The Fuel Retailers Association (FRA) said this week that the rise of loyalty programmes at fuel stations are pushing independent fuel retailers out of business.
In light of this, they aim to use legal steps to force the Department of Mineral Resources and Energy (DMRE) to enact legislation that will protect them, in their view, from unfair competition. The existing legislation prohibits small retailers from offering loyalty programmes to their customers.
According to Reggie Sibiya, Chief Executive of the FRA, the major fuel retailers increased their market share at the expense of the smaller retailers, forcing them out of the market.
Although there was an increase in the national industry volumes it is misleading as the sales simply shifted from one brand to the other. This type of displacement competition typically occurs in saturated or stagnant markets. Retailers are also taking less profit at the promise of long-term loyal customers.
Fuel sales in South Africa are in decline due to the massive increases in the cost. The rise in fuel-efficient cars has also contributed, meaning consumers will spend less at the pump. Budget airlines offering competitive travel options have eroded their market share including alternative modes of transport like the Gautrain.
In the first three quarters of 2019, petrol consumption declined by 5% year-on-year compared to 2018. In contrast, diesel consumption gained a modest 1% during the same period.
This paints an accurate picture of how government regulation can create pockets of privilege and prevent healthy market competition. It is also a snapshot of the current state of our economy.
