- South Africa pumps up to a billion liters of fuel per day.
- And with the price of SA petrol now well above R20 per litre, it stands to reason that petrol stations are good bargains to own.
- But a new gas station isn’t cheap or easy to start, nor is it necessarily all that lucrative.
- A new station will easily cost you several million, and increases in the price of gasoline will require access to surplus working capital.
- This is what it costs to open or buy gas stations like Engen, Shell, Total, Caltex, BP or Sasol.
- And what hoops will you have to go through if you do it with only one independent station.
- For more stories, visit www.BusinessInsider.co.za.
South Africa pumps a large amount of fuel every day; in recent years, up to a billion liters per month.
Much of this would have moved through the 5,000 or so branded service stations in South Africa, many of which are owned by independent franchisees.
And with the price of fuel now comfortably on the other side of R20 per litre, and with fuel supply contributing 6% of South Africa’s gross domestic product, it can 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 sources of income.
See also | PetroSA says it can produce fuel for a third of SA’s cars in Mossel Bay, with some foreign help
But buying a service station is not cheap, nor is it easy. It is an industry that is still heavily regulated by the South African government and now requires 24/7 care.
The increase in the price of gasoline does not help much either. About 60% of that gas price increase also ends up in taxes, levies and markups, and has a huge impact on working capital.
Here’s what several leading gasoline brands are revealing about buying a turnkey service station franchise.
engen
Engen has approximately 1,300 service stations throughout southern Africa. They are one of the largest service station networks in the region and have partnerships with strong brands like Woolworths for their service store accessories. But its huge presence and popularity mean that buying an Engen franchise is expensive, if you can even find one.
Currently, Engen only has one service station on its franchise website: Edgemead in Cape Town. The station pumps around 279,000 liters 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 working capital requirement of R1.5 million. Franchisees must have 20% of this as cash free of charge.
Shell
Shell is a global service station franchise with a strong presence in South Africa. Shell has around 700 stations in South Africa, many of which are on long-distance routes with strong fast-food outlets attached. Shell’s franchise website currently has no companies listed, but they are open to applications from entrepreneurs who align with their ideologies.
To be a Shell franchisee, you must be a South African citizen and presence will be granted to black candidates as defined in the country’s BEE Act, particularly women. Applicants must meet Shell’s Integrity Due Diligence and Anti-Bribery and Corruption requirements, and provide a personal contribution of at least R500,000.
sasol
Sasol is an established service station brand in South Africa that has grown through a successful franchise model. Sasol’s franchise 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 centers and, in addition to fuel, also sells various consumer goods through service stores.
Sasol does not disclose the total investment required by potential franchisees and says it varies from site to site.
However, he does have an established business listed on his website: in Butterworth in the Eastern Cape. The store pumps monthly volumes of 222,766 liters and its convenience store turnover is R343,133 per month. For this petrol station, Sasol asks for 5.5 million rand, excluding VAT.
Total Energies
TotalEnergies is a leading global energy company with a presence in 130 countries. They have around 550 service stations across South Africa and according to their franchise website, they are still open to applications for new dealers.
TotalEnergies does not provide details on the cost of purchasing a new franchise or list established businesses for sale. But they provide a long list of application documents and start-up costs, such as a R9,600 fee for a psychometric assessment and a R30,000 training fee for nominated candidates.
astronomical 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 gas station market. Their association with FreshStop adds another source of income to their business.
According to the Astron Energy franchise website, they are open to applications from potential franchisees; however, they do not stipulate what these costs may be or present existing stores for sale.
independent service stations
It is also possible to open a freelance service station route if you have the capital and know-how.
It will have to go through several legislative hurdles, starting with the location. You cannot open a gas station wherever you want, and the stations must comply with the laws stipulated in the Petroleum Products Law.
A central factor when opening a new gas station is obtaining environmental authorization and land use rights, and licenses and permits can take time to process. An alternative would be to buy an existing gas station that has already taken care of the necessary red tape.
While starting and running an independent station may give you more freedom and not require paying franchise fees, it’s not a cheap venture, especially if you’re building it from scratch.
Merchant Capital estimates that a gas station in South Africa costs between R15 million and R100 million, depending on its size and location. They estimate working capital for inventory and operating expenses to be between R1.2 million and R1.5 million. And despite what many believe, rising gasoline prices can put significant pressure on service station owners, who will need to find additional working capital to purchase the right fuel, often at short notice. .
