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Tuesday, July 16, 2024

Fuel price capping gives an unfair advantage to illegal traders over retailers – FRA

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As the government moves to deregulate fuel prices, the Fuel Retailers Association (FRA) fears the move will cause unfair competition with illegal fuel traders which will force retailers out of business resulting in thousands of job losses.

The FRA, which represents fuel station owners, does not oppose the introduction of the fuel price capping but it feels that if done in the current situation where illegal fuel trade is rife, its members will find it hard to compete with illegal traders.

The Department of Mineral Resources and Energy (DoMRE) Minister, Gwede Mantashe published a brief notice in the weekly Government Gazette, seeking public comment on his intention to introduce a price cap for 93 octane.

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The announcement marked the commencement of a 30-day period for public opinion before the process can go ahead.

Moving to a maximum price, or price cap, would allow petrol retailers to discount fuel, however, they see fit, with price specials, bundles, or volume discounts.

Currently, the exact price of petrol is set by the government and it is illegal to sell the fuel at any other price.

Reggie Sibiya, the chief executive at FRA, said the failure of DoMRE to curb illegal traders amounted to nothing but an unfair competition where wholesalers were increasingly trading to the public, while some operators traded without licences, which the Petroleum Products Act (PPA) forbade, Sibiya said.

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“So retailers will not only be forced to compete amongst each other but to compete at their own peril with unfair competition from illegal traders.

“From the R1.33 only per litre opex margin, of which 60 percent was employment costs, if retailers gave out through that unfair competition, the first casualties will be the employees.

“We do not hear the minister talking about this rampant illegal trading which is taking away jobs from the sector by stealing volumes from the retailers through unfair competition.”

Read also: Some fuel stations selling diesel mixed paraffin, warns Mantashe

The association said Mantashe should be made aware that price capping was fertile ground for more illegal trading and unfair competition.

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“(The) Minister must fix all illegal trading before even thinking of introducing price capping,” Sibiya said.

“Jobs will be lost as a result of maximum pricing in an industry, which has already lost 4 000 jobs since Covid-19 struck. Transformation in the sector will further suffocate, and badly so, because of maximum pricing.

“Small businesses, which be further knocked. It should be borne in mind that jobs, transformation and SMME development are part of our National Development Programme.”

The organisation, which represents fuel station owners said, it would not necessarily be the legally trading service stations that would start discounting the fuel, but the illegal traders, which it said the DoMRE had dismally failed to control over the past decade.

The FRA said it had initially objected to the proposed implementation in June. “Our basis for objecting was on the process followed. DoMRE admitted that due process which includes issuing a gazette for commentary must first happen.”

It is understood that DoMRE is of the view that the petrol 93 octane price cap could be introduced within three to four months following the formal legal process.

Read also: Fuel Price Deregulation Bill could see a sharp drop to R17.50 per litre

On the ULP93 Maximum Pricing, it was resolved that a proper consultation process which should take around three months to complete should take place.

The FRA said submissions made in 2018/19 would be revisited and stakeholders could update or supplement their proposals. The DoMRE will publish calls for broader stakeholder and public participation, a process that requires 60 days. After these further engagements, consolidated inputs would take place before DoMRE makes a decision.

“While we agreed on the process, we believe there is some consulting in bad faith here in that the gazette now talks of 30 days, instead of 60 days, something that we will need clarity on as a follow-up with the DoMRE,” the FRA said.

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