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South Africa: The Great Fuel-Price Rip-Off Must Come to an End
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Business Day (Johannesburg)
OPINION
8 May 2008
Posted to the web 8 May 2008
Mark Smyth
Johannesburg
The fuel industry seems immune to competition at the continual expense of the motorist and transport industry.
THE government recently cracked down on price fixing when it came to bread and milk, both of which are essential to everyday life, yet it seems immune to pressure when it comes to fuel.
This week the cost of petrol and diesel rose again, breaking the R10 barrier. Granted, our fuel prices are still far less than European motorists are paying, but they have the benefit of competition at the pumps. Each retailer can choose to cut their margins in order to entice motorists to their filling stations .
In SA the retail fuel industry is the only market where competition is not encouraged or even allowed. Years ago Raymond Ackerman, the boss of Pick 'n Pay, opened a fuel station at the Brackenfell Hypermarket in Cape Town, in a bid to offer his customers lower cost fuel. This was quickly closed down when the government forced the fuel companies to stop supplying it.
The fault of course does not fall squarely at the feet of government. The fuel companies themselves are given a 10%-20% margin and choose between themselves where the final margin should be within that bracket. The m inerals and energy department then agrees to it and so the fuel is delivered to the petrol stations where the retailer has no choice but to sell at the dictated level.
What is even more bizarre is that SA and the UK are the only two countries in the world where diesel is more expensive than petrol. This is crippling to a relatively fledgling economy that relies heavily on road transport to move its goods. One would be forgiven for thinking that this is a conspiracy by the government to force goods to be moved by our antiquated and unreliable rail network. Granted, Transnet is investing heavily in upgrading , but it is far from being up to the required standard.
The thing I find even stranger is that while the authorities should be encouraging transport companies to modernise their fleets and rid our roads of unroadworthy trucks, instead it is forcing haulage operators to take larger chunks of their budgets for fuel, often putting them in a situation where they may have to keep trucks out longer between maintenance stops.
Today the government is making more money out of the motorist than ever before. For the first time , we are now buying more imported vehicles than locally manufactured ones, ensuring the treasury makes more money from import tariffs than ever before. The cost of borrowing is rocketing, further putting pressure on motorists who must juggle their monthly household budgets.
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The solution is simple. De-regulate the fuel industry and introduce a level of competition that is in line with the rest of the world. Currently the fuel companies and the government are the only ones benefiting from price fixing . The motorist is being penalised all the way down the line and this situation is more unacceptable than ever.
It is clear that the government shows no concern for the economic impact the fuel price is having and would rather rake in the cash .
Last week it effectively closed SA down for a week by not recognising that three public holidays in one week makes no economic sense. So what hope is there that it will finally end its hold over the petrol price?
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