South African consumers are increasingly opting to pay for their fuel with credit cards at filling stations in South Africa, and it is hurting local retailers.
According to data from the Fuel Retailers Association (FRA), as much as 80% of fuel purchases in the country are done with a bank card with the remaining 20% paid for in cash.
Each card payment carries a transaction fee of 44c per litre which is not accounted for in the country’s current fuel price calculation.
As such, this 44c must be absorbed by the retailers and is eating into their already small margins.
An ongoing debate
“If you swipe a credit card, 44 cents a litre which is not on the retail margin has got to be absorbed by the retailer which we feel is very very unfair,” Reggie Sibiya, CEO of the FRA, told SABC News on the sidelines of the association’s sixth annual conference.
“There is still a debate at the moment whether that cost should actually be transferred to the motorist.”
The FRA has therefore approached the Department of Mineral and Petroleum Resources to devise a model through which fuel retailers can recover the cost of motorists paying by credit card.
“While technology is good, it does come at a cost, and so when we talk about this credit card cost is because it is a base cost that is actually incurred and brought by the technology,” said Sibiya.
He noted that the FRA is seeking a “fair model” through which the burden of credit card transaction fees at petrol stations wouldn’t be transferred solely onto consumers.
“We want motorists to also understand that we want a fair model, we’re not saying it must be transferred to them,” he said.
“What we’re busy doing with the South African Reserve Bank is to push the agenda of driving down these costs, but at the same time the Department of Mineral and Petroleum Resources needs to ensure that retailers are recovering these costs while we’re actually looking at a future solution, because it is unfair for a retailer to be absorbing this cost.”
Wits Business School’s Professor Jannie Rossouw echoed these sentiments, though he indicated that financial institutions such as banks could solve the problem without further burdening cash-strapped motorists.
In March 2024, Rossouw said banks could help lower fuel prices in South Africa by a welcome margin should they reduce or even waive credit card transaction fees.
“The one element in the fuel price that is not often discussed is the cost that filling station owners have to pay to the financial services industry when members of the public use their credit cards to pay for fuel. At the moment, the cost going from filling station owners to the financial services industry on credit card transactions amounts to about 40c per litre on every petrol or diesel transaction,” said Rossouw.
“So, if we can get the financial services industry to reduce that levy of about 40c per litre, it would help to get the fuel price lower in South Africa.”
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