Buying a petrol station in South Africa

1. The licences you actually need

Two licences sit at the centre of every fuel deal, both administered by the DMRE under the Petroleum Products Act:

• Site licence, attached to the physical premises where fuel is stored and dispensed.
• Retail licence, held by the operator that sells fuel to the public.

A change of ownership or operator typically requires the licence to be amended or re-issued through the Controller of Petroleum Products. It is not automatic. The application needs a complete document pack, and the timeline sits outside your control, so treat licence transfer as a non-negotiable suspensive condition of your purchase and agree in writing who operates and earns from the station while the application is processed. Confirm too that the existing licences are clean, current and free of any compliance findings, because you do not want to inherit an enforcement problem along with the keys.

2. The supplier (oil company) agreement

Most stations operate under a franchise or supply agreement with a major fuel brand. These agreements govern branding, the fuel supply, pricing mechanics, minimum volumes and the term remaining. Read the contract in full, because it shapes the economics as much as the location does. Pay attention to:

• Term remaining. A long secure agreement supports value; one that expires soon, with renewal at the brand discretion, is a risk you must price in.
• Change-of-control and consent. The brand usually has to approve a new operator. Their consent is effectively a second approval running in parallel with the DMRE licence transfer.
• Volume commitments and rebates. Understand any minimum volume obligations and how rebates or support payments work, because these can make a real difference to the bottom line.
• Operating model. Confirm whether the site is company-owned or dealer-owned and who carries responsibility for equipment, maintenance and tank infrastructure under the agreement.

3. Reading the real profit

Fuel is a low-margin, high-volume business, so headline turnover tells you very little. A station can turn over many millions of Rand a year and still make a modest profit, because most of the fuel turnover simply passes through to the supplier. Break the numbers down:

• Fuel margin (the regulated margin per litre multiplied by litres sold) separated from convenience-store and ancillary income.
• Fuel volumes confirmed against supplier delivery statements and wet-stock reconciliations, not just the seller spreadsheet.
• Shrinkage, losses and any history of stock discrepancies, which directly reduce a thin fuel margin.
• Shop, car wash, quick-service food and other income streams, which often carry the real profitability of the site.

4. A worked forecourt profit example

Take a mid-sized station selling about 400,000 litres of fuel a month. Suppose the retail margin the operator earns works out to roughly R1.20 a litre after the costs that scale with volume. That is about R480,000 a month of fuel gross profit, or around R5.76m a year, before running costs.

The convenience store adds another layer. Say the shop turns over R900,000 a month at a 25% gross margin, which is about R225,000 a month, or R2.7m a year of shop gross profit. A small car wash and a quick-service food counter add, say, another R40,000 a month, or roughly R480,000 a year.

Put together, the site earns about R8.94m a year in gross profit across fuel, shop and ancillary income. From that you subtract the real running costs: forecourt and shop staff, rent or bond, electricity, card and banking fees, maintenance, security, insurance and shrinkage. If those costs come to about R6.5m a year, the station nets roughly R2.4m a year before tax and owner drawings. Notice how the shop and ancillary income, not the fuel, often makes the difference between a thin result and a healthy one, which is exactly why you separate the streams instead of trusting a single turnover figure.

5. Environmental and safety liability

Underground storage tanks are the biggest hidden risk in a fuel deal. A leaking tank can contaminate soil and groundwater and create clean-up liability that exceeds the value of the business, and that liability often follows the site. Older steel tanks carry more risk than newer double-walled or lined tanks, so the age and type of the tank infrastructure matters. Before you commit, insist on tank integrity testing, review the site environmental authorisations, and consider an independent environmental assessment so you understand any existing contamination before it becomes your problem.

Agree who pays for testing and who carries the cost of any remediation that the testing uncovers, and build the answer into the price and the conditions. Confirm fire, health and safety compliance as well, since a forecourt that does not meet current standards can face costly upgrades.

6. Fuel-specific due diligence checklist

• Valid, current and transferable DMRE site and retail licences, with no open compliance findings.
• Supplier or brand agreement terms, remaining period, rebate structure and consent to transfer.
• Verified fuel volumes and margin, separated from shop and ancillary income.
• Tank age and type, integrity testing, environmental authorisations and any contamination history.
• Lease term and landlord consent where the site is leased, or transfer duty and tank liability where the property is included.
• Staff transfers under section 197 of the Labour Relations Act, including forecourt and shop staff.
• Municipal, food and liquor licences for the forecourt shop.
• Equipment condition: pumps, point-of-sale, the canopy, the wash and refrigeration.

7. Red flags specific to forecourts

• Volumes that do not reconcile. If the seller fuel volumes do not match supplier delivery statements and wet-stock records, stop and investigate.
• A supplier agreement near expiry. Without a secure renewal, the brand and supply you are buying may not be there next year.
• Old tanks and no testing. A reluctance to test the tanks before sale is one of the clearest warning signs in the sector.
• Profit that is all fuel and no shop. A site leaning entirely on a thin fuel margin, with little shop income, has very little cushion if volumes dip.
• A short lease on a leased site. If the land is leased and the term is short, the value of everything else depends on a renewal you do not yet hold.