Implementing a quarterly review of local fuel prices, instead of once a month, could enhance stability and predictability for consumers and businesses, said Sbonelo Mbatha, director and co-founder of PetroConnect, in an interview.
This is according to a report from BusinessReport.
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.
Last month, President Cyril Ramaphosa announced that the Government of National Unity (GNU) intended to review the country’s fuel price composition.
He said the government is committed to addressing the rising cost of living for South Africans including a “comprehensive review of administered prices, including the fuel price formula”.
PetroConnect noted that this review's feasibility hinges on factors including the reallocation of levies. One primary component 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.
The review must also consider its impact on the industry. Mbatha said the Department of Mineral Resources and Energy had admitted that petrol prices had reached unsustainable levels.
"Fuel retailers, who are responsible for collecting fuel levies and taxes, ensuring 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 known as CORO (Company Owned Retail Operated) sites.
PetroConnect said the impact of such relief measures on the local market could result in consumer relief.
Lowering fuel prices by adjusting levies like the RAF would provide immediate financial relief to consumers, particularly those relying heavily on personal transportation.
For businesses, especially in logistics and transportation, reduced fuel costs would lower operational expenses, potentially leading to lower prices for goods and services, benefiting the broader economy.
Mbatha stressed the importance of fair compensation for fuel retailers to maintain their viability. “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 to redistribute the financial burden more equitably between motorists and other stakeholders.
Avhapfani Tshifularo, the executive director of the Fuels Industry Association of South Africa, recently said the government’s intention to review the fuel price formula was significant for the South African economy, as fuel prices play 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.
The Automobile Association (AA) meanwhile has pointed to a likely dip in fuel costs for August, across the board, citing unaudited data from the Central Energy Fund (CEF).
CEF data shows 95 unleaded petrol is expected to drop by around 14 cents per litre, and 93 unleaded by around nine cents a litre.
Meanwhile, diesel is expected to decrease by around 26 cents a litre.
"The main drivers behind the decreases are a strengthening Rand/US Dollar exchange rate, and lower international oil prices. The movements in exchange rates contributed most to the trajectory of the fuel prices moving downwards," said AA Spokesperson Layton Beard.
Changes at the pumps are expected on Wednesday.
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