Calls grow to cut fuel levies as prices surge
· Citizen
Trade unions and organised agriculture have lent their voices to growing pressure on government to reduce excise duties and fuel levies on the price of petrol and diesel to help stave off a catastrophic economic meltdown.
It is still not clear what measures government will implement to mitigate the impact of the high prices of fuel, which have been triggered by the ongoing war between the US, Israel and Iran.
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Unions and farmers urge government to slash fuel levies
However, lobbying has intensified to convince government to follow the examples of Namibia and Australia, which have both pledged to cut their government fuel taxes by 50% for at least the next three months.
There are similar discussions in Europe and, in the UK, one of the conservation measures being considered is a reduction in road speed limits.
In South Africa, in 1973, the government banned the sale of fuel on weekends and in the evenings and cut the highway speed limit drastically, to 80km/h.
AgriSA and the Agricultural Business Chamber of South Africa (Agbiz) have urged the department of mineral and petroleum resources (DMPR) to urgently consider a temporary adjustment to the fuel-pricing mechanism in response to emerging supply constraints in rural areas.
AgriSA and Agbiz said their survey of more than 1 000 producers and 100 fuel retail sites revealed constrained supply and increasing rationing across multiple regions.
Survey revealed constrained supply and increasing rationing
Respondents reported daily restrictions ranging from 50 to 500 litres per client, driven by panic buying and surging demand in the farming sector.
The organisations warned that without intervention, the combination of supply shortages and record high prices could disrupt agricultural production at a critical time in the farming calendar.
Farmers already face rising input costs, with fertiliser and diesel prices climbing sharply, and rationing adding further uncertainty.
Trade union federation Cosatu is one of the organisations calling on the government to act on the matter immediately.
Cosatu’s parliamentary coordinator, Matthew Parks, said as a result of high fuel prices, many businesses would retrench workers in large numbers.
Businesses could retrench workers
“Workers are already drowning in debt and supporting about seven relatives each will simply not cope. Most workers already spend an average of 40% of their salaries on transport,” said Parks.
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“This will now jump to 50% to 60%. Workers will now have to choose between feeding their children and travelling to work and school.
“While appreciating the state’s fiscal pressures, it must move quickly to cushion society, in particular the working class, and the economy from the spillover of the latest war in the Middle East.
“The most urgent action needed is to lower fuel price hikes and immediately suspend or lower the fuel levy and taxes for the duration of the war.”
Motor Industry Staff Association (Misa) spokesperson Phakamile Hlubi-Majola said President Cyril Ramaphosa acknowledged at the ANC conference in Limpopo that the government is exploring ways to soften the blow.
Softening the blow
“Misa insists that decisive action is needed now, as workers cannot afford further delays,” Hlubi-Majola said.
“Workers already spend more than 50% of their salaries on transport and electricity. With electricity tariffs set to rise on 1 April, households face a double burden that will push many deeper into financial distress.”
At midnight, the petrol price is expected to be R26.67 per litre, while diesel is expected to be R29.86 per litre.
Prof Peter Baur, an economist from the University of Johannesburg, said the impact of the significant increase in the price of diesel, petrol and paraffin would affect households through the increasing pressure associated with the cost of transportation, both supply side and demand side.
“From the supply side, the upward pressure of the cost of manufacturing will put upward pressure on the cost of goods being exported, impacting trade competitiveness as well as the cost of production for domestic consumption,” said Baur.
Impact on households
“Imported goods may also see an increase in costs and, as many goods imported are used in manufacturing, from technology to materials, this will add additional supply-side costs. Especially the cost of food prices through increasing agriculture costs related to farming and moving food supplies to market.”
Another key challenge facing consumes is the high dependency burden – members in a household which is dependent on a single income source – as a small increase in cost of living, such as increasing food and transportation costs, would have a significant multiplier effect, said Baur.
The longer-term effect would be a generalised increase in inflation as the increase in fuel prices may affect households on different levels, he said.
“This may induce the Reserve Bank to pre-empt possible inflation pressure, impacting the interest rates, which may either remain steady or be moved upwards to prevent or restrict the possible growth in inflation,” he said.
This would impact on investment spending and also impact possible economic growth in the economy, applying additional pressure on job creation. The DMPR has not responded to questions.
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