Home South African Dept explains why SA is not ready to deregulate fuel price

Dept explains why SA is not ready to deregulate fuel price

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Department of Mineral Resources and Energy’s director of fuel pricing mechanism says that various factors need to be considered before the market will be ready for a deregulation.

File picture: Karen Sandison/African News Agency (ANA)

THE DEPARTMENT of Mineral Resources and Energy says the government cannot deregulate the fuel price because the country’s market is not ready for a deregulation.

Briefing the National Assembly committee on minerals and energy on Wednesday, the department’s director of fuel pricing mechanism, Robert Maake, said various factors need to be considered before the market will be ready for a deregulation.

“We still have fuel companies that are dominating in the market. We have a situation where about six main players are controlling the petrol sold in the country. Now if you want wholesalers to compete on price, the playing field has to be levelled first.

“Unfortunately, most of these new wholesalers are customers of big companies therefore you cannot compete with them on price. We need to transform the sector. Once it’s ready to compete on prices then we can deregulate.”

Maake said fuel prices are lower in countries like Botswana and Lesotho because they buy from South Africa at a Basic Fuel Price (BFP) which doesn’t include the local factors.

He said the local factors were applicable to the South African market.

“They buy at BFP price then when it goes to their own countries it will include costs to get it from South Africa to their countries.

“Our local factors and their local factors are different.

“We have the fuel levy and the road accident fund which they do not have and this amounts to almost R6 on our fuel price – for petrol and diesel,” he said.

After last Wednesday’s fuel price hike, the chairperson of the committee, Sahlulele Luzipo, said the hikes in fuel and electricity prices will have a negative socio-economic impact on the livelihoods of many South Africans.

During the presentation, Maake said that the most frequently asked questions include why Sasol is not selling petrol at a lower price.

He said in a regulated environment there cannot be more than one price.

“Sasol is not selling petrol at lower prices because they are producers of coal.

“That plant is more expensive than a normal crude oil refinery.

“In a regulated environment you cannot have more than one price that is regulated so Sasol is also compelled to sell at a regulated price,” said Maake.

POLITICAL BUREAU