/ 7 March 2013

Fuel and electricity increases: The ride’s not over yet

South Africans will have to keep their spending to a minimum if they intend on affording expected fuel and electricity price hikes.
South Africans will have to keep their spending to a minimum if they intend on affording expected fuel and electricity price hikes.

Finance Minister Pravin Gordhan did not increase taxes when he delivered his budget speech in February but did ensure a rise in sin tax and fuel levies.

The petrol price increased by 81 cents a litre on Wednesday, setting the current fuel price at R12.87 and R13.08 for 93 and 95 unleaded petrol respectively. This was after the fuel price was increased in February by 41 cents per litre.

"The temporary relief and hope the 2013 budget speech granted South Africans, and particularly the R7-billion 'given back' to taxpayers will be wiped out by the petrol price increase of 81 cents per litre that came into effect at midnight," the union Uasa said in a statement on Wednesday.

The union added that the expected fuel levy of 23 cents per litre as of April, combined with the increase in electricity tariffs from Eskom, would leave people struggling.

But when petrol increases took place early in 2012 the department of energy stressed the recent drastic increase in fuel prices was out of the government's hands and urged South Africans to be more fuel-efficient.

Uasa acknowledged the needs and said consumers have no option but to keep their spending in check.  

"Consumers will fork out considerably more just to get to work, and the expected price hike in consumer goods will increase their burden even further. Unfortunately, there is currently no light at the end of the tunnel because of expected further fuel price increases due to the weak rand and the high crude oil prices internationally."

Low energy prices
Meanwhile, Eskom was last week granted an 8% tariff increase per year for the next five years by the National Energy Regulator of South Africa (Nersa). Nersa rejected the parastatal's request for a 16% annual price hike.

Although the increase was met with criticism from political parties, unions and civil society, Eskom previously explained it needed the increase to cover the costs of supplying the electricity needed to power South Africa and invest in infrastructure.

The Organisation for Economic Cooperation and Development said Eskom should be raising its tariffs as its prices were still too low. Polity.org reported on Tuesday that the organisation's report into South Africa's economy showed Eskom was not charging enough for electricty.

"Electricity is much less underpriced than it was, after a series of sharp rises since 2008, but South Africa still has among the lowest prices internationally and the current price remains well below the full marginal costs of Eskom, to say nothing of higher-cost renewables," the report explained.

The body said South Africa's economy was energy-intensive and overly reliant on coal, the website reported, and this was reinforced by a "long period of underpricing of both electricity and coal".

Meanwhile, the Road Freight Association (RFA) said on Wednesday Gordhan's announcement of a fuel hike and a carbon tax would have a negative affect on business.

"Already faced with numerous rising costs, the proposed carbon tax will have a serious impact on the cost of logistics, rendering road transport uneconomical" RFA spokesperson Gavin Kelly said in a statement.

He said the road freight industry was one of the highest taxed sectors in the country. Fees in the sector included road user charges, cross-border taxes, toll fees, vehicle licensing fees, inspection fees, and other legal requirements.

Last week, Gordhan announced a carbon tax of R120 per ton of carbon dioxide-equivalent. This was due to be implemented in January 2015.

There would also be an increase in fuel costs on April 3. This included an increase in the general fuel levy of 15 cents a litre, and eight cents a litre for the Road Accident Fund.

The general fuel levy was expected to contribute about R3.2-billion in revenue for the 2013/14 fiscus.

A third of the fuel levy went to the fund, Gordhan said. – Additional reporting by Sapa