South Africa plans to shield consumers
From soaring fuel prices
The price has four components: the basic fuel price, retailer and wholesaler margins, levies and taxes, and distribution and storage costs.
South African Finance Minister Enoch Godongwana says government hopes to cushion consumers from the spiking oil price, at least temporarily, for the months of April and May.
“I can’t reveal the details at this stage. We are in a sensitive discussion with the Department of Mineral Resources and Energy (DMRE). There is the intention by government to take some immediate steps for April and May. We want to make some mitigating steps during these two months,” he told MPs in reply to question in the National Assembly on Wednesday.
Oil prices have spiked since February due to Russia’s war on Ukraine and reached a high of a nearly US$130 a barrel earlier this month. On Wednesday Brent crude was trading at US$116 a barrel. South African consumers are already facing record high petrol prices, and R2 a litre increase is anticipated for April. This will take petrol to R24 a litre. Fuel prices increases also have a significant impact on food prices.
Competitiveness
In his budget speech, Godongwana undertook to engage in discussions with Minister of Mineral Resources and Mining Gwede Mantashe on “all aspects” of the fuel price. Godongwana said that a short-term remedy was under discussion as well as a long-term horizon change which could lead to “a competitive fuel price”.
The fuel price is highly regulated, and all retailers must charge the retail price set by the DMRE. The price has four components: the basic fuel price, retailer and wholesaler margins, levies and taxes, and distribution and storage costs.
In the longer term, a small once-off adjustment of 3 cents on the basic fuel price could be made, a recommendation which emerged out of a DMRE review of the price in 2018.
A Treasury-commissioned policy paper has also recommended revising the Regulatory Accounting System methodology, which would in effect reduce retailer margins, and could lower prices by 86c a litre. Deregulation has not been explicitly recommended but would introduce a competitive market.
Discoveries
Discovering gas on South African shores is one of the things that Mineral Resources and Energy Minister Gwede Mantashe is “enthused” by, because it will attract foreign investment.
The minister on Wednesday was responding to questions in the National Assembly about the development of the gas industry.
“Gas discoveries encourages me because it will save us from importing all the basic inputs into the economy,” said Mantashe.
“I am not one of those people who sees foreign investment as an enemy of the country. I want the investment in the country,” he said.
The minister emphasised that foreign investment is needed for the economy to grow.
“It is quite a strange philosophy that foreign direct investment is the enemy.
“It is not the enemy, it must be attracted,” he added.
According to the minister, the gas industry is “unfolding” and has been recognised by Europe as one of the resources, alongside nuclear, which can support the energy transition.
“We swam against the stream of people who just declared war on anything that looks like fossil fuel and therefore declared their interest in destroying the gas industry,” said Mantashe.
“The gas industry will be with us in the transition, in a big way.”
Last year the minister announced the preferred bidders of bid window five of the renewable Energy Independent Power Producer Procurement Programme. They will supply 2 600 MW of renewable energy. Bid windows six and seven will be launched this year. Collectively 7 800 MW of renewable energy will be procured from all three bid windows.
Renewable energy will have to be supplemented by other technology - namely gas, Mantashe explained.
Mantashe added that it is essential to invest in gas infrastructure to develop the industry, as the country did when it first developed the renewable energy industry.
- Fin24/Bloomberg
“I can’t reveal the details at this stage. We are in a sensitive discussion with the Department of Mineral Resources and Energy (DMRE). There is the intention by government to take some immediate steps for April and May. We want to make some mitigating steps during these two months,” he told MPs in reply to question in the National Assembly on Wednesday.
Oil prices have spiked since February due to Russia’s war on Ukraine and reached a high of a nearly US$130 a barrel earlier this month. On Wednesday Brent crude was trading at US$116 a barrel. South African consumers are already facing record high petrol prices, and R2 a litre increase is anticipated for April. This will take petrol to R24 a litre. Fuel prices increases also have a significant impact on food prices.
Competitiveness
In his budget speech, Godongwana undertook to engage in discussions with Minister of Mineral Resources and Mining Gwede Mantashe on “all aspects” of the fuel price. Godongwana said that a short-term remedy was under discussion as well as a long-term horizon change which could lead to “a competitive fuel price”.
The fuel price is highly regulated, and all retailers must charge the retail price set by the DMRE. The price has four components: the basic fuel price, retailer and wholesaler margins, levies and taxes, and distribution and storage costs.
In the longer term, a small once-off adjustment of 3 cents on the basic fuel price could be made, a recommendation which emerged out of a DMRE review of the price in 2018.
A Treasury-commissioned policy paper has also recommended revising the Regulatory Accounting System methodology, which would in effect reduce retailer margins, and could lower prices by 86c a litre. Deregulation has not been explicitly recommended but would introduce a competitive market.
Discoveries
Discovering gas on South African shores is one of the things that Mineral Resources and Energy Minister Gwede Mantashe is “enthused” by, because it will attract foreign investment.
The minister on Wednesday was responding to questions in the National Assembly about the development of the gas industry.
“Gas discoveries encourages me because it will save us from importing all the basic inputs into the economy,” said Mantashe.
“I am not one of those people who sees foreign investment as an enemy of the country. I want the investment in the country,” he said.
The minister emphasised that foreign investment is needed for the economy to grow.
“It is quite a strange philosophy that foreign direct investment is the enemy.
“It is not the enemy, it must be attracted,” he added.
According to the minister, the gas industry is “unfolding” and has been recognised by Europe as one of the resources, alongside nuclear, which can support the energy transition.
“We swam against the stream of people who just declared war on anything that looks like fossil fuel and therefore declared their interest in destroying the gas industry,” said Mantashe.
“The gas industry will be with us in the transition, in a big way.”
Last year the minister announced the preferred bidders of bid window five of the renewable Energy Independent Power Producer Procurement Programme. They will supply 2 600 MW of renewable energy. Bid windows six and seven will be launched this year. Collectively 7 800 MW of renewable energy will be procured from all three bid windows.
Renewable energy will have to be supplemented by other technology - namely gas, Mantashe explained.
Mantashe added that it is essential to invest in gas infrastructure to develop the industry, as the country did when it first developed the renewable energy industry.
- Fin24/Bloomberg
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