Why Fuel Stations will Keep Mushrooming in Kampala City



By Sam Stewart Mutabazi

Kampala is a city of petrol stations. At every turn, you will get an old one or another being built. They are as many as they have different names. Forget the past when the fuel dealership market was dominated by big brands like Shell, Total, Caltex Agip, etc. Today the fuel market has several small retail outlets and they are found everywhere. Some are situated right next to each other and each has its own customers. Kampala residents have often complained about the mushrooming petrol stations saying they are a danger and a security risk to the city. They have called on authorities to regulate them. Its true petrol stations are sprouting up at a very high rate.

Industry sources have attributed the craze to great profitability of fuel Business. It’s a very lucrative venture where one is assured of profits all year round. As long as one has capital to sink in as the initial investment, which is very high, they are assured of good business with very few risks compared to other forms of business in the city. Unlike other products, oil cannot expire and neither can one fail to get customers. Every petrol station, however small will have its dedicated clients ranging from Bodaboda riders to taxis. Petrol stations have to have competitive prices lest they lose consumers.

The new entrants and the smaller ones normally display lower prices compared to well established ones like Shell and Total. In fuel dealership, lower prices count when it comes to attracting many customers. The less the price displayed on the board the more the clients the station is likely to attract. Some petrol stations go a step further by outcompeting each other for as less as one shilling. It’s common to see a petrol station quoting its selling price at 5799 Uganda shillings while the other is selling at 5800 shillings. Do not be surprised, some customers will choose to buy fuel from the one quoting the lower price by even one shilling since, to them, it looks like saving some money.

The big fuel companies usually quote higher prices compared to smaller ones as they have the reputation which they have built over time. Besides most corporate companies have strict guidelines that require staff to get fuel from only designated fuel stations or companies. Such companies go a step further to issue free fuel cards to their clients with prepaid credit which they use to fuel their cars without paying cash. Such fuel cards are meant to “hook” customers such that they can only take fuel from the card issuing Fuel Company and not any other.

The big fuel companies post higher prices compared to other smaller companies with a price difference of sometimes as big as 400 shillings a Littre. It is alleged that smaller fuel stations sell adulterated fuel while big brands have very high quality fuel. In fact some motorists have reported their cars experiencing engine problems when they take fuel from the small operators.

The quality control Agency, UNBS has in the past carried out operations aimed at clamping down stations that sell contaminated fuel but the problem persists. Fuel stations located within Kampala city Centre tend to charge a higher price per Littre of fuel compared to those outside the city. In fact, stations that are further away from the city quote much cheaper prices. For instance fuel stations along Gayaza road and Masala road, Bombo and Road Hoima road, have low prices compared to those within the city of Kampala.

The big question therefore is why there are too many fuel stations and why are many more opening up within and outside the city? The answer is that fuel is a very reliable business and hardly can one make loses especially when the business is well managed. Contrary to many people’s fears that these stations could one time catch fire which could engulf a big part of the city because of their proximity to each other, this may be unfounded.

Experts have explained that it’s a rare occurrence for a petrol station to catch fire as the tanks where fuel is stored in the underground have very strict safeguards which would not permit fire to erupt within or near those tanks. This is perhaps verified due to the fact that there has never been any fire explosion at ant fuel station in Kampala in spite of the fact that they are very many and in crowded places.

Therefore, as long as the fuel business is still lucrative, many more petrol stations are likely to be opened up in your neighborhood and even more will open in other areas in the near future. Fuel remains one of the most easily accessible good in Uganda thanks to the mushrooming petrol stations. Other than some of them selling sub standard fuel, they have also had stiff competition which has led to fair and competitive fuel rates throughout Kampala and Uganda in general

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