No easy way out of the petrol price crisis

While we aren’t at the stage yet where trucks block highways in protest at high fuel prices — as recently seen across Brazil — the steep rise in the cost of petrol this year could snowball into a big crisis. The price at your local petrol station hasn’t quite fed into the overall inflation numbers, which should still remain within the Reserve Bank’s targeted range of between 3% and 6%. But if you ask any South African, the cost of living is rising fast. Political parties that are prone to bouts of populist rhetoric have been insisting that the government find some reprieve. The solutions espoused by what must be a rogue faction within the governing party include the suspension of the Road Accident Fund levy, or the general fuel levy, or abolishing both.

Combined these make up about R5.30 of every litre of petrol. Their removal raises the tantalising prospect of paying about R10 a litre, but removing the levies would leave the country out of pocket. The National Treasury would need to find money to fill that shortfall because there would be immediate pressure to plug the hole. The fuel levy contribution to gross tax is about 5.5%, totalling more than R71-billion.

We face a fuel price emergency and the question is how to alleviate those pressures. What to do outside of pleading with retailers, producers and the transport sector to cushion the impact on consumers? Or do we establish yet another task team, which has been done?

Perhaps we should start growing this economy and putting an end to policy uncertainty that has left it in a state of limbo. The Treasury is forced to use the easy route of fiddling with the levy every other year because it’s the easiest way in which to raise revenues in a low-growth environment.

We have no control over international oil prices; it is a storm that we have to ride out. But we would do well to focus on converting whatever confidence is gained from our political changes and grow the real economy. Otherwise the Treasury will continue to tinker where it is easiest to raise the required revenues.