Fuel retailers have been rebuked by the department of mineral resources and energy for raising tax-related matters and the Road Accident Fund (RAF) and fuel levy issues when criticising the government about retail fuel margins.
Tseliso Maqubela, deputy director-general of minerals and petroleum regulations at the department, told the Fuel Retailers Association (FRA) conference last week that the industry “needs to be cautious and steer clear of politicising issues”.
“My plea is for the industry to stay within the sector issues, not to veer into tax-related matters. That is a strong view from ourselves. The industry must talk margins, BFP [basic fuel price] issues, not Road Accident and fuel levy issues. There are people who are elected to deal with those issues.
“The constant threats to government and the constant criticism, which in my view is misplaced, needs to come to an end because it is not helpful,” he said.
Maqubela was responding to complaints and criticism by FRA representatives about retail margins, the illegal wholesaling of fuel, diesel adulteration and the deregulation of fuel and the resulting potential job losses.
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Adulteration is the illegal introduction of a foreign substance into diesel using illuminating paraffin or similar substance, resulting in the product not conforming to specifications.
Maqubela said inadequate recoveries are a result of the high prices but are being blamed on “taxes and everything else”, when nobody is talking about those in the value chain that benefit from the high oil prices.
Maqubela stressed that taxes are a global reality and cannot be wished away, especially in South Africa. The government in the past three months has cushioned the impact on motorists and the economy of sharply higher fuel prices through a temporary R1.50 per litre reduction in the general fuel levy.
This temporary reduction will reduce to 75 cents per litre from next month, with this relief measure scheduled to end in August.
Maqubela said this has cost the state no less than R10 billion, adding the government is still committed to looking at all possibilities in assisting the economy to adjust to the disruptive geopolitical events that have led to high crude oil prices.
Maqubela said the outlook is bleak because as China emerges from the lockdown, the crude oil price is going to increase significantly.
“The use of energy as a weapon in global conflicts is affecting developing countries disproportionately. We therefore must be careful that our debate focuses on the causes of these high fuel prices. It is my view that cutting off the Russian Federation from global oil supply is a mistake because developing countries are the biggest victims,” he said.
Maqubela said the department believes the retail fuel margin is fair but admitted it might not be adequate. He believes illegal activity is impacting the margins of retailers. Maqubela said it has always been an aspiration of government to deregulate the fuel price.
“What we need to think about is whether you do it in the middle of a global economic war. The answer is that it is not advisable to do that on a wide scale.
“Our proposal was that we start with ULP 93. The issue of deregulation of ULP 93 remains on the table but it is up for discussion. We have never mentioned anything about deregulating ULP 95. In addition, we do not foresee self-service to be allowed. Therefore the threat to jobs will not materialise,” he said.
FRA president Reggie Sibiya referred to Maqubela’s appointment of a company in 2016, to conduct a study, which concluded that fuel retailers in South Africa are underrecovering by a minimum of 12 cents per litre.
“I am surprised to hear you talking about the fair amount of the margin we are making and yet the company you appointed gave you results that we are underrecovering by 12 cents and … still today nothing has happened,” he said.
Maqubela said it was decided that the outcome of that study would not be implemented because it contained flaws, but the department has committed to looking at pricing holistically, with the retail margin forming part of that process.
FRA deputy president George Nkosi questioned how the retail margin may not be adequate – but is fair with regards to credit card transactions being permitted on fuel service station forecourts from 2010, while fuel retailers have not been compensated for the credit card costs.
Fuel retailers have also not had any increase in the retail margin in the past year or two despite other associated expenses continuing to increase annually, such as Eskom tariffs and rentals, he said.
Maqubela believes the regulatory accounting systems margins try as far as possible to compensate everyone but there may be areas that “need to be tweaked”.
“We are going to reopen the calculations and let’s see. That is why I said there won’t be any changes unless we have sat down with all of the industry players and then see where the inadequacies may be.”
Maqubela said the importation of illuminating paraffin continues to increase and the department does not believe this is only due to legitimate demand. He confirmed that the department is picking up samples at service stations that confirm adulteration.
This article was republished from Moneyweb with permission