The Democratic Alliance says that government must introduce legislation to protect consumers against ever-increasing fuel prices.
Motorists are likely facing a hefty hike in petrol and diesel prices in June as the government’s General Fuel Levy intervention is expected to come to an end at the end of the month.
In March, finance minister Enoch Godongwana announced a temporary reduction of the general fuel levy by R1.50 cents per litre, for the period 6 April 2022 to 31 May 2022.
The minister said that the reduction of the general fuel levy would be funded by the liquidation of a portion of the country’s strategic crude oil reserves.
“In this instance, the revenue foregone by the reduction in the levies will be recouped through a sale of strategic crude oil reserves, which are held by the Strategic Fuel Fund, which is a subsidiary of the Central Energy Fund. The sale would be required to raise around R6 billion.”
He stressed at the time that the fuel levy reduction would be temporary. And, while it is not yet clear whether the deadline for this intervention (31 May) means that it will still be in place for June’s petrol price adjustments, experts say that motorists will inevitably have to deal with the R1.50 levy being forged back into the overall price.
Moreover, the conflict between Russia and Ukraine, which initially spurred the intervention, has not subsided, causing further rand weakness, and rising crude oil prices, both of which heavily factor into the monthly fuel prices in South Africa.
“With finance minister Enoch Gondongwana’s temporary tax relief of R1.50 set to expire at the end of the month, South Africans might have to pay an increase of more than R3 per litre for fuel and as much as R25 per litre of fuel from the beginning of June,” said the DA’s Kevin Mileham.
“While the DA is grateful for minister Gondongwana’s temporary relief, the lapsing of the tax break and subsequent hefty increase will have a massive impact on the cost of living, hitting the poorest of the poor the hardest.
“Not only will transport prices increase, but food and other basic necessities will also become more expensive yet again. And these prices do not ebb and flow like the fuel price. South Africans are already struggling to make ends meet and unemployment is soaring,” he said.
The opposition party urged the finance minister to continue with this tax relief, and to fast track and prioritise the review of the fuel pricing model.
The DA said it is planning to introduce a Private Members Bill (PMB) to codify, through legislation, the deregulation of the fuel price to encourage competition between wholesalers and retailers.
“The PMB will seek to protect the consumer from exorbitant price increases by decoupling the basic fuel price from government taxes and levies and additional margins used by wholesalers and retailers,” Mileham said.
Further measures to be introduced by the Department of Mineral Resources and Energy
Gondongwana said in March, in Parliament, that a broader package of relief measures would be explored, “and they will come into effect after the expiry of the two-month fuel levy reduction”.
The minister of Mineral Resources and Energy proposed the following package of measures to be introduced after the expiry of the temporary measures from Wednesday 1 June 2022:
- A reduction in the Basic Fuel Price of 3 cents per litre, in line with the recommendations of the review done by the DMRE.
- The termination of the Demand Side Management Levy (DSML) of 10 cents per litre on 95 unleaded petrol sold inland.
- The introduction of a price cap on 93 octane petrol, following from the previous DMRE proposal and consultation. This means that retailers can sell below the regulated prices.
- The termination of the practice of publishing guidance by the DMRE on diesel prices to promote greater competition.
- The Regulatory Accounting System (including the retail margin, wholesale margin and secondary storage and distribution margins) will be reviewed to assess whether adjustments can be made to lower the margins over the medium term. Interventions will be considered by the DMRE to reduce the price pressure for illuminating paraffin over the medium term.
“We are doing all of these things in line with our overall commitment to keeping money in the pockets of South Africans during these trying times, while at the same time restoring the health of our public finances,” the minister said.