25 April 2012

South Africa: Petrol Price Increase Will Punish the Poor

Photo: warrenski/Flickr
Traffic in Cape Town.

press release

The Central Energy Fund (CEF) today announced that it will increase petrol prices by another 28c on the 2nd of May.

The CEF is responsible for setting the fuel price in South Africa.

This is on top of a 34c per litre increase at the end of January, a 28c per litre increase at the end of February and a 71c per litre increase at the end of March. This means that the petrol price has increased by R1.61, a 15.17% increase, since the beginning of the year.

These price increases will affect the price of goods across the country. South Africans, already struggling with rapidly rising living costs, will be forced to pay higher taxi fares, and increased transportation costs will push up the cost of food over time.

Government has to step up and help to ease the burden.

The fact of the matter is that since December 2011, poor people in particular have faced a significant increase in the cost of daily survival. This is forcing South Africans to make difficult decisions about what to cut from their budgets.

Over the last ten years, the fuel price has, on average, increased by 11% per year. This is far above the official inflation rate which has hovered around 6%.

There are two key ways in which government can smooth out the impact of fuel price increases over time; and to even lower the price of fuel.

A comprehensive review of all levies and taxes placed on the price of fuel to determine which ones, in which quantity, continue to be justified in the light of the substantial impact they have on the economy.

The CEF must re-examine the formula it uses to calculate the basic fuel price. Currently, the formula is overly-sensitive to short term fluctuations in the price of oil and the rand/dollar exchange rate. The Department of Energy has already conceded that such a review is necessary, but hasn't initiated the process. We believe that, given the significant economic pressure on our people, this formula must be reviewed as a matter of utmost urgency.

I have already written to the Minister on this issue. I will today also request a meeting with the CEF to request that a Democratic Alliance (DA) delegation meets with them as soon as possible to discuss the initiation of these reviews. It is vital that the CEF understand just how damaging fuel price hikes are to South Africans and to our economy.

We must move now to contain the increase in the cost of living, to help South Africans maintain and improve their standard of living. Containing the increasing cost of living is essential to the creation of opportunities for all.

Lance Greyling, Shadow Minister of Energy

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