October 21, 2003

By Audrey d'Angelo

Cape Town - More than half of South Africa's service stations would be unviable if they relied on fuel sales, Colin McClelland, the chief executive of the SA Petroleum Industry Association (Sapia), said yesterday.

These service stations needed to supplement income by running shops and selling other goods.

He said he did not envy the new regulator of the industry, one of whose objectives would be to retain jobs.

McClelland was speaking at an oil industry conference organised by Global Pacific and Partners, where he pointed out that Sapia would like a liberalised market.

Government targets included black empowerment in the industry, and McClelland did not think this would have been achieved in a normal market.

But now empowerment deals had been achieved or were in the process of being completed.  

The government was committed to a policy of allowing reasonable profits and encouraging sustained investment in the industry.

However, McClelland said, sales volumes were not growing, costs were escalating in line with inflation, and rates of return were shrinking.

On the equity side, empowerment had moved remarkably fast. But procurement could lead to more empowerment than equity deals.

He said Sapia companies had high ethical standards and good governance, and were concerned for the environment.

But he said it would cost an estimated R10 billion to R15 billion if all the refineries changed to an improved product specification.