The South African fuel retail industry has grown considerably in recent years. It is one of the few sectors to weather the downgrading, rand volatility and negative growth rates recently experienced. According to the South African Petroleum Industry Association (SAPIA), this sector contributes 8.5% to the South African Gross Domestic Product (GDP).
Fuel retail is a highly specialised sector, with operating margins that are affected by a multitude of factors such as oil prices, labour costs, exchange rates and regulations, to mention a few.
“There are more than 4,600 fuel service stations in South Africa with a collected annual turnover in excess of R324 billion. This industry has been gradually increasing over the past three years and we expect it to continue in the same trajectory over the next coming years” (Ronél Fester, FNB Franchise Industry Specialist).
Given our dependence on petrol and diesel, the fuel retail industry has been resilient. South Africa pumps more petrol than any other country on the continent (some 11.7 billion litres per year). Diesel is not far behind this figure. Fuel sales still make up the majority of profits at filling stations in South Africa (between 80% and 90% of profits, according to Absa). The additional income from forecourt businesses such as convenience stores, coffee shops and restaurants provide strong complementary revenue for these businesses.
Given South Africa’s growing middle-class population, and the country’s strong vehicle sales figures, we see fuel retail remaining healthy and profitable into the foreseeable future. What is, however, of critical importance is that fuel retailers closely manage their budgets.