The DA is putting pressure on parliament to fast-track the introduction of legislation to promote greater competition at fuel pumps and potentially put the brakes on crippling fuel price hikes.
This comes amid fears that the cost-of-living crisis could spark civil unrest that could have a knock-on effect for political stability and investor confidence.
South Africans, already grappling with high unemployment and economic decline, will be hit by another bruising fuel hike on Wednesday that will have a serious effect on inflation, particularly for the transport and agriculture sectors, driving up the cost of food and other essentials.
There have been calls to fully deregulate the retail fuel industry, allowing retailers to set their own margins and compete on price. However, the department of mineral resources & energy says deregulation will happen over time and will come with restrictions.
On Monday, the DA submitted its Fuel Price Deregulation Bill to parliament for processing by parliament’s legal services unit.
The primary objective of the bill is to deregulate the fuel sector to increase competition in price setting at both the wholesale and retail level, which will result in lower petrol prices for consumers, as retailers compete to win customers based on price levels, DA MP and mineral resources & energy spokesperson Kevin Mileham said.
The bill seeks to amend the Petroleum Products Act to allow for businesses to implement “creative methods” of trading that may result in reduced petroleum prices.
“We are taking the possibility of collusion and the abuse of dominant market positions seriously. The Competition Commission will be tasked with keeping a close eye on the fuel price market. Should any anticompetitive practices be determined, swift investigation and remedial action will follow,” Mileham said.
He highlighted that the government-regulated fuel price system is rigged against the local consumer as it in effect does not promote competition.
The bill will need the support of the ANC to pass.
“Now the ball is firmly in the ANC government’s court and it has the chance to do the right thing. The success or failure of regulating the fuel price now rests with the ANC in parliament,” Mileham said.
The department announced on Monday that the price of 93-octane petrol will rise by R2.37/l and 95-octane by R2.57/l, with low-sulphur 50 ppm diesel to go up by R2.30/l and 500 ppm by R2.31/l. Illuminating paraffin rises R2.21/l.
The new retail price of a litre of 93 petrol will be R26.31, while 95 will cost R26.74 inland and the inland wholesale price of 500 ppm diesel will be R25.40, with 50 ppm diesel costing R25.53. The prices are nearly R10/l more than a year ago, with the recent sharp increases ascribed to a strong dollar, a weakening rand, bullish global oil prices and the continued conflict in Ukraine.
“Independent estimates indicate that costs and profits at the wholesale, transport and retail levels account for about 20% of the fuel price. This is unsustainable if SA is to have a competitive fuel market and fuel price system that protects consumers from exorbitant increases,” Mileham said.
The Automobile Association (AA) recently requested a full review of the country’s fuel price calculations.
The DA has also previously called for the scrapping of the general fuel levy of R3.93/l for petrol and exempting those who pay for comprehensive third-party insurance — including bus, taxi and transport companies and private commuters — from the Road Accident Fund [RAF] levy of R2.18 by means of a tax rebate.
In a bid to limit the effect of rising fuel prices, the 2022 budget did not increase the general fuel levy and RAF levy, saving consumers R3.5bn, but this has not been enough to cushion the public.
The department and the Treasury have previously stated that they intend to continue with consultations and proposals to remove the price cap on 93-octane unleaded petrol. If implemented, the move would partially deregulate the market, introduce more competition and offer further relief to hard-hit motorists.
But the Fuel Retailers Association recently said deregulation would compound the problems facing fuel retailers.
“Deregulation is a buzzword in SA and is seen as a solution [to high fuel prices], which it really isn’t,” the association’s CEO, Reggie Sibiya, said at a conference in Johannesburg in June. Sibiya referred to the UK, where the sector has been deregulated yet fuel prices continued to increase. Petrol there costs about R32/l.
“We are seeing compromised margins [for fuel retailers]. In 2016, retailers were already under-recovering 12c per litre and it is even higher now, [yet there is] still more pressure to cut margins by [deregulating the industry and putting us] in competition with each other,” he said.
With Denene Erasmus
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