THE DEFINITIVE TRUCKING SITE

September 2008

When the fuel price went up at the beginning of the year, FleetWatch warned that fuel theft and fraud would increase. We were not wrong. Litre by litre, billions of Rands worth of diesel is being drained out of the South African road transport industry as fuel crime hits record levels. Andrew Parker reports. 

COMMERCIAL VEHICLE FLEET operators, fuel management specialists and suppliers of fuel security systems report that fuel thieves are treating diesel as the new liquid currency and are cashing in while they can. 

While combating fuel theft has been an ongoing challenge for fleet operators for decades, the reasons behind the sudden spike in fuel crime have been widely documented in the media. High prices have made fossil fuel an extremely valuable and much sought after commodity and theft and fraud of fuel has sky rocketed around the world. Suppliers of fuel management systems and anti-siphoning devices say their phones are ringing non-stop and order books are bursting at the seams. 

The thieves, either working alone, in small groups, or as part of well organised crime syndicates, are employing a variety of techniques to get their hands on fuel. These range from fuel card fraud, pumping fuel out of the storage tanks at company depots, making short drops and so on. However, the most common form of theft is siphoning directly from the vehicle’s fuel tank and is perpetrated by the drivers. 

André Steyn, MD of fuel management specialists, iFleet, says the modus operandi is quite simple. The driver fills the tank, drives out of the depot and somewhere along the route he will siphon anything between 20 and 50 litres and sell it on. He says the drivers are quite shrewd and will generally steal exactly the same quantity every time making it difficult for management to detect. 

Steyn tells of a bus company where a member of staff and the security guard were caught taking one litre of fuel out of each bus every night. With 80 buses parked in the yard, this was easy and lucrative pickings. 

It is also a well known fact that organised syndicates operating along major routes and the major centres are buying small amounts of diesel from a large number of drivers. The syndicates in turn sell the diesel to owner drivers, small operators and farmers who are quite willing buy cheap diesel without asking questions. 

If the drivers are not selling to syndicates, there are plenty of individuals out there with diesel powered bakkies, tractors and cars also willing to buy “cheap” diesel. Even roadside prostitutes are getting in on the act and are reportedly charging clients in litres!!! 

Drop point

Drop points are a favourite target of fuel thieves. 

• It is not uncommon that the actual drop is not verified either in terms of the amount or the quality of the fuel delivered. 
• Checks to see if the diesel contains water, paraffin or other contaminants are not carried out. 
• Most of the time, storage tanks are not locked. 

Our sources say that before implementing any kind of control system, fleet operators have to realise that in many cases the staff, including the security staff, are involved in the theft of fuel. 

The following tips are suggested as a starting point to implementing a fuel management system into the fleet. 

• Bowsers have to be kept clean and fuel quality must be checked after every drop. 
• Fuel bowsers must be included in the total fuel management system. 
• While dip sticks are still common, more accurate electronic probes are available that not only check fuel levels but also check for contaminants such as paraffin and water. 
• Management must be able to measure what goes into the bowser, equate it to what’s going out of the pump and ensure that what goes out of the pump is going into the vehicle. 
• The vehicle fuel intake and consumption should be monitored on an ongoing basis. 
• The best way to ensure minimal theft is to remove the human element as far as possible. 

Short Drops

According to Octane Technology directors, Neil Pearce and Christo Oosthuizen, short drops are a major problem for both suppliers and receivers. They claim to have uncovered what they term “massive” short drop fraud operations which has resulted in one retail outlet claiming R1,8-million from the fuel supplier. 

They say the scam was put in place by an Eastern-Cape crime syndicate. No one knows how long they had been operating but it is believed the scam was operating all over the country. Losses could run into tens of millions of Rand. Octane Technology says the problem of short drops is exacerbated at off-site remote fuelling points en-route. In many instances, these satellite refuelling points comprise little more than a tank and a pump. 

Inefficiencies, they add, are compounded if the vehicle has to fill up at retail points along the way or in neighbouring states in the case of cross border operations. 

Control

As mentioned at the beginning of this article, fuel crime has always been around. It is just now that the rising cost of fuel has accentuated the problem and what used to be theft has grown into grand larceny. 

Due to the nature of the crime, no one knows how big the problem is but according to three separate fuel management companies approached by FleetWatch (Octane Technology, Dreamworks Technologies and iFleet) up to 14% of all diesel sold in South Africa is either stolen or obtained through fraudulent means. 

What is quite alarming is that quite often management is unaware of theft or fraud at any level until a management system is put in place. 

According to our sources, many trucking companies do not have any form of written fuel management policies and are quite happy to give the driver a fleet card and let him get on with it. Management of home-based refuelling points is also claimed to be distinctly lacking. 

Looking at the rate of fuel theft in road transport, it is quite obvious that there is an urgent need for fleet operators to come to the party and take greater responsibility for the acquisition and usage of their fuel stocks. 

According to Steyn, active control is the only effective way to lower fuel theft. Timorous fuel records, bench marking and physical access controls are the required tools to attain this objective. He also says that whatever they do, fleet operators will not eliminate fuel theft and the best they can expect to achieve is to minimise it. 

Benchmarking in any application is limited as there is at least a 5-10% discrepancy in the actual consumption when measured in this manner yet it remains an important method to determine theft or identify substantial theft. 

Effective physical barriers can only prevent access and Steyn stresses that anti-siphoning devices alone are not going to stop theft. “Preventing or minimising theft is a total process that has to be followed, managed and maintained for operators to make a difference.” Fuel card transactions, for example, should be reconciled within 48 hours. 

“The only way a system works is if the total quantity of fuel dispensed into the fuel tank remains in the fuel system,” says Steyn.

Pearce reiterates. “There is more to managing fuel problems than combating theft.” 

Inefficiencies in fuel management

Oosthuizen, Pearce, Steyn and Hein Crocker of Dreamworks Technologies all say that in almost every fleet they have visited, they have found momentous inefficiencies in fuel management. 

“Proper management of fuel stocks is, to say the least, distinctly lacking and in many cases non-existent,” Pearce says. “It is my personal opinion that fleet managers make the mistake of focusing on more tangible cost centres such as tyres, vehicle maintenance and so on than they do on fuel.” 

As an example, Pearce cites the case of a large mining house that has operations in numerous African countries. “This is a major company with major national and international investments and they use a simple spread sheet system to keep track of fuel costs.” 

Further to this, Pearce says while many fleet managers are aware of the need to secure fuel stocks, they believe this is achievable with a modern high-tech pump and an electronic tag or collar on the vehicle's fuel tank and nothing more. 

“Then you get those who, in spite of the advent of electronic controls and monitoring systems being available, still use the dip stick method. You have to ask; how many managers have examined that dip stick to check if the end has been cut off?” Pearce asks. 

Like any form of administration, fuel management needs consistency. “In our experience very few transport companies have any form of written fuel management policy” Pearce reveals. “After speaking to some of the leading transport companies in this country and analysing how they manage their fuel supplies and usage, we came away with the opinion that fuel management is not their core function. They identify fuel as a means to keep the wheels turning.” 

Oosthuizen says many fleet managers are aware of problems with fuel but they are in the dark when it comes to fixing them. 

“We are not into gadgets,” Oosthuizen says. “We work with data. Our approach is to link all the components of the fuel chain together from ordering and delivery to pumping and consumption. When you put all this information together, you get a full perspective of what is happening with your fuel stocks.” 

He says fuel card systems, while touted as being a panacea to fuel fraud, are easily manipulated. “On top of this, they generate a huge amount of paperwork which the fleet manager does not have the time to analyse properly. 

“If you are going to be serious about managing fuel properly you have to be focused and have seamless control systems in place. Management has to get an holistic view of what is going on in their operations, otherwise they are definitely going to be losing money.” 

Time to tighten up gentlemen!