Proposed changes for how petrol prices are calculated in South Africa

Parliament’s Portfolio Committee on Mineral Resources and Energy held a series of meetings in April to discuss South Africa’s basic fuel price.

The discussions come after the country’s petrol price reached record highs this month, with only a slight drop in prices forecast for May 2021.

The committee has now advised the Department of Mineral Resources and Energy to conduct a review of the basic fuel price, including alternatives on the taxation aspect.

It said that high fuel prices have a socio-economic impact that should not be ignored.

Committee chairperson Sahlulele Luzipo said that the committee would also compile a report on the presentations it received, categorising them properly into different areas.

He said the areas should highlight all the aspects, such as amendments to legislation, involvement of other parliamentary committees, and long-term investment.

“The report must show what are the immediate, short- and long-term interventions. The report must indicate clearly what is to be done to overhaul the fuel pricing system,” he said.

However, the Department’s director of fuel pricing mechanisms Robert Maake has warned that various factors need to be considered before the market will be ready for deregulation, and that South Africa is not yet ready for these changes.

Recommendations 

Presenting to parliament on 14 April, the Automobile Association (AA) said that long-term analysis of the components of the fuel price needs to be done as a matter of urgency,

This should include all calculations relating to the fuel price being audited to determine if they are still relevant and appropriate to South African conditions, said Willem Groenewald, chief executive of the AA.

Apart from focusing on the fuel price itself, Groenewald said extensive research must be conducted into every single element of the fuel value chain which contributes to the fuel price in South Africa.

Alternatives must be sought if any elements are deemed too expensive, and each cent which is being charged must be justified, he said.

Among the key recommendations made by the AA to the Portfolio Committee on measures to mitigate rising fuel costs were:

  • An investigation of current pricing model;
  • Recalculation and audit of existing elements within the pricing model;
  • Reduction of the cost of the Road Accident Fund (RAF) to motorists through measures such as better management, improved road safety and better policing;
  • Better allocation and utilisation of funds from the General Fuel Levy (GFL);
  • Investment in alternatives to the country’s current reliance on fuel.

Fuel cap

The country’s labour unions have also raised concerns around the high petrol price, and the Congress of South African Trade Unions (Cosatu) wants the government to relook at the introduction of a fuel price cap.

Cosatu said that workers already spend an average of 25% of their wages on transport.

“These higher fuel prices will also drain away the purchasing power of most South Africans and this will retard economic recovery. This coupled with the government austerity measures that have seen below-inflation adjustments for social grant spells disaster for many households.”

To address these issues, Cosatu called on government to release a research report that was conducted by the Department of Energy looking into the possibility of a fuel price cap.

“We are also calling on our government to consider increasing subsidies for public transport and improve the quality and efficiency of our public transport system, particularly in poorer communities and rural areas,” it said.

The idea of a petrol price cap was first mooted by former energy minister Jeff Radebe in October 2018. However, despite confirmation that the department was still considering the issue in April 2019, the issue has not gained further traction.


Read: This graph shows how petrol taxes have ballooned in South Africa over the last 10 years

Must Read

Partner Content

Show comments

Trending Now

Follow Us

Proposed changes for how petrol prices are calculated in South Africa