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SA makes rare intervention to contain fuel prices

| Economic factors

South Africa intervened in setting fuel prices for September for the first time since the early 2000s as costs surged by more than inflation as the rand plunged, straining consumers.

A litre of 95-octane gasoline in Gauteng will climb by 5c to 16.08 rand, a record high, at midnight on September 5, the Department of Energy said in an emailed statement.

Gasoline prices in Africa’s most-industrialised economy, which imports all its crude, are regulated and recalculated monthly according to movements in the rand and oil prices, and annual changes to taxes. The under-recovery in the month to August indicated fuel prices would rise by 28c. They climbed 23 percent in August from year earlier, government data showed.

The advance will cater for forecourt attendants’ salary increases but does not cover the higher cost of fuel and the slump in the rand, which had its worst month against the dollar in August since May 2013, raising the cost of imports.

South African inflation accelerated to the highest level in 10 months in July, driven by increased fuel prices.

‘Temporary Intervention’

“This is a once-off, temporary intervention to provide some relief to motorists and consumers against fuel-price hikes,” the Department of Energy said, without explaining how the shortfall would be covered.

In July, President Cyril Ramaphosa said the government was planning interventions to mitigate the impact of record-high fuel prices, saying they posed a challenge for works and could crimp growth in the economy.

“Someone has to bear the cost of the under-recovery of the product that they imported and refined,” Peter Noke, head of terminals at Royale Energy, said by phone.

There has been no additional communication from the department with fuel retailers besides the press statement, said Vishal Premlall, a director at the South African Petroleum Retailers’ Association, whose members include the local units of Chevron South Africa, BP Southern Africa and Total South Africa.

– BLOOMBERG




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