aim of this charter was to create equity, redistributing some control of the industry into the hands of previously disadvantaged South African individuals.

Despite this and the introduction of the BBBEE act in 2005, there has not been much progress. A study in 2020 sadly found that transformation was not being achieved fast enough, and in some pockets, had even regressed.

In response to this, we assume the Minister of Minerals and Energy must have flexed his muscles and given an ultimatum. Recently, oil majors have decisively embarked on vigorous Fuel Retail transformation targets within their own organisations. Each organisation has set their own targets to align with BBBEE legislation, as industry-specific codes are yet to be confirmed.

A-C-I for Transformation in Fuel Retail

In absence of industry codes, we have seen wide adoption of what is termed ‘A-C-I’ (African - Coloured - Indian) which most, if not all, oil majors are implementing. Whenever there is an opportunity for a new fuel retailer, an African will be an automatic preferred candidate (African Women are most preferred ahead of men). Should there be no qualifying African, then a Coloured individual is the second preference, followed by Indian individuals. This is in line with redistributing fuel station ownership ratios, to align with the total South African population race ratios, aiming to make significant improvements for the most disadvantaged groups (hence African females being given priority).

While there has not been any mention of ‘W’ in this picture, their chances of continuing to play in this space seem to be limited to strategic partnerships. Lots of debates have been doing rounds on whether a 30% Black-owned stake qualifies an entity as BBBEE compliant. While the Act may interpret this as such, however, we have seen most oil companies insisting on Black partners having controlling equity in the business if they are to give a blessing to this transaction. This, of course, is never a one-size-fits-all scenario and there are deals we’ve seen with 30% Black-owned equity, although very far in between. PetroCONNECT can assist ‘W’ dealer owners with ownership solutions and ensuring the i’s are dotted and t’s crossed with partnerships being forged for a sustainable future as partners in a business.

Current Statistics Related to Transformation in Fuel Retail

As we speak, there are still less than 20% African owned service stations in the country, with about 5% in the hands of African Women. This clearly shows that the industry is still going to undergo massive changes over the next 5 years to enable significant transformation in the fuel retail industry. The context shared herein pertains to Company Owned service stations, what is often referred to as CORO.

Partnerships in Fuel Retail

Whether you want to get into the industry or you’re looking for a strategic partner, PetroCONNECT has a wide range of solutions that are suited to your requirements. PetroCONNECT is dedicated to positively adding to transformation in the Fuel Retail industry. With this in mind, we have opportunities for interested individuals to join our Readiness Academy Programme to learn all about the practical ins and outs of the Fuel Retail industry, as well as mentorship and full back-office support for existing Dealers and Buyers in their transformation journeys within the fuel retail industry.