Deregulating SA’s fuel price put on hold

The DA’s campaign to make fuel cheaper by deregulating the price has been put on hold until 2024.

In July 2022 the party submitted its Fuel Price Deregulation Bill notice, saying it estimated doing so could lower the price at the pumps by up to R9/l. It said if the bill gets passed into law the market would take control of the prices, allowing people to import cheaper fuel, wholesalers to distribute cheaper fuel and retailers to compete on the basis of price.

“The bill was put out for public comment and we collated it and took it to parliamentary legal services. They told us it was effectively a 'money bill' and could only be introduced by the minister of finance. What this means is we will propose amendments to the budget in February 2024,” DA mineral resources and energy spokesperson Kevin Mileham said.

In response to pressure on government to deregulate fuel prices and ease the financial burden on consumers, as other countries have done, mineral resources and energy minister Gwede Mantashe gazetted a notice in July 2022 proposing a price cap on 93 octane petrol only, which accounts for about 20% of petrol sold nationally and a higher percentage of inland fuel sales (93 petrol is not sold at the coast).

The retail price of petrol is set by the government but the price cap would allow fuel retailers to discount prices of 93 unleaded, allowing motorists to shop around for the best deal as they now do for diesel. The wholesale price of diesel is regulated but not the retail price, and can vary by more than R2/l between retailers.

The minister gave the public 30 days to comment on the gazetted notice. Nearly a year later, the proposal is still with the department.

“The department has received more than 400 submissions, which are still under discussion internally; the outcome will be communicated to all stakeholders as soon as all internal processes have been concluded,” the department said, without giving a time frame.

The Fuel Retailers Association (FRA) has warned that motorists shouldn’t expect major price savings if the bill is passed. Though drivers will be able to shop around for better prices, they could only expect marginal discounts as petrol stations have small profit margins, FRA CEO Reggie Sibiya said.

External factors such as the dollar-based price of petroleum products, the rand-dollar exchange rate and shipping costs account for about 54% of the basic fuel price, while levies and duties account for 27% and wholesale and retail margins for about 15%. Sibiya said most of the retail margin paid to fuel station owners (now R2.42/l) goes to rental and operational expenses, leaving little room for discounting.

Petrol users in South Africa are paying about R1.50/l more for fuel in May 2023 than at the same time in 2022. The increases to 93 unleaded inland and 95 unleaded at the coast are at about 7% over a year. The wholesale price of diesel over the same time has decreased from R21.99/l to R20.15/l inland, and from R21.34/l in May 2022 to R19.43/l at the coast.

The fuel price is adjusted on the first Wednesday of every month and is determined by two main factors: the rand-dollar exchange rate and international petroleum prices.