Despite freight companies welcoming the news of Energy Minister Gwede Mantashe engaging with Finance Minister Enoch Godongwana over the price of fuel, economists think consumers should not expect much from it.
DESPITE freight companies welcoming the news of Energy Minister Gwede Mantashe engaging with Finance Minister Enoch Godongwana over the price of fuel, economists think consumers should not get their hopes up.
University of KwaZulu-Natal Economics Professor Bonke Dumisa said many “players” were involved in the value chain of the fuel industry which could sometimes hinder the state’s ability to act on prices.
He said another big factor was the price of crude oil, which was high at present because of geopolitical tensions between Ukraine and Russia.
If the state were to subsidise fuel, the country should first look to other countries that had tried such methods and suffered because of it, Dumisa said.
“The reason I say that is because we pay about R6 or so at the bowser for the general fuel levy, which includes the Road Accident Fund (RAF) and such. The general fuel levy is used by the government for road maintenance as well. It is a highly regulated industry. Retailers cannot just add a mark-up to fuel because it is administered by the government.
“The other way they can try to change the levy is through the RAF. I am a lawyer but I am concerned about the role of lawyers in disrupting the RAF. We have had many lawyers being struck off the role for corruption.
“Whenever the government tries to make the process much easier so that there are not many middlemen involved, the lawyers rush to court and win most of the time.
“Sometimes you can try to be nice to people, but the reality of global economics states otherwise,” Dumisa said.
On Wednesday, BigFoot Express Freight welcomed the government’s move to review the methodology of fuel pricing in the wake of the Russia-Ukraine conflict, which saw the price of Brent Crude break the $110 a barrel mark.
The CEO of the KZN-based freight firm, which operates in South Africa and some African countries, Denesh Singh, said the move by Mantashe was a step in the right direction.
This came after reports that Mantashe and Godongwana were engaging in talks. Mantashe was speaking at the Africa Energy Indaba in Cape Town on Tuesday.
“We have implored the government in the past to look at ways to cushion our industry from the spiralling cost of fuel and we are heartened by the fact that our voice is being heard. Such moves will not only be beneficial to our sector but to the ordinary South African who, in addition to rising cost of fuel, is being hit with escalating costs to food and utilities,” Singh said.
“The fact that the Treasury is also considering reviewing the Road Accident Fund levy must be applauded as this will go a long way to easing the burden of ordinary South Africans and the transport sector,” he added.