Half-hearted reforms to fuel price formula hinder rather than help

14 December 2021

Solidarity today rejected the proposals of Mineral Resources and Energy Minister Gwede Mantashe and Finance Minister Enoch Godongwana that adjustments to the fuel price formula are necessary.

According to Solidarity, adjustments to the fuel price formula, on the one hand, will be insufficient, and on the other hand it will be an obstacle in bringing about real, sustainable relief for South Africans.

“Mere adjustments will not go far enough. Half-hearted reform efforts would actually stand in the way of cheaper fuel. Separating the fuel levy from prices, as Mantashe suggests, will do nothing to reduce the burden on consumers; instead, it will place an extra administrative burden on consumers,” said Theuns du Buisson, economic researcher at the Solidarity Research Institute.

According to Solidarity, the only ways to reduce fuel prices consistently would be by means of tax relief and the deregulation of petrol.

“The solution is twofold. Firstly, the levy must be reduced. Secondly, the price of fuel must be deregulated. While the minister is arguing about the pricing formula, everyone could benefit much more from complete deregulation – the elimination of the pricing formula in its entirety,” Du Buisson concluded.

Issued by Theuns du Buisson, Solidarity Research Institute: Economic Researcher, 14 December 2021