By Amb. Bheki Gila
The global oil prices are steadily rising, raising the spectre of excessively higher prices at the pump.
The timing could not have been more inauspicious.
The Yuletide season brings with it mass movements of persons and goods out of the large metros to various provinces, especially hurried migratory vehicular lines filing out of Gauteng.
The implication of such extensive movements in a country whose majority of the populace is dependent on taxis to a large extent, and to a lesser degree buses, is enormous.
The trucks that move cargo to and from South Africa tend to increase significantly at this time as well.
In a climate of high inflation of both goods and services and rising costs of diesel and petrol, the inflationary cost pressures are transferred directly to the suffering consumer.
According to Stats SA, an increase in the fuel price has an impact on the economy.
Higher fuel prices place upward pressure on consumer inflation. During the early days of the COVID-19 pandemic in 2020, the tumbling fuel prices contributed significantly to the overall inflation pushing the headline rate to its lowest reading since September 2004.
Every so often, our system which is wired to produce these rigged outcomes, comes into full heat. Arguably, most capitalist derived systems are like Las Vegas casino machines.
They are designed to disadvantage large numbers of persons and not surprisingly, handsomely reward a few. And no penny for your thoughts as to who the few are.
There are certain flash points that keep us occupied in earnest, and comically turn our economic analysts into prophets.
These are the Rand Dollar exchange rate and the global oil prices contracts which would eventually find a statistical rounding up or down in the State Levy Over and Under recovery mechanism.
Starting with the Basic Fuel Price which reflects the global oil prices, it is a concept that sounds innocent enough.
Yet as a loaded concept, what does secondary storage refer to and to be sure, when the storage facilities have long been paid for, what is the purpose of continuing to reimburse the proprietors of these facilities on a permanent basis?
The language is stripped off of meaning and made insensitively abstract sufficient to de-emotionalize the issues that provide it context.
In mid April of last year, AA made five key recommendations to the Parliamentary Portfolio Committee on Mineral Resources and Energy. The first two are telling.
They recommended that an investigation be conducted on the current pricing model for all fuel, without elaborating what is wrong with the current model nor what indeed should support the investigatory pursuit.
The second recommendation was that a recalculation ought to be done including an audit of all existing elements within the pricing model. This means a recalculation and audit on all existing elements, and not just a few of them nor an exception for some.
Coming from that august body of consummate experience, the policy makers need to heed their counsel. After all, ‘we have been with you on the road since 1905’.
For so long is their memory slate that they even witnessed the first regulation of wholesale and retail margin in 1946 under the War Measures Act. From the mouths of the AA experts, it would seem that the BFP is genuinely unwell and wholly unsuited to serve the people for whom it was designed.
The other is the Rand Dollar exchange rate.
However, that would be a subject of detailed discussion for another day.
The challenges posed by our systemic constructs present us with an equal number of commensurate opportunities, if we put our minds to it. These opportunities include the recommendations of AA, their opaque language notwithstanding.
By a subtlety of an admixture of public bullying and smart coercive tactics, South Africa is made to believe that it is in their best interest to be an all out energy importing economy.
It is meant to accept that the public responsibility to refine and the enjoyment of attending benefits is a privilege reserved for someone else. And that privilege when in the utility of others, is not a subject which South Africa is suffered to partake in. Ours is to do or die. Literally, both economically and by political implosion.
And as is common in latter day politics, militarily if everything else fails. Heading to Cairo for the COP 27, the commitment to the rigour of inflexible carbon emission policy strictures and environmental inviolability, is a painful subject which will be grotesquely twisted into the usual developed economies’ double speak.
A glimpse from a collection of excerpts from the government utterances, South Africa seems to be determined to stay the course and tread lightly on the side of rationality and diligent care.
Their avoidance of doctrinaire cacophony that feeds into strange agendas which change every so often depending on the fortunes or otherwise of NATO’s military adventurism in Ukraine, is emblematic of a matured policy instinct by a Pretoria bureaucracy playing a longer game than the tenure of their political heads.
This summer will see a shortage of refined products accounting to a number of factors, both internal and external. Internally, we have two crude oil refineries which have closed down, Enref and Sapref.
The third, Glencore’s Astron Refinery is still shut, even though it is expected to reopen before the end of this year.
With so much import volume demand, putting a strain on the country’s current account balance, our reliance on foreign suppliers will be subject to the same pressures as all other importing countries are. If America has less than 25 days worth of diesel reserves, they will soak up all available products in the open market.
So is Europe and the rest of the net importer Asia Pacific nations. South Africa is not a priority right now. And therefore it is wise to brace ourselves for an economically severe summer holiday.
The representatives of the people should take advantage of this policy crisis and not let it go to waste.
So much of our energy discourse has got severe intellectual limitations.
The choices presented to us as the only ones available simply because they are given vogue epithets, should be approached with caution and a lot of research.
Amb. Bheki Gila is a Barrister-at-Law.
BUSINESS REPORT