Warning over petrol price deregulation in South Africa
The Fuel Retailers Association has cautioned against a proposal to ‘deregulate’ the country’s fuel price.
The move is expected to allow retailers to compete on price and offer motorists discounts and special offers to fill up at their stations. However, the association warned that the change could have to opposite effect of promoting competition, and ultimately set the country’s fuel sector back decades.
Speaking to news channel eNCA, the association’s chief executive Reggie Sibiya said the move will effectively destroy the transformation of the sector and prevent the emergence of new fuel retailers.
Sibiya said that fewer than 20% of the country’s petrol stations are owned by black South Africans, and a move to cut fuel margins further would hit these owners the hardest.
He added that the planned proposal did not amount to ‘full deregulation’ which would allow the country’s petrol stations to set any price they want for fuel. Instead, the move to introduce a petrol price ceiling was the worst form of regulation and akin to a ‘nazi regime’ as it does not take into account all of the additional margin costs that fuel retailers have to pay, Sibiya said.
“It’s a killer – you want to kill businesses this is what is being proposed here. We did say in a 2018 proposal that this is not going to work and we are surprised that it is being introduced now in an opportunistic way, taking advantage of rising fuel prices.”
Speaking to the Sunday Times this week, finance minister Enoch Godongwana said full deregulation would only take place once the National Treasury figures out how to recoup the R90 billion loss the fiscus would take if fuel taxes are removed in one go.
Godongwana said the government was already considering several options to make up this shortfall, including additional taxes on motor licence renewal fees to fund the Road Accident Fund which relies on funding through a fuel levy.
Once the government has figured out a way of removing taxes and other administered prices from fuel, that will make it attractive for competition and drastically lower the price consumers pay.
Outa chief executive Wayne Duvenage said fuel stations would be able to publish their prices visibly at their pumps, with deregulation also potentially leading to retailers such as Pick n Pay entering the market.
“It is not going to be cheap because of the margins. There is not much for retailers to play with. Some retailers might discount it, but what you don’t want is manipulation by a few of the bigger players who push prices too high. However, the deregulation will create a little bit of competition,” he said.
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