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Sunday / 14 July 2024
HomeFeaturesSouth Africa one step closer to having capped petrol prices

South Africa one step closer to having capped petrol prices

In July 2022, the Minister of Energy Gwede Mantashe officially gazetted a notice confirming the government’s intention to introduce a price cap on Petrol 93 in an effort to contain ever-increasing fuel costs, giving the public 30 days to comment.

Now around a year later, the Department of Mineral Resources and Energy (DMRE) confirmed to TopAuto that it received comments from approximately 400 stakeholders regarding the potential price cap, which have all been consolidated into a single report.

“The report is undergoing [an] internal approval process and will be made public once this process is complete,” said the DMRE. “It would be premature to talk about the introduction of the
price cap at this stage as the report is not finalized yet.”

While this is not a confirmation that petrol 93 will be capped, it is the furthest the authorities have progressed in launching the initiative since the first communique about a possible price limit was delivered back in 2018 by the ex-energy minister, Jeff Radebe.

A cap will be determined “the same way that the Basic Fuel Price (BFP) is calculated every month, [and] it will be called the Maximum Price as opposed to the regulated price,” said the DMRE. The BFP is calculated using the rand/US dollar exchange rate and is heavily influenced by fluctuations in international oil prices.

Essentially, the initiative aims to give fuel stations the freedom to price petrol 93 more aggressively than their competitors to lure customers to their pumps, in contrast to the regulated rate that is set by the government each month and can’t be changed.

Not the answer

An abundance of industry participants have noted that a cap may not be the answer to soaring petrol costs in the country.

The initial proposal put forward around five years ago was to update the price limit monthly, but this drew criticism from the public and it is unclear whether it is still the same strategy that the DMRE wants to pursue today.

Speaking on Cape Talk in February 2022, DMRE senior manager Robert Maake said that as many as 84% of stakeholders who approached the department at the time were against the possible introduction of a price cap, claiming that it would likely not work as intended.

Similarly, in July 2022 the South African Petroleum Industry Association (Sapia) voiced its concerns over the renewed interest in instating a petrol 93 price cap.

“While the current system to determine fuel prices and adjustments is not flawless, it is a fair and transparent process which is documented, subject to constant review, and auditable,” said Sapia.

“Any changes to the present regulatory system should be conducted in a spirit of transparency and on condition that relevant consultations with industry are observed, taking into account the interests of all role players.”

Reggie Sibiya, CEO of the Fuel Retailers Association, also said that filling stations operate on such thin margins as it stands, so any significant price cuts may not be feasible.

Organisations such as the Automobile Association have called on the government to review how fuel prices are calculated and to cut taxes and levies wherever possible, rather than looking at alternative relief measures such as price caps.

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