With South Africa’s ability to produce its own fuel and its geo-political connections as part of BRICS, petrol in the country could cost in the region R10 per litre, according to Visvin Reddy, convenor of civil rights group People Against Petrol, Paraffin Price Increases (PAPPPI).
Speaking to Newzroom Afrika, Reddy said there are several solutions to rising fuel prices that, whether it be out of incompetence or malice, the government is simply not pursuing.
This week, the country saw record hikes of between R1.71 and R2.84 per litre, pushing prices of petrol past the R24-per-litre mark and diesel into the region of R23 per litre.
Not only does this negatively impact all motorists on the road, but also each and every person in South Africa especially those who are under the most financial strain, as higher prices at the pumps translate to inflation in areas such as food, clothing, medicine, and just about every other essential the average person needs.
South Africa has everything it needs to reduce fuel prices
South Africa’s current fuel prices are largely dependent on international factors such as the cost of oil and the rand/US dollar exchange rate, both of which performed less than favourable in recent months.
Reddy therefore referred to India as an example of what the local government can do to lessen the adverse effects of oil prices on local fuel costs.
India has broken away from the main oil-producing (OPEC) nations due to their strategy of intentionally cutting output to artificially buoy prices, and has started to purchase its oil from other countries that provide more competitive rates, such as Russia and Iran.
Russia is already a BRICS member, whereas Iran is slated to join in 2024, thus presenting an “ideal opportunity for our government to actually start buying crude oil from other countries outside OPEC using our own currency,” said Reddy, something that “makes perfect sense” but is not being considered.
South Africa itself is actually also a fuel-producing nation, and Reddy said there’s no reason for it to rely on imported propellants as much as it does, and neither for fuel prices to be as high as they are, given that the countries that buy locally-made fuels sell them for cheaper rates than what South Africans are forced to pay.
“Sasol makes fuel from coal, we export that fuel to neighbouring countries, and they sell it cheaper than what we get our fuel in South Africa for,” said Reddy.
“The cost to manufacture Sasol fuel is around R6 per litre, and Sasol is amassing huge profits using the resources of this country, and that’s why they currently sit in the top 10 on the Johannesburg Stock Exchange (JSE).”
As such, ramping up production at Sasol, and re-commissioning many of the refineries that closed their doors in recent years, will assist in meeting the demands of local motorists at a much lower cost than importing fuel.
South African refinery output in 2019. Four of these plants have since closed down. Source: Bloomberg
Valid fears exist that government would lose out on a large portion of the R95 billion in revenue it receives from the general fuel levy, which is used for public service delivery, but PAPPPI argues that there are other areas on which it could focus its efforts to maintain its finances.
For example, this includes imposing a “special tax” on companies with a monopoly on a certain industry.
“That R95 billion doesn’t need to come from motorists and fuels. It can come from a special tax on monopoly industry that sits on the JSE,” said Reddy.
“Take that R95 billion from a special tax on those companies, and immediately reduce the price of petrol in this country by 35%.”
With all these solutions at its disposal, it’s “very possible” that the South African government will be able to bring fuel prices down to around R10 per litre.
“What we need to understand is that we are in this predicament today precisely because of the government’s mishandling and mismanagement of the fuel situation in this country,” said Reddy.
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