Government exploring solutions to address high fuel costs

Friday, August 31, 2018

Deputy President David Mabuza says government is exploring solutions to address the high costs of fuel.

The Deputy President said this when he fielded questions from Members of Parliament in the National Assembly on Thursday.

As several organisations across the sectors of the economy continue to call for action to deal with escalating fuel prices, Mabuza said fuel prices continue to be a concern for government.

“Between July 2017 and July 2018, the fuel price increased by 25.2%, leading in part to a 10% increase in the cost of transport.

“Fuel prices have been driven by higher global oil prices and a weaker rand,” he said.

Last week, Energy Minister Jeff Radebe briefed members of the Portfolio Committee on Energy, and at the meeting, he told them government was using several avenues in a bid to lower the cost of fuel, among others, negotiating with crude-oil producing countries to obtain pricing regimes that are favourable to developing economies.

Addressing members of Parliament, Mabuza said: “Government is currently considering available options to address the costs of petrol and diesel”.

Economic interventions to knock down the cost of living

Mabuza said, meanwhile, that the cost of living in South Africa has a deep impact on the lives of people and that the poor will often feel the impact the most as this will exacerbate the levels of poverty.

“Government is therefore, very focused on addressing these rising costs across the economy,” he said.

Mabuza said that during 2015 and 2016, the severe drought across the country had a serious impact on agricultural production.

This led to increases in the cost of bread and other cereals, which are staples in the homes of many South Africans.

The poor were, Mabuza said, the hardest hit. Since then the drought has eased in many parts of the country, and production levels for wheat and maize has increased substantially. He also said that this provided some relief to food prices.

He said that over the past 12 months, food prices have increased by 3%.

“The rise in food prices has been softened by a decrease in the price of bread and cereals by 3% over the same period, and a decrease in the price of fruits by 4% over the same 12-month period. This will have eased some of the pressure on the poorest households in South Africa, but food prices remain unaffordable to many citizens.

“There are a number of products that are currently zero-rated for VAT. These include brown bread, maize meal, samp, milk, rice, vegetables, eggs and fruit.

“A task team was established by National Treasury last month to investigate other products that could be zero-rated, or exempted from VAT. We expect to receive their findings in due course. 

“While there is a lot of work to address the cost of living, particularly for the poor, there is also a lot of work underway to improve job opportunities and better wages, so that more South Africans can be enabled to mitigate the impact of the rising cost of living,” he said.

He said that the escalating costs, especially where the poor feel the impact more than other parts of society, are a challenge for any economy.

“Given South Africa’s history, the high levels of inequality, as well as the need to reduce poverty levels, it is imperative that as this government we make the necessary interventions to mitigate the impact.

“We have no choice but to address the cost of basic goods and services in order to provide our people with opportunities to create their own businesses, find decent work, and earn decent wages,” he said.

He said government’s response to address the negative impact of rising costs to the poor requires a comprehensive approach that is multi-faceted.

“Over and above the VAT zero-rating of basic food items, our comprehensive anti-poverty programmes are geared towards cushioning the poor, in order to ensure that poor households earn incomes that allow them to participate in the economic system.

“Government will continue to prioritise public employment programmes to create job opportunities and provide many young people with some income relief.

“We are also focusing on developing and supporting small businesses and cooperatives in order to expand economic participation and job creation of all South Africans across all sectors of our economy. As we do this, the poor will be absorbed into productive economic development and employment opportunities.

“More importantly, the government has also embarked on a vigorous campaign to attract investment, which will grow the economy and expand employment opportunities. To this end, the President has announced an Investment Conference for later this year, with the aim of attracting R1.3 trillion over the next five years. This investment should come from foreign and local investors.” –