The South African government has officially started the process to deregulate the petrol price, which might finally open the doors to possible lower fuel prices.
The Minister of Mineral Resources and Energy, Gwede Mantashe, asked for comment on his “intention to introduce a price cap” for 93 octane in the weekly Government Gazette on Friday.
On the next page of the gazette, it states that the public will have 30 days to comment on the notice before the process can move forward.
What is interesting to note, though, is that Mantashe signed the notice on 30 June, meaning that he has been “sitting on the notice for three weeks”, as reported by Business Insider.
Putting a price cap on fuel will have a significant impact on South African consumers. Petrol retailers will have the freedom to discount fuel with price specials, bundles, or volume discounts, creating a competitive space on the market.
The price of petrol is currently controlled by the government, making it illegal to sell petrol at any other price than what the government dictates.
Mantashe reportedly has been considering this move for much longer than since 30 June. According to finance minister Enoch Godongwana, Mantashe previously looked at capping the petrol price as part of a package of measures to introduce after a prior temporary measure to lower the petrol price.
But Mantashe did not give any details on the price cap, such as how it would be calculated, when it would be implemented, or how it would be enforced.
The opposition Democratic Alliance has previously suggested a deregulation of the fuel prices as a way to lower the prices. In a proposal to lower the fuel prices to R17.50, the DA suggested that by introducing a new Fuel Deregulation Bill, competition in the fuel sector could be allowed. If the Fuel Deregulation 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.
But the retail industry warns that calls for deregulating the fuel prices are “ignorant” and will actually impact fuel retailers negatively.
As reported by Fin24, CEO of the Fuel Retailers’ Association, Reggie Sibiya, said that if fuel retailers cut margins through competition with each other, they will not survive.
“The people that are calling for deregulation are ignorant. They think that the margin for retailers is a lot to share. There is nothing to share. Actually, we need more in order to sustain our businesses,” Sibiya said.
He believes “deregulation cannot happen before the sector’s transformation, as cutting margins will hurt new entrants that are highly geared and already struggling to make ends meet”.
“Pricing has everything to do with transformation because the fuel business is about margins and volumes. If you bring in new entrants and cut margins, you are actually frustrating transformation,” Sibiya said.
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Picture: Cape {town} Etc