Implementing a quarterly review of local fuel prices, instead of once a month, could enhance stability and predictability for both consumers and businesses, Sbonelo Mbatha, the director and co-founder of PetroConnect, said in an interview.
South Africans have been calling for a review of the fuel price and levies as consumers face financial strain amid high inflation rates and increased cost of living.
Mbatha said this approach would allow for more consistent and manageable adjustments in fuel costs, enabling better budgeting and financial planning.
“These quarterly reviews can also help mitigate the impact of sudden price fluctuations due to external factors, providing a more stable economic environment,” Mbatha said.
Delivering the Opening of Parliament Address last month, President Cyril Ramaphosa announced that the Government of National Unity (GNU) intended to review the make-up of the country’s fuel price.
PetroConnect, which offers a range of professional services to the fuel retail industry, said the feasibility of this review hinged on several factors, which included the reallocation of levies.
One of the primary components of the fuel price is the Road Accident Fund (RAF) levy, which stands at R2.18 per litre.
“PetroConnect has consistently advocated that this levy is misplaced and should not be borne by motorists. For a 50-litre fill, removing the RAF levy would relieve R109 off motorists’ expenses. For motorists filling up four times a week, this translates to a significant saving of R436 monthly,” the organisation said.
A reduction in levies must be balanced against the need to maintain fiscal stability, it said.
Another factor that the intended review must consider was its impact on the industry.
Mbatha said the Department of Mineral Resources and Energy had admitted that petrol prices had reached unsustainable levels.
He said: “Fuel retailers, who are responsible for collecting fuel levies and taxes, insuring this money, and taking all the associated risks, are compensated far less than the actual beneficiaries. With fuel retailers making only R2.86 per litre (and about R1.80 for CORO, which constitutes the majority of sites), there is an urgent need to address this disparity to ensure the sustainability of fuel retail businesses, more especially during this time when the industry is undergoing transformation.”
Oil company-owned petrol stations are also known as CORO (Company Owned Retail Operated) sites.
The business said the impact of such relief measures on the local market could result in consumer relief. The lowering of fuel prices by adjusting levies such as the RAF would provide immediate financial relief to consumers, particularly those who relied heavily on personal transportation for their daily commute.
For businesses, especially those in logistics and transportation, the company said reduced fuel costs would lower operational expenses, potentially leading to lower prices for goods and services, thus benefiting the broader economy.
Mbatha said for retailers, adjusting the pricing structure to ensure fair compensation for fuel retailers was absolutely crucial. “This would help maintain the viability of fuel retail businesses, which are essential for the distribution of fuel across the country.”
PetroConnect recommended a comprehensive review of all levies and taxes included in the fuel price with the aim to redistribute the financial burden more equitably between motorists and other stakeholders.
Mbatha said engaging with all relevant stakeholders was key, adding that: “The current system requires urgent review to ensure that it serves the best interests of consumers, businesses, and fuel retailers alike.”
Recently, Avhapfani Tshifularo, the executive director of the Fuels Industry Association of South Africa, said the government’s intention to review the fuel price formula was significant for the South African economy, as fuel prices played a major role in personal budgets and overall economic stability.
“However, it also needs to be remembered that dollar-related costs presently comprise about 45% of the retail pump price for petrol in Gauteng, which may limit any major changes in prices,” Tshifularo said.
It said addressing components such as levies and pricing formulas would be essential to ensure visibility on price setting.
“The review of the fuel price formula is significant for both consumers and industry stakeholders as it should address pricing mechanisms, provide visibility on these mechanisms to ensure transparency, and understanding of how and when fuel prices are set,” Tshifularo said.
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