Business and Technology

Legal threat over R20 petrol price in South Africa

The South African government must urgently deregulate petrol and diesel prices in South Africa, or it could face legal action. This is the call from labour union Solidarity, which has warned that the surging fuel price threatened economic growth and that current price controls were not benefitting motorists.

The union has written letters to the finance and energy ministers in which it lay down its case for deregulation and asked National Treasury to reduce the fuel levy.

Solidarity’s comment comes as petrol and diesel prices in South Africa have reached record levels due to a weakening rand and a global increase in the Brent crude oil price.

The latter is expected to continue its climb as demand for fuel increases with more Covid-19 lockdowns being lifted around the world. According to the AA, the inland price of petrol is expected to breach R20 in December.

Solidarity economic researcher, Theuns du Buisson, said deregulation of fuel prices was in the public interest.

“Today, our country counts among a minority of countries whose governments are exercising the current degree of artificial price manipulation,” Du Buisson said. To exacerbate matters, our government insists on keeping the price of certain fuels artificially high while almost all other governments are intervening to keep the price of fuel lower.”

Du Buisson pointed out that many people had not fully recovered financially from the impact of the Covid-19 pandemic.

In its letter to the energy minister, Solidarity chief executive Dirk Hermann pointed out that the proposal would not be strange to the government. In the 1998 White Paper on Energy Policy, the government said it believed that competitive market forces should determine prices.

It stated an intention to move away from price control once suitable “transitional milestones and arrangements” had been achieved.

“Control of industry margins, at wholesale and retail level, will be removed and thereafter will be determined on a competitive and commercial basis,” the government said.

However, more than 20 years later, petrol prices are still regulated. Hermann said South Africans could no longer afford to wait for such “transitional arrangements”.

He added that National Treasury had conceded that the policy of price controls on fuel had failed to achieve its desired goals. That would bolster a legal challenge to the controls in respect of their rationality and legality.

Solidarity’s call echoes that of agriculture organisation AgriSA, which has warned that rising fuel prices will significantly impact food prices.

Source: eNCA

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