CHAPTER 1 Introduction
7.3 SUMMARY
The research highlighted the historical background of Gauteng Province and the economic perspectives with its impact on the national economy. The provincial standing in the SADC region was also discussed. Major economic sectors were highlighted as the engine that drives the province in Chapter 2.
The rapid structural economic changes in Gauteng Province was highlighted, and so also the role of the energy sector in South Africa. It was found that the energy sector supplies energy at a much lower cost than most of the developed world. As energy cost is an important element in the total input cost of every single commodity produced in the country, South Africa might be seen as having a competitive advantage in the area of energy production. This might have important implications for the general competitiveness of South African products in the international markets.
The Business Confidence Index was highlighted in view of the impact related to the liquid fuel industry. The chapter concluded with a discussion on the City of Tshwane Metropolitan Municipality as the area of the research study. The city’s economic indicators per sector were discussed to highlight their importance to the Gauteng Province’s economic standing.
In Chapter 3, the literature review studies related to the research project was highlighted.
The background information about petroleum industry in terms of the primary vs.
secondary oil, the oil flow chart and the impact of price shocks were discussed. The sustainable supply of exhaustible resources like crude oil was highlighted. The current and future demand of the resource and its impact on the environment were also discussed. The chapter concluded with the South African energy demand discussion. Coal is one of the major energy sources. The reserve quantities, supply to local and export markets were highlighted.
The petroleum industry background was discussed in Chapter 4 in relation to the historical periods: pre-1973 oil embargo, post-1973 oil embargo and before 1994. In addition, the organizations which influence the petroleum and liquid fuels industry were presented from the global perspective, including among others, Organisation of Petroleum Exporting Countries and the national bodies like South African Petroleum Industry Association.
All the petroleum companies operating in South Africa were discussed in relation to the nature of business, refining and marketing and shareholding structure. This included among others the formation of Sasol and the South African government involvement in the industry. The main Acts of parliament (i.e. legislations) affecting and influencing the petroleum industry were highlighted as an attachment.
The Chapter concluded with the industry agreement entered into by role players, like the Service Station Rationalisation Plan which influenced the development and petrol supply in the country, the Blue Pump Agreement entered into by petroleum companies which allowed Sasol to distribute their petrol without having their own network. The Blue Pump Agreement has expired, which allowed Sasol to establish their own retail network in the early 2000. The Roster Outlet was discussed as this affects all petroleum companies’ petrol distribution. The minimum qualifying standards were set for the service station to be approved. The Chapter concluded with the Petroleum Charter which aims to promote the empowerment of previously disadvantaged South Africans within the sector.
In Chapter 5, a full discussion on the formation of Sasol was highlighted. The Sasol plants in the liquid fuels industry during sanction period when the Government wanted to reduce the reliance of the South African crude market on the international suppliers was a strategic move at the time. It went further by highlighting the Government’s role in terms of financial assistance and tariff protection accorded to Sasol in order for it to survive and not feel the impact of crude oil price fluctuations.
Sasol was guaranteed a market by “making” other petroleum companies trading in South Africa to purchase their petrol from Sasol through the Rationalization Plan (Ratplan) and through the installation of Sasol pumps at those companies’ service station retail outlets.
The main Acts that govern and affect the liquid petroleum industry were highlighted. The main topical and critical issues of whether to deregulate the industry has been highlighted
research institute. Their viewpoints differ in relation to Government participation in the industry, introduction of self-service, vertical integration and retail price maintenance.
Chapter 6 analysed the data captured during the research process. The City of Tshwane Metropolitan Municipality service station sample was discussed. The South African petrol price historical performance was analysed. The national petroleum companies’ market share was highlighted to show the overall picture per company. The petrol and diesel price analysis over the years was also shown using 1985 constant prices. The price composition, price historical analysis and fixed price analysis were discussed. The retailer margin was analysed compared with the price changes over the period analysed. The service station profitability was discussed based on the petrol sales, sales changes over months, gross profit per litre, retailer margin changes and the margin as a percentage of petrol prices.
The South Africa inflation status was also discussed. The elasticity calculation was analysed to highlight the effect of price change on quantity demanded. Other factors affecting the retail service stations profitability were highlighted based on the statistical results. A comparison of the service stations volume was done in from the point of view of different trading areas: suburb, industry, township and the city. This chapter concluded with the full statistical analysis of the research results.
The survival of the service station is key to the economy as logistics network relies on the services of the industry. The major variables that influence the service stations were discussed which include among others, tax, retailer margin, etc. It was evident that there are too many taxes on the South African petrol compared with other countries. The petrol price increases impacts are huge for the service station retailers; this has a major effect on the individual service station operator.