‘Huge’ diesel discounts and selling poor quality petrol could get garage owners 10 years in jail

Business Insider SA

Diesel petrol price South Africa
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  • Illicit fuel trading is putting them out of business, legal retailers say, and they want action.
  • A new team of police officers and tax agents has been established to inspect petrol stations and depots.
  • This coincides with amendments to the Petroleum Products Act, which focuses extensively on diesel.
  • The retail price of diesel is not regulated but “skimming” and diluting – which result in discounted retail rates – have become a major concern for the government.
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Fines of up to R1 million, and decade-long jail term, could await those who break fuel laws, as government plans an organised crackdown on an illicit trade.

The rise of illegal fuel traders and unlicensed depots has risen dramatically in recent years and threatens the collapse of the retail industry, according to Fuel Retail Association (FRA) CEO Reggie Sibiya, who has petitioned for stricter regulation and enforcement.

Now the sector has new draft rules, and a new public policing forum for petroleum products, headed by police officers and tax agents, due to help with identify those operating outside the law across manufacturing, wholesaling, and retailing of petrol and diesel.

At the same time, new definitions for petrol and diesel grades under the Petroleum Products Act are aligning legal quality standards with South African National Standard (SANS).

South Africa’s retail fuel sector is highly competitive – with approximately 4,600 service stations dotted throughout the country, according to the South African Petroleum Industry Association – and can be highly lucrative. But setting up a legal site in compliance with stringent requirements requires a hefty capital investment, and taxes are high, so the black market trade is more lucrative still, and illegal operators can easily undercut their licensed equivalents..  

READ | April's petrol price may be 25% higher than a year ago. Here's how much is going to tax

The illegal trade of diesel is the most common from of illicit activity within the fuel retail sector, according to lobbyists such as the FRA. While there is a base price per litre set by the department of energy, the retail price of diesel, unlike petrol, is unregulated in South Africa.

Diesel, industry players say, is commonly siphoned from trucks in "diesel skimming", or diluted with paraffin.

The Public Petroleum Products Act Compliance Forum, Mantashe announced on Wednesday, has been authorised to conduct spot checks on service stations and depots.

It will also be checking for wholesalers who sell directly to the public, operators without a licence, undisclosed storage facilities, and empowerment fronting.

More importantly for consumers, it will also look for "huge" discounts on diesel, adulteration, inferior quality petrol or diesel in general, and the sale of ULP 93 at the price of ULP 95 to unsuspecting retailers and motorists, especially in outlying areas.

The department says incidents of non-compliance should be reported to regional inspectors.

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