Barriers to entry, by reinforcing the market power of incumbent firms in liquid fuel distribution, have meant that the pace of transformation throughout the fuel value chain in South Africa has been slow. The ability of new firms to enter the sector, develop capabilities, and become effective competitors to the major oil companies is important for achieving transformation and introducing dynamic rivalry in the liquid fuels sector. This paper draws on interviews with market participants and publicly available sources to assess the nature and extent of barriers to entry and expansion of firms in wholesale of liquid fuels. The analysis categorises barriers to entry along six main themes, namely: the costs of entry, skills and training, access to supply, access to customers, and the reactions of incumbents to entry, and policy and regulatory challenges. However, it is clear that these challenges at the wholesale level form part of a broader set of concerns in the value chain as a whole, relating to access to infrastructure and low levels of competition between the major oil companies themselves. The paper concludes by suggesting a set of short and long-term remedies for increasing access and competition in transportation and storage, wholesaling infrastructure, and in retail.

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Written by Anthea Paelo, Genna Robb and Thando Vilakazi, Centre for Competition, Regulation and Economic Development, University of Johannesburg