NEWS & ANALYSIS

Govt must deal with fuel price crisis – COSATU

Federation says this poses a massive threat to stagnant economy

COSATU is calling on the government to come up with a serious plan to address the country’s Fuel Price crisis 

3 April 2019

South African motorists and consumers are once again dealing with another massive fuel price hike today.  The increase in the fuel price of more than R1 a litre poses a massive threat to our stagnant economy and will affect lower-income households the most.

It is becoming blatantly clear that our inept government does not have a solid plan to lessen the impact of these fuel hikes on consumers. We are calling on the government to release the promised research on the possible fuel price cap.  The government promised a review of the fuel price structure in November 2018. Since that promised review, the public has heard nothing from the state.  In the meantime, the fuel price has been increased three times with another massive increase predicted for May.

Currently, 38% of the fuel price goes to taxes that are being wasted and looted with impunity.  It is puzzling that fuel is now far cheaper in neighbouring states even though their fuel is imported through South African ports!  These price hikes represent a regressive anti-poor tax. While all income groups are treated equally, it is, in fact, the poor who are the hardest hit. They have to bear the brunt of not only higher transport costs to get to work and send their children to school but also have to bear the burden of higher food prices and other essential goods.  This is in contrast to income tax, where the more a person earns, the higher their income tax rate is.

The government needs to tell the public what it is going to do to lower the fuel price both in the short and longer term.   These interventions need to include:

1.   Reducing the 38% tax rate of fuel:

The government must compensate for such a reduction by:

- Reducing the 10% of the budget that the Auditor General estimates is lost to corruption, wasteful expenditure, rollovers etc.

- Increasing taxes on the rich through higher income taxes for those earning above R1.5 million, higher VAT tax for luxury goods, increasing company tax from 28% to 30%, increased estate and inheritance taxes etc.

- Clamping down on tax evasion by the rich and especially illicit goods e.g. tobacco industry, illegal imports etc.

- Reducing wasteful expenditure in the state e.g. the billions spent unnecessarily on catering and vanity projects e.g. the four new departmental head office, Tshwane Council and SA New York Consulate buildings costing R13 billion.

- However, any reduction in the fuel levy should not come at the expense of the already poorly paid petrol station workers.  Part of the fuel levy is a dedicated allocation for their salaries.  This should be protected to avoid forcing the petrol stations automating, as this would put almost 100 000 petrol station attendants’ jobs at risk.

2.   Fixing the public transport crisis:

A clear plan to halt the collapse of Metro Rail, this must include dealing with rampant crime on trains.

A plan to get freight off the roads and onto the rails.

Investing and expanding the role of buses and taxis

The taxis will equally need to come to the party and stop behaving like hooligans.

3.   Halt the bleeding at the RAF:

A large amount of fuel taxes goes to the RAF.  The RAF is in a perpetual funding and governance crisis.  Its current deficit is R141 billion and projected to increase to R480 billion at this rate if its crises are not addressed. 

The government has promised for years to fix the RAF.  It needs to tell the nation how and when it will do that? 

4.   Begin building a local electric vehicle industry:

South Africa will remain perpetually dependent on the vagaries of the oil price, whatever war is happening at the moment in the Middle East, the Rand Dollar rate etc. so long as we remain a fuel driven economy.

South Africa has a large car manufacturing industry.  It is time government becomes serious and engages with the auto-manufacturers on building a local electric vehicle industry.  This must include cars, buses and motor bicycles.  Renault and Volvo have already announced imminent dates when they will move to only producing electric vehicles.  China is now producing almost 1 million electric vehicles a year.  VW has announced plans to build 15 million electric vehicles in the next few years.  Yet government and industry are yet to begin engaging on plans to position South Africa to become the hub of electric vehicle manufacturing for the continent.  If we continue to sleep, we risk collapsing our already fragile industry.  It is a unique opportunity to not only reduce carbon emissions but also escape the oil price juggernaut, save Eskom through a massive increase in demand for electricity, save workers and the economy huge costs and create hundreds of thousands of jobs.  All that is needed is for government to awaken from its deep slumber.

Issued by Sizwe Pamla, National Spokesperson, COSATU, 3 April 2019