Sasol plans to merge with empowerment fuel company Exel and establish a joint network of 300 service stations by mid-2004. But how will the move affect the already overtraded fuel retail sector?

Sasol plans to merge with empowerment fuel company Exel and establish a joint network 300 service stations by mid-2004. But how will the move affect the already overtraded fuel retail sector?


The deal will bring Sasol closer to the 25 per cent black equity level stipulated by the empowerment charter for the liquid fuels industry. If approved by the Competition Commission, the merged company, called Sasol Liquid Fuels Business, will incorporate the liquid fuels interests of both firms and will give Sasol access to 189 service stations.


Sasol needs a fuel distribution network because its "Blue Pump" agreement, which guarantees its role as supplier to other fuel firms, comes to an end in December. In other words, Sasol and PetroSA would enter the market once they ended their agreements with the major oil companies to uplift their synthetic fuel and started marketing under their own brands.


Exel chief executive Maurice Radebe said that the merged group would operate a "dual-brand strategy" and hoped to establish 150 Exel and 150 Sasol service stations by mid-2004.


Sasol Liquid Fuels Business would not only buy sites but would build new stations around the country. This was despite the 5 000 service station limit for the country imposed by the Petroleum Producers Amendment Act.


The two companies predicted they would initially hold five per cent of the petrol market and up to 10 per cent of the diesel market. According to , Sasol said the target was to achieve a 15 per cent market share by 2010.


Hovever, the entry of Sasol into the retail market could only aggravate a desperate situation, representatives from African Minerals and Energy Forum (Amef), the Fuel Retailers' Association and the SA Fuel Dealers' Association, told the Parliamentary portfolio committee on minerals and energy in August.


The SA Coastal Crude Refineries Association is against the bill's apparent preference for Sasol and government-owned PetroSA when it comes to retail licences because the companies produce 40 per cent of the fuel used in the country.


The association represents BP, Caltex, Engen and Shell, which are opposed to a clause in the bill, saying licences could be linked to the amount of fuel made in a given area.


However, the parties agreed the petrol station market was chronically overtraded with, for example, over 60 stations within a 5 km radius in Johannesburg while they were scarce in rural areas.


Overtrading has squeezed margins for petrol station operators, forcing many to close, and increasing competition through the new licensing system to accommodate new entrants could result in “a bloodbath” with many, mostly black, franchisees going out of business, the committee was told.