GNU promises modest fuel price cuts

President Cyril Ramaphosa announced a concerted effort by the Government of National Unity (GNU) to address the escalating cost of living in South Africa. Key measures include adding more essential items to the VAT-exempt basket and reviewing the petrol price formula.

In his address at the opening of Parliament on July 18, Ramaphosa outlined the GNU’s strategies for the next five years, noting the collaboration among 10 minority parties. Despite their differences, the GNU has agreed on a unified set of goals and targets aimed at improving the lives of South Africans.

The development plan, set to be executed over five years, includes specific goals and measurable targets for each department, irrespective of the minister in charge. “It is about putting the people of South Africa first and foremost,” Ramaphosa declared.

Focusing on “inclusive growth” and broad-based black economic empowerment, the GNU aims to restore the country’s municipalities. Ramaphosa highlighted the acceleration of public-private partnerships, particularly in developing infrastructure such as broadband fibre.

Addressing the high cost of living, Ramaphosa emphasized the need for a comprehensive strategy to provide price protection and support for the most vulnerable. Despite corporate profits, many South Africans are struggling with rising prices of essential goods.

To mitigate this, the GNU plans to expand the VAT-exempt basket of essential food items and review administered prices, including the fuel price formula. “We will seek to find ways to address this challenge,” Ramaphosa affirmed.

Previously proposed interventions to address petrol prices include:

• Introducing a price cap
• Ceasing the publication of diesel price guidance
• Reviewing the Regulatory Accounting System (RAS)

These measures were initially suggested in response to the economic fallout from the Russian invasion of Ukraine, which saw direct intervention from the Treasury to provide temporary relief amidst successive price hikes.

However, the roughly 70% of the fuel price created by various taxes has not been considered for a cut, making significant declines in the fuel price unlikely. Instead, the government has proposed price controls, which experts warn could result in fuel shortages.

A review of the RAS promise to decrease fuel prices by R1.03 per litre by 2028, though details are not forthcoming. Similarly, while a fuel price cap for 93 unleaded petrol has been proposed, it demands thorough examination before implementation. Removing diesel price guidance could foster competition among retailers.

In summary, the GNU’s multi-faceted approach aims to alleviate the financial burden on South Africans, with a focus on inclusive growth, poverty reduction, and creating a more capable and ethical state.

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