Helen Meintjies and Robert Aitken
MA DLADLA doesn’t complain much about the absence of refuse removal or the long queues to get water from one of the five standpipes in her shanty town. She prioritises a different concern: paraffin is expensive and getting more so. She lives in a shack settlement with high levels of unemployment, no access to electricity and limited access to other fuels. Residents rely on paraffin for most of their energy needs.
“No less than one litre” of the fuel is bought daily by Ma Dladla. She needs it to cook, iron and heat her home. In September 1995, when paraffin cost R1,30 a litre at her local spaza, her monthly expenditure of at least R40 on the fuel already represented 13% of the household’s monthly R300 income. A year later paraffin expenditure, up to around R54 a month, now represents 18% of the household’s income.
In South Africa, paraffin is essentially the fuel of the poor. Yet over the past year, the price of paraffin has outstripped inflation, increasing by 30%. The country’s poorest are shouldering the largest price rise of any essential consumption item.
Paraffin wholesale pricing structures are complex. They fluctuate monthly according to an aggregate of international and local determinants: along with other liquid fuels (including petrol and diesel) the base price is set as the “In Bond Loaded Cost” (IBLC) – a price set by four large international export refineries. Since this is tallied in dollars, its fluctuations are to some extent dependent on the rand-dollar exchange rate.
However, on to this base price a number of “adjustments” – government levies and so on – are calculated and added by the government’s Central Energy Fund.
Taxes from a number of government departments are imposed. These are not constant and change in response to pressures from different interest groups, and according to Cabinet decisions. The Equalisation Fund Levy was also added to the IBLC price in order to subsidise Mossgas and Sasol’s sanctions busting and expensive synthetic fuels. A “zone differential” is also added to wholesale prices, accounting for transport costs for the fuel from the coastal cities to inland areas. Wholesale prices thus vary around South Africa, and are lower at the coast.
The non-transparency of the pricing mechanism makes it difficult to identify where constructive interventions can be implemented to control price increases. In addition to the levies and taxes included in the wholesale price, paraffin is also subject to Value Added Tax (VAT).
Several questions need to be answered by the government. Why is that the poor are contributing to subsidising activities unrelated to their own needs? Why does paraffin, a basic necessity for so many of South Africa’s daily domestic activities, have a VAT rating? How can a price increase of over 30% in a year be justified?
On December 4, the price increased yet again, this time by 3c a litre. It will be those who can least afford an increase, those that are financially most vulnerable, who will absorb the costs, unheard.
Helen Meintjies is from the Centre for Policy Studies, Johannesburg; Robert Aitken is from the Agency for Cultural and Policy Research, Dept of Social Anthropology, University of Natal, Durban