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- South Africa pumps as much as one billion litres of fuel per day.
- And with SA’s petrol price now well over R20 a litre, it stands to reason that filling stations are good businesses to own.
- But a new petrol station isn’t cheap or easy to start – nor is it necessarily as lucrative.
- A new station will easily set you back several million – and increases in the petrol price will require access to a surplus of working capital.
- Here’s how much it cost to open or buy petrol stations like Engen, Shell, Total, Caltex, BP, or Sasol.
- And what hoops you’ll need to jump through if you go it alone with an independent station.
- For more stories, go to www.BusinessInsider.co.za.
South Africa pumps a lot of fuel every day – in recent years, as much as one billion litres per month.
Much of this would have moved through the roughly 5,000 commercial brand name filling stations around South Africa – many of which are owned by independent franchisees.
And with the fuel price now comfortably on the other side of R20 per litre, and with fuel provision contributing 6% to South Africa’s gross domestic product, it may be tempting to look at petrol station owners with envy
It’s also a resilient industry despite tough economic times – and with add-ons like convenience stores and coffee shops, it’s often profitable through multiple revenue streams.
See also | PetroSA says it can make fuel for a third of SA’s cars at Mossel Bay – with some foreign help
But buying a filling station isn’t cheap – nor is it easy. It’s an industry that the South African government still regulates heavily and one that now requires 24-hour attention every day of the year.
The climbing petrol price doesn’t help much, either. About 60% of that climbing petrol price also ends up in taxes, levies and margins – and it heavily impacts working capital.
Here’s what several leading petrol brands reveal about buying a turnkey filling station franchise.
Engen
Engen has roughly 1,300 filling stations throughout Southern Africa. They’re one of the more extensive filling station networks in the region and have partnerships with solid brands like Woolworths for their forecourt store add-ons. But their large footprint and popularity mean that buying an Engen franchise is expensive – if you can find one.
Currently, Engen has just one service station listed on its franchising website – Edgemead in Cape Town. The station pumps about 279,000 litres of fuel per month and has a Quickshop and Bakery on site.
For a franchise of this size and volume, Engen is asking for R8.39 million, which includes a R1.5 million working capital requirement. Franchisees must have 20% of this as unencumbered cash.
Shell
Shell is a global filling station franchise with a strong presence in South Africa. Shell has about 700 stations throughout South Africa, many of which are on long-haul routes with strong fast-food restaurants attached. The Shell franchising website currently has no businesses listed – but they are open to applications from businesspeople who align with their ideologies.
To be a Shell franchisee, you must be a South African citizen, and presence will be given to black candidates as defined in the country’s BEE Act, particularly females. Applicants need to meet Shell Anti-Bribery and Corruption and Integrity Due Diligent requirements – and bring a personal contribution of at least R500,000.
Sasol
Sasol is an established filling station brand in South Africa that’s grown due to a successful franchise model. The Sasol franchising website says they offer the advantage of an established brand with full support – and are looking for franchisees who bring “commitment, management skills, and daily hands-on involvement” to their business. Sasol defines its businesses as convenience centres, and in addition to fuel, they also sell various consumer goods through forecourt stores.
Sasol does not disclose the total investment required by prospective franchisees and says it varies from site to site.
It does, however, have one established business listed on its website – in Butterworth in the Eastern Cape. The store pumps monthly volumes of 222,766 litres, and its convenience store turnover is R343,133 per month. For this petrol station, Sasol is asking for R5.5 million, excluding VAT.
TotalEnergies
TotalEnergies is a significant global energy company with a presence in 130 countries. They have about 550 filling stations throughout South Africa, and according to their franchising website, they’re still open to applications from new dealers.
TotalEnergies does not provide details on the cost of buying a new franchise or list any established businesses for sale. But they provide a long list of application documents and initial costs, like a R9,600 fee for a psychometric assessment and a R30,000 training fee for appointed candidates.
Astron Energy
Astron Energy is the rebranded Caltex, and they have 850 stores in the Southern African market. This makes them one of the most prominent players in the local filling station market. Their partnership with FreshStop adds another revenue stream to their businesses.
According to the Astron Energy franchising website, they’re open to applications from prospective franchisees – however, they don’t stipulate what these costs may be nor feature any existing stores for sale.
Independent filling stations
It is also possible to open an independent filling station route if you’ve got the capital and know-how.
You’ll need to jump through several legislative hoops – starting with location. You can’t open a petrol station wherever you like – and stations must follow laws stipulated in the Petroleum Products Act.
A central factor when opening a new petrol station is obtaining environmental authorisation and land use rights, and licenses and permits may take time to process. An alternative would be to purchase an existing petrol station that has already dealt with the requisite red tape.
Although starting and running an independent station may give you more freedom and not require the payment of franchise fees, it’s not a cheap operation – particularly if you’re building it from scratch.
Merchant Capital estimates that a petrol station in South Africa costs between R15 million and R100 million, depending on its size and location. They estimate that working capital for stock and operational expenses to be between R1.2 million and R1.5 million. And, despite what many believe, increasing petrol prices can put a significant strain on filling station owners who will need to find additional working capital to purchase adequate fuel – often on short notice.
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