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Staff Writer

Ramaphosa says changes coming for fuel and food prices in South Africa



President Cyril Ramaphosa has assured South Africans that the parties in the Government of National Unity have committed to putting the wishes of the citizens first and driving the country forward with “great urgency” to grow an economy for all.


The president delivered his Opening of Parliament Address (OPA) in Cape Town, outlining the government’s agenda, priorities, and policies for the next five years during a joint sitting of the two newly constituted Houses of Parliament.


He said that the Government of National Unity (GNU) is committed to addressing the rising cost of living for South Africans including expanding the list of essential items exempt from VAT and undergoing a “comprehensive review of administered prices, including the fuel price formula”.


“This we did for a while, as prices of fuel kept rising, we found a way we could stabilise the price. We will seek to find ways to address this challenge,” he said.


“It is about putting the people of South Africa first and foremost,” the president said.


South Africa’s fuel price is comprised of many different elements, some of which make fuel in the country more expensive than in neighbouring countries to which South Africa exports.


The costs are calculated using May fuel price data which incorporates the two main taxes paid on every litre of fuel namely the General Fuel Levy (GFL) and the Road Accident Fund (RAF) levy.


The fuel price in South Africa is comprised of four main elements:


  • The GFL

  • RAF Levy

  • Basic Fuel Price (freight and insurance costs, cargo dues, storage, and financing)

  • Wholesale and retail margins, and distribution and transport costs


The Basic Fuel Price (BFP) is calculated based on costs associated with shipping petroleum products to South Africa from the Mediterranean area, Arab Gulf, and Singapore. These costs include insurance, storage, and wharfage (the cost to harbour facilities when off-loading petroleum products into storage).


Other costs associated with the petrol price include transport costs (from the harbour to inland areas, which accounts for the difference in price between coastal and inland prices), custom and excise duties, retail margins paid to fuel station owners, and secondary storage costs.


Following two consecutive months of significant fuel price decreases, South Africans can expect minor relief at the pumps for petrol and slight increases for diesel and paraffin in August, according to the Automobile Association (AA).


Mid-month unaudited data from the Central Energy Fund (CEF) shows 95ULP down by seven cents/litre, 93ULP down by four cents/litre, and the wholesale price of diesel down by one cent/litre. Illuminating paraffin is set to increase by six cents/litre.


Despite forecasted decreases in petrol prices, fuel prices in South Africa remain high, and previous increases will continue to impact the economy. The AA reiterated the need for a review of the fuel price structure and an audit of its components to offer sustainable solutions against rising fuel costs.


As South Africa grapples with high poverty levels and the cost of living, the Government of National Unity (GNU) will look to expand the range of essential food items exempt from value-added tax (VAT).


The president touted South Africa’s “renewable energy revolution” as one that will foster “significant growth and job creation in the next decade and beyond”.


South Africa bears a climatic advantage which allows the country to draw energy from, among others, the sun and the wind. Added to that, the country boasts the critical presence of rare earth minerals needed for renewable energy technologies.


“As we undertake a just transition towards renewable energy, South Africa must create a green manufacturing sector centred on the export of green hydrogen and associated products, electric vehicles and renewable energy components.


“We have seen, for example, how the Northern Cape has already attracted billions of Rands of investment in renewable energy projects. South Africa is undergoing a renewable energy revolution that is expected to be the most significant driver of growth and job creation in the next decade and beyond,” the president said.


Government has also worked hard to open the door to renewable energy independent power producers to take up projects to not only strengthen the grid but create employment opportunities as well.


“We already have a huge pipeline of renewable energy projects, representing over 22 500 MW of new generating capacity, estimated to be worth around R400 billion in new private investment. Investments such as these will create many jobs.


“Just this week, we saw the largest-ever private energy project connect to the grid near Lichtenburg in the North West, with over 390 000 solar panels that will add 256 MW to the grid," he said.

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