CONSUMERS will still have to dig deeper into their pockets despite cushioned fuel hike measures as electricity and municipal rates are set to increase.
Economists have predicted a fuel price increase this week, while consumers are warned to brace for hikes in municipal and electricity tariffs.
Finance Minister Enoch Godongwana and the Department of Minerals and Energy announced measures to soften the blow of rising fuel costs on consumers. These will see a reduction in the levy on petrol from R3.85 per litre to R2.35 per litre and in the levy on diesel would be reduced from R3.70 per litre to R2.20 per litre for a period of two months.
The government also plans to sell some of the strategic crude oil reserves to recover the R6 billion it will cost to implement the measures.
Economists have warned that the measures will do little, if anything, to alleviate the financial burden caused by rising fuel and food prices on households.
Economist Dr Azar Jammine said the petrol price could rise by about 31c a litre and diesel price by R1.40 a litre.
He said the alternatives would have been an increase in the petrol price of about R1.80 a litre and a rise in the diesel price of about R3 a litre.
Jammine said the under-recovery on diesel was far greater than on petrol as there was a much greater shortage of diesel than of petrol worldwide.
Economist Dawie Roodt also predicted that the increase in the petrol price would be significantly less than it would have been. “The increase could be around 25c a litre,” he said.
Jammine said the government’s move meant that pressure had been taken off the Reserve Bank to increase the interest inflation rates and these might remain unchanged.
“The most impressive aspect of this is that money is not going to come from the budget but instead it will generate the R6bn required by selling some of the strategic fuel stock. That is a measure taken by a number of countries,” he added.
US President Joe Biden announced a similar measure to release up to 180 million barrels of crude oil over 180 days to alleviate the crisis and increase the global oil supply by at least 1%.
But Roodt said the selling of strategic oil reserves by the South African government was like selling “the family silver to pay for unexpected expenses”. He said consumers would pay back for the “stop-gap” measure in future as the stock crude oil reserves would have to be replenished.
The SA Petroleum Industry Association (Sapia) welcomed the measures as they would provide a relief to consumers impacted by the rising fuel prices.
The government said it would implement a “two-phase approach” which included the temporary reduction in the general fuel levy.
Sapia director Fani Tshivularo said they would engage with the Department of Mineral Resources and Energy on its proposed package of additional measures to be introduced after the expiry of the temporary measures.
“We support a fair and transparent regulatory pricing system with periodic reviews but with stronger oversight of regulations. This is necessary to ensure that pricing mechanisms keep abreast of developments and that unacceptable practices are not allowed to proliferate in the industry,” Tshivularo said.
Roodt said the measures would not benefit households. “The pain will be less but it will still be there as the fuel price will still increase,” he said.
Consumers will be hit by 9.6% electricity increases which came into effect on April 1 for direct Eskom customers and will come into effect in July for municipal customers.
The Pietermaritzburg Economic Justice and Dignity organisation said the measures wouldn’t have a significant impact on food prices, leaving households in the same position. Programme co-ordinator Mervyn Abrahams said: “South Africans have significantly become poorer over the past six months because their expenses are not keeping track with the electricity price, which will rise by close to 10% in addition to the 2021 increase of 15%.”
Cape Town ratepayers will also dig deeper in their pockets for municipal services from July 1 when service charges increase by an average of 5%. Mayor Geordin Hill-Lewis announced a proposed increase of 5.2% for property rates, a 5% increase in water and sanitation tariffs with an additional 1.5% “for expanding access” to water to the informal settlements.
Stop CoCT said the proposed increases were higher than municipal workers’ salary increase of 4%. Spokesperson Sandra Dickson said the proposed tariff increases were also higher than the expected inflation rate for 2022/23 of between 3% and 5%.
“The recommendation from Treasury to municipalities was to keep the increases to the bottom end of the Reserve Bank’s target inflation rate of 3% to 6%. Yet the City chose to hike the tariffs at the high end,” she said.
Dickson noted that the tariff increases were based on a budget that the City failed to spend year on year.
She rejected the proposed 9.5% hike in electricity tariffs as “unacceptable”
“The City’s bulk purchase for electricity makes up only 60% of their cost to resell it. Already the monthly municipal bill for middle-income households is not affordable any more as residents cannot keep up with the annual above-the-inflation-rate tariff increase from the City,” she said.