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Protests, deregulation and the petrol price

Aug 02, 2018 Petrol Price, fuel, deregulation, AA, DA, OUTA, Taxi, economy, South Africa,


The increase to fuel prices in July marked the fourth straight month in 2018 that these prices increased. They came off the back of three decreases in January, February and March. And, the Automobile Association announced recently, while the outlook looks positive for a small decrease in August, the fuel price remains under pressure off record highs in 2018. ‘Under pressure’ is an understatement indeed.

 

The deregulation of petrol prices, and whether this would lead to lower fuel prices, was debated recently at an event co-hosted by the AA and the Wits Business School in Johannesburg. Speaking at the event, AA CEO Collins Khumalo noted that the petrol price is a symptom of a weak economy, and that dealing with increases to fuel prices needed a broader overview of the current economic climate in the country.

 

“Road users and consumers are feeling the pressure of the increases; many households are having to cut back on other expenses to fund private or public travel costs, with consumers using illuminating paraffin among those hardest of the hit. Several options to reduce the fuel price have been put forward but the reality, unfortunately, is that the fuel price make-up is complex and a single solution will not necessarily solve the problem,” Khumalo noted.

 

And, he said, scrapping the indirect taxes on fuel – in the form of the R3.37 a litre General Fuel Levy and R1.93 a litre Road Accident Fund (RAF) Levy – is not going to ease the pressure on consumers. 

“In the short-term the scrapping of these levies may reduce the fuel price but government will still have to collect this revenue through other means. Will consumers be happier with these taxes, for instance, the raising of the VAT rate, or an increase to personal income tax rates?” he asked.

 

“Deregulation, on its own, will not fix the entire fuel price structure and, importantly, it is not going to put money in the pockets of consumers immediately. This is a long-term issue, which must be discussed and debated by civil society and government. The discussion around deregulation is, of course, part of that long-term debate which is important for us to be part of,” said Khumalo.

 

The association debated the pros and cons at the event, but for the average South African, the end result is all that matters.

 

July ended with news that the Democratic Alliance and several taxi organisations had issued a call to government to act with urgency on the fuel price and taxation issue. The DA was joined by OUTA and the Freedom Movement, who then jointly marched to National Treasury in Pretoria to highlight the issue, with the hashtag #StopTheTaxAttack.

 

The parties want a 20% reduction in the Road Accident Fund and general fuel levies – believing this will see the petrol price drop to less than R15 a litre. 

 

At the AA event however,  Khumalo had cautioned that civil action against rising fuel prices, in the form of road blockades and fuel boycotts, may not bring the desired results to those protesting, and may be dealing with the issue from the wrong angle. He added that the AA acknowledges that people are angry but that solutions are needed now, not protests which could further harm the economy.

 

“It is important to understand that rising fuel prices are not a petrol issue. They are an economic issue. What we all need to get behind, as a nation, is understanding how government is spending the money from the levies on fuel, and how any wastage in expenditure can be curbed. In this way the considerable onus on consumers will, in the long run, be eased,” he said.

 

Another major issue from the discussion was the structure of government and State Owned Enterprises (SOEs) which, Khumalo said, need to be more efficiently managed. “There is a dire need for the proper allocation of resources – and management of those resources – throughout government and SOEs. If these resources are better managed the impact of what we are seeing now would be lessened,” he concluded.

 

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