With South African households and businesses currently feeling the severe pinch after the latest fuel hike this week, the Democratic Alliance (DA) have insisted that pricing models need to be reviewed to spare them further financial agony.
The price of price of petrol rose by 91 cents per litre to a record high of R18.20 per litre on Wednesday, with the price of diesel rising by between 54 and 55 cents per litre in the latest hike after months of consecutive increases.
In a letter to Mineral Resources and Energy Minister Gwede Mantashe, the DA said that the record fuel hikes will have an “enormous knock-on effects on consumer and producer inflation and the cost of doing business”.
Kevin Mileham, the DA’s Shadow Minister of Mineral Resources and Energy, said that considering that a significant portion of the fuel price is attributed to government taxes and levies, “which serve primarily to benefit cross-government expenditure, including the completely dysfunctional Road Accident Fund”, it is time that the pricing model is reviewed.
“We believe that it is past time that the fuel pricing model be reviewed, with an eye to normalising the price into a range similar to that of other countries, and to easing the burden on South Africa’s cash-strapped citizens,” said Mileham in the letter.
“Accordingly, we request that you urgently commission a review of the fuel pricing model. Such a review should include all major stakeholders, including business, labour and civil society.”
In a statement released on Thursday, Mileham said that the DA is proposing a review of the fuel pricing model to provide relief to South Africans, but said that in order to accomplish this, the opposition party will need inputs from major sector stakeholders.
“A new fuel pricing model that recognises the impact of fuel prices on our economy (including high taxes and consumer and producer inflation) must be developed,” he said.
The Basic Fuel Price (BFP) is currently based on the import parity pricing principle, that is, how much it would cost a South African importer of petrol to buy the product from an international refinery, transport the product from that refinery, insure the product against losses at sea, and land the product on South African shores, he explained.
“On top of this government imposes various fuel levies which are adjusted annually to fund cross-government expenditure programmes, including the dysfunctional Road Accident Fund.”
Mileham said that with many South African households still reeling from the ANC’s “years of failure to create a favourable economic environment”, as well as its “disastrous” economic response to the COVID-19 pandemic, urgent intervention is required.
“These fuel price increases will put additional strain on already overburdened consumers,” he said.