Home South African Mantashe takes first step to deregulate fuel prices

Mantashe takes first step to deregulate fuel prices

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Energy Minister Gwede Mantashe has gazetted a notice calling for public comment within 30 days on the government’s intention to introduce a price cap on 93 octane petrol.

File picture: Ayanda Ndamane/ANA

THE PETROL price in South Africa could soon be determined by free market forces as the government moves to deregulate fuel prices as part of mitigating the rising cost of living.

Energy Minister Gwede Mantashe on Friday gazetted a notice calling for public comment within 30 days on the government’s intention to introduce a price cap on 93 octane petrol.

The price of 93 octane increased by R2.37 per litre to R26.31 per litre this month, reaching an all new record high due to the escalation of global oil prices.

The introduction of a price cap on 93 octane petrol will allow retailers to sell at a price below the regulated price, including discounts on petrol.

This is the next step in the government’s “two-phase approach” introduced to reduce fuel prices in addition to the temporary reduction in the general fuel levy implemented from April.

Currently, the petrol price falls under the category of administered prices and the government sets the price every month with which it is sold, depending on the international oil prices and the exchange rate for the period under review.

Levies and taxes account for about a third of the petrol price per litre, with the basic fuel price (BFP) set on parity pricing for oil imports.

However, industry players have expressed anxiety in the manner in which consultation about the proposed deregulation was conducted and the possible consequences of the move.

Cindy-Lee Maneveld, a spokesperson for the South African Petroleum Industry Association (Sapia), said they would like industry players to be properly consulted on deregulation.

“Sapia says that while the current system to determine fuel price adjustments is not flawless, it is a fair and transparent process, documented, subject to constant review and auditable,” she said.

“Any changes to the present regulatory system should be conducted in a spirit of transparency and on condition that relevant consultations with industry are observed, taking into account the interests of all role-players.”

The government has been under severe pressure to act on petrol prices following constant and gradual fuel price hikes as a result of the ongoing war between Russia and Ukraine, and rising demand due to global economic recovery.

According to Statistics South Africa, fuel prices increased by 45.3 percent in June compared to the same month last year, representing the largest annual increase for fuel since 2009.

Earlier this month, the DA submitted its Fuel Price Deregulation Bill to Parliament whose deregulation proposal could slash petrol prices to about R17.50 per litre.

DA’s spokesperson on mineral resources Kevin Mileham on Friday welcomed Mantashe’s announcement, but still did not go far enough.

The DA believes that a full deregulation model which goes beyond a price ceiling is most desirable for consumers and producers alike,” Mileham said.

“Full deregulation is common practice in developed economies, and it is time South Africa joined their ranks.”

RMB economist Siobhan Redford said the price cap might introduce competition among fuel retailers.

“The current retailer margin is sitting at 228 cents per litre and the current formula would be the very obvious case where there could be some competition if it were to be amongst some retailers,” she said.

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