Home South African Deregulation of fuel price will decimate jobs, says FRA

Deregulation of fuel price will decimate jobs, says FRA

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Deregulating the fuel price will decimate employment in the fuel retailing industry, according to the Fuel Retailers Association.

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DEREGULATING the fuel price will decimate employment in the fuel retailing industry, according to the Fuel Retailers Association (FRA).

Reggie Sibiya, the chief executive at FRA, said in an interview that it was the fuel volumes pumped and the sustainable margins that would maintain jobs.

An under-recovering opex margin was the trigger to job losses, he said. The operating margin measures how much profit a company makes on a rand of sales after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax.

“It also does not make any sense to deregulate price and not the other conditions around it,” Sibiya said.

He said this narrative was at the expense of a political agenda and a misleading narrative.

“These jobs have been lost because fuel retailers cannot afford to sustain them,” he said.

He said the government needed to show that small businesses, transformation and jobs matter in South Africa.

The Covid-19 pandemic had led to a 40 percent drop in the sale of fuel volumes due to new ways of doing business and less travel, which was estimated in the long-term result in at least 25,000 job losses. Motor Industry Bargaining Council statistics had already shown close to 4,000 job losses through retrenchments.

Last week, the DA spokesperson on Mineral Resources and Energy, Kevin Mileham, said in the wake of another massive fuel price increase, the DA had handed in a Fuel Price Deregulation Bill to Parliament for processing by Parliament’s Legal Services.

He said this bill would seek to amend the Petroleum Products Act, which gives the government the power to prescribe the price of petroleum products. The party said it would publish its “Notice of Intention to Introduce” in the Government Gazette within which the public would be invited to provide comments on the stated aims of the bill.

In April, trade union Solidarity said it had been running a protracted petition process for some time as well as a campaign aimed at breaking the government’s grip on fuel prices.

Theuns du Buisson, an economic researcher at the Solidarity Research Institute, said at the time that they had been asking for the deregulation of all fuels in South Africa since the middle of last year.

“The deregulation at retail level can result in a saving of up to R2.28 per litre for the consumer. Together with the reduction in taxes and levies, this could result in a potential saving of R3.91 per litre in the interior. It is now in the hands of communities and local filling stations to ensure this saving is realised in full,” Du Buisson said at the time.

But the FRA told the Business Report that it stands by its views that deregulation was not a solution to rising fuel prices, nor should it be used as political grandstanding.

Sibiya said more than 5,000 fuel retailers and their more than 83,000 employees had their livelihoods in these businesses.

He said the FRA had undisputed empirical evidence that deregulated markets like the US, UK and Germany had the same issues. These countries had their motorists complaining to their respective governments about rising fuel prices way before the current Russia-Ukraine war.

“Obviously the two major events, Covid-19 and the Ukraine war, have impacted prices dramatically globally and in all deregulated markets. It, therefore, does not take any rocket scientist to figure out that the call for deregulation to reduce fuel prices is not a genuine call, simply because it chooses to ignore empirical evidence across the globe,” Sibiya said.

He said the common thing between South Africa and the deregulated markets mentioned (US, UK and Germany) was that they were all net importers, and their price structure was on the whole influenced by global price movements.

He said South Africa was further impacted by the weaker rand currency against the dollar.

Furthermore, the FRA said diesel was deregulated a long time ago in South Africa, thereby serving as other empirical evidence that deregulation had not reduced fuel prices.

BUSINESS REPORT

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