By Lehlohonolo Lehana.
Director of fuel pricing mechanism at the Department of Energy, Robert Maake, says the government is working on several regulatory changes to address high petrol price.
Speaking to radio station 702, Maake said this includes:
– The possible introduction of a price cap;
– A proposal to stop publishing guidance on diesel prices;
– A process to review the Regulatory Accounting System (RAS).
These interventions are the three that remain from the initial list of planned changes announced in March 2022, which included a reduction in the basic fuel price of 3c per litre and the removal of the 10c per litre Demand Side Management Levy (DSML) on 95 unleaded petrol sold inland – both of which were part of interventions introduced in May 2022.
Treasury previously said that a revise of the RAS could result in a significant decrease of R1.03 cents/litre by 2028. However, this will take significantly longer to implement than other measures and investigations need to take place to fully understand the changes that can be implemented.
Similarly, while Treasury has previously proposed a fuel price cap, it warned that it will require ‘significant investigations’ before officially being introduced. The introduction of a petrol price cap was suggested for 93 unleaded petrol, which would retailers to sell fuel below the regulated prices.
Removing the guidance on diesel prices, meanwhile, would promote competition among retailers.
Maake said that any other proposals – including the opposition Democratic Alliance’s bill to deregulate the petrol price – would have to be tabled in parliament before they could move forward.
The opposition Democratic Alliance has submitted its Fuel Price Deregulation Bill to parliament for processing.
The bill aims to amend the existing Petroleum Products Act, which gives the government the power to prescribe the price of petroleum products. The bill is set to be gazetted for public comment in the coming weeks.
“The primary objective of the Bill is to deregulate the fuel sector to increase competition in fuel price-setting at both the wholesale and retail level, which will result in lower petrol prices for consumers, as retailers compete to win customers based on price levels, “said the party’s Kevin Mileham.
“The bill does this primarily through the removal of Section 2 of the Petroleum Products Act. The bill also amends section 2(1)(d) to allow for businesses to implement creative methods of trading which may result in reduced petroleum prices.”
Mileham said that the bill will also give increased powers to the Competition Commission, which will be tasked with keeping a close eye on the fuel price market. Should any anti-competitive practices be determined, swift investigation and remedial action will follow, he said.
“The regulated fuel price system is rigged against the South African consumer. The average fuel price is composed of at least seven levies that combine to make our fuel one of the most expensive in the region when compared to countries such as Botswana, which happens to get most of its fuel supplies from South Africa.
“Independent estimates indicate that costs and profits at the wholesale, transport, and retail levels account for about 20% of the fuel price. This is unsustainable if South Africa is to have a competitive fuel market and fuel price system that protects consumers from exorbitant increases.”
Maake’s comments come as South Africa faces its largest petrol price increase on record on Wednesday (7 July).
The adjustments announced by the Department of Mineral Resources and Energy (DMRE) include an increase of R2.57 to 95 petrol in Gauteng, which will push the cost of this fuel to R26.74. The increase of R2.37 to 93 petrol will push this fuel price to R26.31, all-new record high prices.