Monday, 20 March 2023

News — The Regulation of Filling Stations

The Regulation of Filling Stations

 Fuel is an essential part of any economy.  It is a large contributing factor to the value chain on any business.  Security of supply of fuel is therefore crucial for sustainable economic development.  Businesses use fuel for their manufacturing and distribution needs, and individual citizens use it to get to work or anywhere they need to be.  The fuel value chain also employs significant amount of citizens, contributing significantly to the socio-economy of the country.  It is therefore crucial that this sector is carefully regulated, to ensure that the supply is secure and to the correct standards.  

1. Regulation of Fuel

ESERA is mandated by the Petroleum Act, 2007 to regulate the downstream petroleum activities in Eswatini.  The Authority performs this mandate through licensing businesses that operate in the sector, as well as conducting a vigorous compliance and monitoring activity.  Fundamentally, the Authority’s primary role is to ensure that Eswatini has enough fuel that is safe for consumption.  

2. Fuel Retailing business

The supply chain for fuel is divided into 3 sections; the upstream (reconnaissance, exploration and production of crude oil) , the midstream which mainly deals with the transportation and processing of crude into finished products (petrol, diesel, etc.) as well as the downstream which mainly consists of marketing, importation, sale and distribution of finished products. ESERA regulates the downstream activities of this supply chain.

The Regulation of Filling Stations

The fuel retailing business is one of the key regulated activities that are responsible for ensuring the public is able to access good quality fuel (petrol, diesel and paraffin) in a safe and secure manner. This is pivotal to the Authority’s mandate of ensuring security of fuel supply. This is one segment of the fuel value chain that locals (Emaswati) can play a meaningful and valuable role in as entry into this market has less economic barriers when compared to the other segments such as wholesaling. Local participation in this segment is critical for the promotion of local skills and empowerment.

ESERA issues licenses to all retail business owners with accompanying license conditions which are specific to the site where the retailing activity is to be undertaken. These conditions are meant to ensure the retailing activity is undertaken in a healthy, safe and environmentally sound manner while serving the fuel needs of the general public. The Authority ensures that these conditions are observed through the vigorous exercise of inspections. In this way, both the retailer and consumer are protected from anything that could harm the business or the consumer. Furthermore, the country is assured that it receives the correct standard of fuel.

Since assuming this regulation role of the downstream petroleum sector, the Authority has seen a tremendous response and interest from Emaswati who continuously apply to obtain retail licenses. This has been an encouraging response. Emaswati have been obtaining retail licenses in various areas around the country, some of which were in dire need of fuel service stations within vicinity. More and more Emaswati have been employed in this sector as a result, and more households improving economically.

While this is an encouraging response, it is worth noting that it is still a business whose operations and profit margins are regulated requiring that due diligence is done prior to investing the monies required to set up. The survival of the retail business is highly dependent on high fuel volume sales.

To ensure retail industry sustainability, and the ease of access to fuel for all Emaswati, the Authority has to limit the number of retail licences issued so that existing as well as new service stations can co-exist and still be profitable. While a number of Emaswati are in possession of retail licences, failure to develop the retail service station within the stipulated timelines shall eventually result in the revocation of those licences so that other equally deserving applicants can be granted licenses to the benefit of all consumers who need to access to fuel.

The Regulation of Filling Stations