Study exposes gaps in liquid fuel market
A recent study by the Competition and Fair Trading Commission (CFTC) on the liquid fuel market has exposed gaps in the level of competition among market players across the supply chain.
For instance, the retailers claim that they find it hard to run fuel stations, forcing them to sell their property and surrender their stations after incurring overdrafts, having made no profit from the business.
“With the current electricity problems, we have been forced to use generators, which are an extra cost on our operations. We feel it would be fair if these costs are split [between the dealers and Oil Marketing Companies] because we are losing a lot of money to operate them, but this is not the case,” said one retailer in an interview yesterday.
The retailer said because of power outages, they are using the same fuel which they are supposed to sell to customers to run generators, which is increasing their operational costs.
The CFTC study, conducted to assess competition in the sector, was done on the back of claims from some petroleum franchise retailers that conditions imposed on them by Oil Marketing Companies (OMCs) are unfavourable and has led to loss of property.
CFTC director of consumer welfare and education Lewis Kulisewa, in response to an e-mailed questionnaire on Monday, said the study found that the industry is integrated from upstream to downstream with OMCs involved across the supply chain.
He said the development has affected the level of competition among market players across the supply chain.
He said: “Being a regulated industry, the study recommended effective regulation by the industry’s regulatory authorities. It is pleasing to note that some of the issues raised by the study are being addressed.
“For example, the franchise agreements between [OMCs] and retailers are now subject to review by Mera [Malawi Energy Regulatory Authority] before implementation.
“Any trade restrictive terms identified during the review are eliminated from the agreements.”
When asked on the development yesterday, Association of Oil Marketing Companies spokesperson Seggie Kistasamy said most OMCs have ensured that they apply the new dealership law as mandated by Mera.
“Though these issues are subject to individual companies as the Mera arrangement was addressed to petroleum companies individually, it is hard to speak on behalf of all companies, but to my knowledge, most of us [OMCs] have made the changes in line with Mera requirements,” he said.
Mera senior consumer and public relations officer Fitina Khonje said the franchise and dealership by-laws were gazetted last year to reform the liquid fuels and gas supply industry downstream market by restructuring it, encouraging greater private sector participation and localisation of retail outlets through affirmative action.
She said: “Mera will be monitoring compliance and any party that feels that the by-laws are being violated is welcome to report to Mera or seek any relevant institution’s intervention.
“Those who contravene any provision of the by-laws commit an offence and shall on conviction be liable to imprisonment for three months.”
Khonje said the by-laws provide that the agreements should have a dispute resolution procedure.
The dealership by-law states that except for own-operated retail outlets, all retail outlets should be operated and managed by Malawians, through franchise arrangements with retail outlet owners.
