Picture: Ian Landsberg/African News Agency (ANA).
Picture: Ian Landsberg/African News Agency (ANA).

5 key recommendations to mitigate rise in cost of fuel

By Tarryn-Leigh Solomons Time of article published Apr 14, 2021

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The AA has proposed five key recommendations to the National Assembly committee on mineral resources and energy on measures to mitigate the rising fuel costs.

The association’s chief executive, Willem Groenewald, addressed the committee on Wednesday.

He suggested that providing cheaper fuels to South African citizens will not happen with the flick of switch but will require a multi-faceted, multi-departmental approach with the involvement of the private sector.

Among the recommendations include an investigation of current pricing model, recalculation and audit of existing elements within the pricing model, better management and governance of the Road Accident Fund, better allocation and utilisation of funds from the General Fuel Levy (GFL) and investment in alternatives to the country’s current reliance on fuel.

“Our view is clear that a comprehensive, long-term analysis of the components of the fuel price needs to be done as a matter of urgency, and that all calculations relating to the fuel price be audited to determine if they are still relevant and appropriate to South African conditions,” he said.

Groenewald said their aim is to fight for the rights of consumers and if that means having to take a step back and relook how things are being done then that’s what needs to happen.

“Continuing with a pricing model because it’s historically the one we’ve always used doesn’t make sense; we must ask if there is a better model available and, if there is, we should consider replacing our existing one.”

The Department of Minerals and Energy said that government cannot deregulate the fuel price because the country’s market is not ready for a deregulation.

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) price which doesn’t include the local factors.

He explained that the local factors are 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.

POLITICAL BUREAU

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