How To Own A Petrol Station In South Africa

Below is How To Own A Petrol Station In South Africa

Opening an independent fuel station

The independent route allows for greater freedom, and potentially greater profit, without the restrictions of a parent company. In theory, if you know what you’re doing and have enough cash, you can establish a filling station with your own brand.

You can’t open a petrol station anywhere you like, though. New sites require approval from the government, and you’ll need to jump through several legislative hoops as stipulated in the daunting Petroleum Products Act regarding petroleum products site and retail licences. 

As part of the process of opening an independent petrol station, you’ll need to obtain environmental authorisation and land use rights. Once you have these approved you apply for your operating licenses. Not getting the approval right could be a real problem.

If you’re familiar with the petrol industry or have run a station before and you want to go independent, your best bet is to purchase an existing filling station that has all of the red tapes already sorted. This may enable you to bypass some aspects of the Petroleum Products Act that governs the locations of new stations. 

Opening a petrol franchise via Engen, Shell, or other oil companies 

Like other types of franchising, it may be a far safer option for first-time owners to buy an existing franchise from one of the major oil companies. This may come with some restrictions, such as store layouts, product pricing, and branding, as well as some additional costs like franchise and advertising fees, but you’ll be tapping into the expertise, workflow and brand of established players.

Many franchise petrol stations now also have affiliations with loyalty schemes like those from Clicks and Discovery, which can help drive customers to use these locations over competitors.

The likes of Engen, Shell, Total, Caltex, BP, or Sasol are open to new franchise locations, but with licensing and locations hard to come by, your best option may be to purchase an existing franchise operation. Even these are rare. Most leading petrol station brands appear to advertise just one or two on their websites every few months.

The cost of these franchises varies according to the location, fuel pumped, and other add-ons like convenience stores. 

Engen currently has just two service station franchise opportunities in South Africa.

The first, in the North West, pumps an average of 135,512 litres of petrol, and 4,096 litres of diesel, per month, and has no convenience store. By most counts, it’s a small station, and Engen is asking for just under R2.5 million for it. Of this, R700,000 must be in unencumbered cash, and buyers must have a working capital of R800,000.

By way of comparison, Engen is also selling a larger petrol station franchise in Mpumalanga, that has a convenience store attached. This franchise location pumps 193,854 litres of petrol and 75,364 litres of diesel per month and turns over R615,000 at its convenience store. The group is asking for R6.8 million, with working capital of R1.5 million, for this location.

Larger stations in the network can go for a lot more. Those that pump in excess of 200,000 litres and come with a forecourt Quickshop have previously fetched R4 million. 

Engen requires more than cash to be successful. Applicants will complete a psychometric assessment at their own cost to ensure a good fit with the business.

Competitor Sasol has fewer locations, but its new, fully-equipped stations are equally expensive. The group was selling an existing filling station last year that cost in excess of R10 million. It was based in Gauteng, with a convenience store with a monthly pumped fuel average of 315,000 litres. 

By way of comparison, a smaller Sasol petrol station in Port Elizabeth, which sees an average of 203,300 litres per month, was recently on the market for just under R6 million.

New and existing franchises, bought directly through the brands they’re associated with, are hard to come by. But if you have your heart set on a petrol station and there are no opportunities directly through the brands there are still several private purchasing opportunities available.

Profitable and established petrol stations around the country, like one recently listed online that’s located along the Garden Route, can easily fetch upwards of R22 million if bought through a broker. The above example, available only as a cash purchase, turns over a net monthly profit of R227,854 according to an online listing, which means that it’ll take about a decade of pretty hard work before you realise a profit.

Even if you have the money to stump up for a petrol station bought directly from the franchisor, or via a private sale, you’ll likely need to undergo a fairly extensive vetting process. Most leading brands require applicants to pass exams and submit to comprehensive questioning before they can proceed to the actual building or handover phase. 

If you pass the exams, and possibly a psychometric assessment, and have shelled out the millions needed to cover the required amounts of unencumbered cash and working capital, you can then turn your attention towards the thankless task of pumping other peoples’ fuel.

How much is a petrol station franchise in South Africa?

A local petrol station business set up costs range in the region of R15 million and R100 million depending on the size and site. Further to this the operation payable to the oil company ranges between R2. 5 million and R15 million, depending on the cost to develop, projected volumes and profitability.

How do I buy a petrol station in South Africa?

Selling Price of business R 5 000 000.00 net profit +- R 120,000 pm.

Plus: Stock R 600 000.00.

Plus Working Capital R 500 000.00.

Other: e.g. Training, Licence application, etc.

Oil company fuel guarantee R800,000.

TOTAL Funding Requirement R 7 000 000.00.