Malawi Energy Regulatory Authority (Mera) has acknowledged concerns raised by players in the local petroleum retail market and hopes that by-laws put in place will bring sanity in the sector.
Mera outlined its position in a written response to Business Review inquiry on concerns raised by some local petroleum franchise dealers who asked the regulator to address challenges and enforce energy laws in the liquid fuel industry.
Among others, the franchise dealers alleged that conditions some oil companies impose on them were unfavourable, leading to loss of properties by some dealers.
Mera senior consumer and public relations officer Fitina Khonje said Mera was aware of a number of concerns raised by parties in the liquid fuels and gas supply industry.
She said by-laws put in place to regulate the sector would provide room to encourage fairness. For example, she said, going forward, Mera would only approve franchise agreements which will provide for all costs, and charges applicable in the franchise agreement, maximum period of time between order and delivery of liquid fuel and gas; and method of
payments, among others.
Said Khonje: “[The agreements should also have] provision of training by the franchisor to the franchisee and its employees before the franchised business starts operating and during the operation of the franchised business.
“Maintenance and compliance with regulatory requirements and standards; term of the franchise agreement; and the site and location to which the franchise applies.”
Besides, according to Khonje, every franchise agreement should have a dispute resolution procedure as “unreasonable obligations/terms” are prohibited.
In their concerns, among others, the retail franchise dealers accused oil companies of unfair terms of payment, including their refusal of cheque payments, opting for upfront cash deposits into the companies’ bank accounts.
The retail franchise dealers complain that the relationship between them and the dealership companies is that of intimidation and fear where the retailers are on the receiving end and cannot negotiate for credit facilities even for two days.
Further, they say oil companies take away part of their commission, leaving many of them in deep debt.
In a May 15 2015 letter to Mera, Petroleum Retailers Association chairperson Victor Lulker sought an update on several issues, including consumer charter, KPMG consultancy on retail margins whose formula is in dispute, rentals, dealer code and working capital support.
On working capital, the retailers argued that while oil companies are given up to 45 days to pay for the fuel they purchase, the same favour is not extended to retailers.
Khonje, in her response, observed that franchising and dealership by-laws are designed to encourage greater private sector participation and the localisation of retail outlets through affirmative action.
On the question of credit facilities, Mera said oil marketing companies are allowed to pay levies within 45 days from date of sale or billing and that the 30 days credit period alluded to, if any, is a contractual arrangement between the companies and importers.
Three weeks ago, the Competition and Fair Trading Commission (CFTC) said it had commissioned a market inquiry to assess the state of competition and business environment in the liquid fuels and gas industry in the country.
Association of Oil Marketing Companies was yet to respond to a questionnaire sent on Tuesday to its chairperson Naftal Kakwambi who is also managing director of Engen Malawi. n