Trade union Solidarity has warned that half-hearted reforms to South Africa’s fuel price formula could hinder, rather than help motorists.
The union has rejected proposals by mineral resources and energy minister Gwede Mantashe and finance minister Enoch Godongwana that adjustments to the fuel price formula are necessary.
According to Solidarity, adjustments to the fuel price formula, on the one hand, will be insufficient, and on the other hand, it will be an obstacle in bringing about real, sustainable relief for South Africans.
“Mere adjustments will not go far enough. Half-hearted reform efforts would actually stand in the way of cheaper fuel. Separating the fuel levy from prices, as Mantashe suggests, will do nothing to reduce the burden on consumers; instead, it will place an extra administrative burden on consumers,” said Theuns du Buisson, economic researcher at the Solidarity Research Institute.
According to Solidarity, the only ways to reduce fuel prices consistently would be by means of tax relief and the deregulation of petrol.
“The solution is twofold. Firstly, the levy must be reduced. Secondly, the price of fuel must be deregulated. While the minister is arguing about the pricing formula, everyone could benefit much more from complete deregulation – the elimination of the pricing formula in its entirety,” Du Buisson said.
In a letter addressed to Godongwana in November, the union said that when the retail price of diesel was deregulated, it saw a significant price drop almost immediately.
Currently, petrol is about 20c more expensive than diesel when imported at R9.37 per litre. However, the price difference is often more than R2 per litre at the retail level, with R16.66 being the lowest diesel price Solidarity could trace – a difference of R2.88 per litre, the group said.
“As the diesel price indicates and is proof of, deregulation is in the public interest. We, therefore, call on the Minister of Mineral Resources to deregulate the price of petrol at both wholesale and retail level and to also deregulate the price of diesel at the wholesale level,” Du Buisson said.