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Friday / 14 June 2024
HomeFeaturesWhy some petrol stations in South Africa can’t stay open 24/7 anymore

Why some petrol stations in South Africa can’t stay open 24/7 anymore

The ongoing energy crisis in South Africa is affecting every corner of the economy, raising the cost of operating and ultimately prices for consumers.

Load-shedding has led to certain petrol stations not being able to afford to keep the lights on for 24 hours a day, despite being able to do so for many years before, as spending on backup power in the face of persistent electricity cuts has eaten into their profit margins.

Profit goes down when load-shedding goes up

The South African Fuel Retailer’s Association (FRA) said that load-shedding remains an ongoing threat to fuel retailers, which is causing their costs to rise.

Petrol stations generally operate 24 hours a day, which means they are increasingly reliant on diesel generators to keep the lights on, FRA chief executive Reggie Sibiya told IOL.

This narrows the operating margin for the retailers, as well as the convenience stores located on their premises; however, since the local prices of both diesel and petrol are regulated by the national government, they have not changed to reflect this.

Of course, fuel rates have gone up at an alarming rate over the past year, as petrol reached a new record high of R26.74 per litre in July 2022, and is still swapping hands at a substantial sum of R22.63 per litre as of June 2023.

These price hikes are attributed to global factors, such as sanctions against Russia (a major oil supplier) and the rand/U.S. dollar exchange rate, which has worsened over time in tandem with South Africa’s poor economic climate and controversial political stance regarding Russia’s invasion of Ukraine.

The harsh operating environment has led to certain petrol stations claiming that they will no longer be able to stay open 24/7, owing to their increasing expenses and reduced profit margins.

A significant portion of the sky-high cost of petrol is actually the result of six different government taxes, levies, and customs, which collectively raise the price of each litre by over R6.00.

The substantial tax rate on every litre of fuel, combined with government price regulation, means retailers are making smaller and smaller returns on sales with every increase in the stage of load-shedding the country experiences.

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