An investigation into the barriers to entry in the South African downstream petroleum industry
Master Thesis
2003
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University of Cape Town
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This dissertation investigates barriers to entry into the downstream petroleum industry of South Africa. The study seeks to understand why there is insignificant entry into the downstream petroleum industry by Historically Disadvantaged South Africans (HSDA's), while the government has set itself an objective of achieving sustainable presence, control and ownership by HDSA's of approximately a quarter in all facets of the industry. The government has set this objective in order to address the past imbalances before the industry could be deregulated. In an endeavour to ascertain why this key policy objective was not achieved, the study investigated barriers to entry into the industry, and revealed a number of these impediments. There are three categories of these impediments or barriers to entry, namely, economic barriers to entry, non-economic barriers, and cross-sectoral barriers. These barriers contribute towards deterring entry by HDSA's and hold back the BOC's from increasing their market share in the downstream industry. In order to address some of these barriers a business model for economic empowerment has been developed, which seeks to assist in the achievement of the government's set key policy objective. The barriers to entry could be circumvented through this business model, with an aim of making entry into the industry easy for HDSA's. The model could create a business environment that will allow the BOC's to increase their market share in the downstream while at the same time alleviating the identified barriers to entry in order to achieve approximately twenty five percent sustainable presence, control and ownership of the industry by HDSA's. The model would also enable BOC's to capture five percent (5%) of the market share of the refiners in a sustainable way without significantly harming the established oil companies. The role of government in this regard would be limited to issuing a licence to the BOC's in order to acquire the 5% target at an Import Parity Price (IPP), which is far less than the Basic Fuel Price (BFP). The revenue loss of the refiners for their petrol and diesel would be 0.5% and 0.26% respectively.
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Bibliography: leaves 112-116.
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Mokoena, J. 2003. An investigation into the barriers to entry in the South African downstream petroleum industry. University of Cape Town.