Politics and policy

Independent oil marketers form sacco, sign supply deal with Engen

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By ZEDDY SAMBU

Posted  Thursday, November 29  2012 at  20:59

In Summary

  • The sacco will bring together all independent dealers under the Kenya Independent Petroleum Dealers Association (Kipeda). The investors own 20 retail outlets in Nairobi but are predominant in western Kenya.
  • The launch of the sacco coincides with the signing of a memorandum of understanding with Engen for fuel procurement.
  • The Energy Regulatory Commission (ERC) had earlier confirmed the dealers’ plan, saying it would help them negotiate contracts with marketers as a group.
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Independent oil marketers will launch Kipeda Sacco Society Ltd next week to handle a joint supply contract with Engen Kenya Limited, a South African firm principally owned by global giant Petronas of Malaysia.

The marketers complain of thin margins occasioned by the price control regime. The sacco will bring together all independent dealers under the Kenya Independent Petroleum Dealers Association (Kipeda).

The investors own 20 retail outlets in Nairobi but are predominant in western Kenya.

The launch of the sacco coincides with the signing of a memorandum of understanding with Engen for fuel procurement.

The Energy Regulatory Commission (ERC) had earlier confirmed the dealers’ plan, saying it would help them negotiate contracts with marketers as a group.

This could also see them form their own oil importing company to enable them enjoy better margins on wholesale and retail trade.

Independent dealers typically own less than 10 service stations each and buy products from major marketers. They make up about 30 per cent of all stations in Kenya.

Service station dealers are permitted Sh3 per litre gross margin while major oil companies, also referred to as importers or wholesalers, are allowed Sh7 per litre under the ERC price formula.

The controls have been in force since December 2010. Some small dealers, especially in western Kenya, have tended to break price schedules by charging higher prices due to the high cost of running the business.

Industry players say that only large sellers are able to survive on low margins as they operate on huge volumes and a steady supply.

However, top marketers like Total Kenya and KenolKobil have also complained over price control.