Stakeholder engagement on impact of increasing fuel prices & alternatives to mitigate this

Meeting report

Opening Remarks by the Chairperson

The Chairperson said that South Africa has had a crisis within this sector prior to the Russia/Ukraine conflict. South Africa has always had the challenge of fuel hikes. The Committee is meeting to get a briefing on the impact and/or experiences relating to the fuel price increases and the interventions in mitigating the increases in fuel prices.

Briefing by the South African Petroleum Industry Association (SAPIA)

Mr Avhapfani Tshifularo, Executive Director, SAPIA, explained that the petrol price is strictly regulated by the Minister of Mineral Resources and Energy. SAPIA notes the impact felt by the consumer caused by rising fuel prices but argues that there is little that it or its members can do to alleviate such price hikes without impacting the security of the supply of petroleum products, or jeopardising the sustainability of the industry.

SAPIA supports a fair and transparent regulatory pricing system with periodic reviews but stronger oversight of regulations. The presentation considered the entire price regulatory structure for petrol and Liquefied Petroleum Gas (LPG) and Illuminating Paraffin (IP), indicating where attention may be required to promote fair and transparent price regulation.

Basic Fuel Price: Reasons for Recent Increase

The rapid increase in the price of fuel is attributable to the Basic Fuel Price as a consequence of international events, which include:

- The relaxation of the restriction on movements of people after the pandemic has led to increased demand for all petroleum products.

- Higher gas prices in Europe caused by a cold winter, less energy derived from renewables, increased demand for gas and consequent switching to other fuels.

- Compounded by Russia's illegal invasion of Ukraine and the displacement of cargoes to Europe in anticipation of the potential widening of the conflict.

This has significantly impacted liquid fuel process worldwide. There is nothing to adjust in the Basic Fuel Price in the short term to afford significant relief to the consumer.

Liquefied Petroleum Gas (LPG) and Illuminating Paraffin (IP):

- The recent price increases for these fuels have the same underlying drivers as that experienced for petrol and diesel.

- Short-term price relief for LPG consumers has potential through lowering or wavering VAT.

- Innovative ways to offer short term price relief to IP consumers need to be urgently considered since there are no levies or VAT applied to the product, and it is a fuel used largely by the poor.

See presentation for further details

Briefing by the South African Oil & Gas Alliance (SAOGA)

Mr Adrian Strydom, Executive Director, SAOGA, gave an introduction to SAOGA.

Mr Craig Morkel, Chairperson of the SAOGA Gas Economy Team, presented the “Indigenous Oil & Gas as a Potential Solution to High Fuel Prices.”

How could Indigenous Oil & Gas Reduce High Fuel Prices?

Geopolitical Context:

- Global Conflicts with local impacts that influence energy prices, i.e., the “Resource Curse”

- UN Framework Convention on Climate Change (UNFCCC)

- UN Sustainable Development Goals

- Market forces

SA Policy Context:

Summarised Solution Proposal

Noting that ~70% of Onshore Indigenous Oil & Gas input costs, besides Biofuels, are denominated in ZAR, it can and should be sold in ZAR by applying the pricing principle of ‘cost + margin commensurate with risk’ for all public goods, especially energy goods.

The Upstream Petroleum Resources Development Bill (UPRDB) should set aside a portion of indigenous oil & gas production as a Strategic National Reserve from which derivative products should be sold in ZAR, whilst the balance may be sold at an indexed price locally or abroad.

Does SA have Adequate Oil and Gas?

The Petroleum Agency of South Africa and indigenous oil & gas rights holders have adequate geological data that is verified by independent agencies – besides the requirements for ethical financial reporting of the stock exchanges on which most rights holders are listed.

The recently-reported deal between Renergen (an onshore indigenous gas producer) and Invanhoe (a mining company), besides similar discoveries by other upstream rights holders, serves as evidence that South Africa has significant gas volumes for import fuel substitution.

See presentation for further details

Briefing by the Liquid Fuels Wholesalers Association (LFWA)

Mr Peter Morgan, Director, LFWA, presented the experiences relating to fuel increases and the alternatives and/or considerations in addressing the increases in fuel price.

Experiences Relating to Fuel Increases

Problems faced and exacerbated by fuel price increases:

- Storage and distribution cost recoveries, as reflected in petroleum product prices, are average of storage and distribution costs across the country whilst costs incurred by independent wholesalers are much higher than average.

- There is no flow-through mechanism in the current pricing systems - the oil majors in South Africa are the first receiver of margins. They, in turn, negotiate fixed discounts with the independents to service the non-profitable parts of the value chain, retaining margin to suit their own returns on investment.

- Missing significant costs in the zone and secondary distribution margin calculations e.g., toll fees. 

- Regulatory lag: diesel price used for transport calculations (SD and Zone diffs) uses October of the previous year’s prices.

- Most people who are not in industry do not understand that, when the price of fuel goes up, Fuel Wholesalers and Retailers do not make more money.

- Any revisions that include attempts to remove the tax component from the WACC rate, do away with the Entrepreneurial Component or reduce the Weighted Average Cost of Capital (WACC) rate will lead to retailers and investors being severely impacted to such a degree that their businesses will be unsustainable. Retailers will only be left with cost-recovery margins.

Alternatives and/or considerations in addressing the increases in fuel price:

- Caution against a knee-jerk reaction.

- It is not only about pricing today, but also about sustainability of market participants.

- The pricing model must reflect what is happening on the ground.

- The risk of Geo-political impact is higher for an import reliant economy. Without crude refining capacity then the country is at the mercy of global markets even more.

- Much of the motivation behind these requests to review prices is based on the current spike in fuel prices due to the Russian-Ukraine War.

- It is the Basic Fuel Price where all 2022 increases are.

- Material solutions can therefore only rely on managing (a) BFP e.g., different sources of crude and refined product and (b) possibly Fuel Levies where recoveries are deferred until fuel prices are lower.

Medium-Term Solutions

Fundamental changes to the pricing system are required, in terms of a pricing review: A systemic review of the entire value chain. Each part must be examined for its own specific operational requirements. Once this is done, each section needs to be ring-fenced to ensure that there is no damaging vertical integration.

See presentation for further details

Briefing by the South African Petroleum Retailers Association (SAPRA)

Mr Vishal Premlall, Director, SAPRA, presented the current challenges with realisable solutions for the short-medium term. The presentation covered an overview of SAPRA, a consumer perspective on the fuel price, a retailer’s perspective on the fuel price, fuel price in the macroeconomy, and proposed solutions to consider.

Impact on the consumer

- If the fuel price goes up then the prices of consumer goods go up.

- If the fuel price comes down, then the consumer goods price stays the same. It does not alter accordingly.

The impact on the fuel retailer

External forces, of late, played a critical role in diminishing retailer volumes. The Covid-19 pandemic set the trend for an abnormal situation in the retailer environment, compounded more recently by the Russia/Ukraine saga that has had a ripple effect worldwide. Retailers in South Africa have already lost volumes that they would not ordinarily recover. The current state maintains the same trajectory on perpetual volume loss. Volumes are still the major income generator in the retail environment and continued losses will eventually lead to job losses and traps on business sustainability. Merchant fees continue to increase with the increasing fuel price.

Macroeconomy

Stakeholders that are new to the industry will have great difficulty, especially those that are trying to achieve transformation targets. The monthly fuel price announcement has the effect of stirring media hype, resultantly affecting consumer emotion and the consumer goods basket. Millions of product prices, as well as service rates, are to be adjusted to cater to the fuel price change. Non-fuel industry misuses the opportunity to hike prices and blames it on increased fuel prices.

Market-wide price increases hit the hardest on the poorest communities, e.g., taxi rates, basic food distribution costs etc.

Proposed solutions to mitigate the impact of fuel price increases

1. Price Change Frequency:

- Change the monthly price adjustments to quarterly adjustments.

- Reduce the hype and the monthly costly knock-on effect on the country’s macro-economy.

2. Card Machine Fees:

The Retail Fuel pricing structure is a structure based on cents per litre. Bank card machine fees are percentage-based. This means that each time the fuel price increases, the card machine fees automatically also increase. Solution: regulate card machine fees on a cents-per-litre basis to align with the fuel pricing methodology.

3. Job Creation

There is a massive opportunity to transform the retail fuel industry into a leading job creation incubator. Fuel attendant jobs are ideal to introduce unskilled persons into the job market. Suggestion: Develop a special job creation programme for the Retail Fuel industry to enable Fuel Retailers to employ more people, and embark on more focused training initiatives to upskill pump attendants.

See presentation for further details

Briefing by the Fuel Retailers Association (FRA)

Mr Sbonelo Mbatha, FRA Board Member, addressed the current state of the fuel industry in South Africa.

 

There are about 4 790 Service Stations in the country, employing over 81 000 people {from the Motor Industry Bargaining Council (MIBCO) Database}. About 60% of them are Company-Owned-Retailer-Operated (CORO) sites, which means that they are under control of oil companies, and the retailers do not own the site’s assets. The industry is currently in transformation drive. Africans still represent less than 20%, and African Women constitute only about 5%. These transformation transactions are geared at either 100%, 90& or, at best, 80%.

 

Challenges with the DMRE Regulatory Pricing System Retail Margin:

 

- Fuel is still a major revenue stream of the service station (60-80%) and more so in township and rural sites.

- It is, however, a volatile revenue stream because the margins are fixed cents per litre, and are not relative to fuel price changes.

- Every time fuel prices goes up, they erode a portion of this on an already-compromised fixed margin.

- As the petrol pump price is regulated, retailers cannot recover the losses by adjusting the pump price.

 

Challenges with the DRME Regulatory Pricing System – Opex (operational expenditure) under-recovery:

 

- Some operational costs are directly linked to the pump price fluctuations and yet they are not properly allocated by the DMRE on the Retail Margin.

- Although, in 2010, DMRE regulated payment of fuel via cards over and above cash, DRME never allocated the cost of cards in the margin since 2010. This has resulted in a major under-recovery of 38cpl on credit card transactions and 14cpl on debit cards transactions.

 

Challenges with the DRME Regulatory Pricing System – profit margin under recovery:

 

- Currently, the DRME allocation for retail profit margin is only 31 cents per litre.

- The Opex is meant to cover all expenses, but it does not due to its own under recovery factors of fluctuating pump prices and card costs, which are not compensated for.

 

Recommendations:

- A total scrapping of the Road Accident Fund in its current revenue structure: this can be replaced with a mandatory motor insurance flat fee, not linked to pump price.

- Reduce government fuel levies and give relief to already-burdened motorists.

- Review retailers’ margin by an extra 12c/litre to assist the industry to remain sustainable.

 

See presentation for further details

Discussion

The Chairperson said that, after receiving presentations from the operators within this industry, the Committee will schedule a session to table a report on what the Committee recommends as alternatives in addressing the increases in fuel price. He opened the floor to Members for them to engage the presentations.

Mr K Mileham (DA) said that he is concerned about the incredible amount of self-interest at play between the different sectors. Very few of the presentations actually addressed the critical concern, which is how to minimise the impact of the increasing fuel prices. He said that self-interest should be put aside and there should be focus on what the country can do to address the rising fuel prices and the impact that this has on every single sector of the economy. He asked that the presenters provide clarity on the concrete steps that can be taken to achieve this.

He said that he is concerned that SAOGA did not really talk about the fuel price but rather spoke in terms of generalities. There seemed to be an assumption that the oil and gas resources will translate into bountiful supply of oil and gas for South Africa in the short term. He was curious about the basis upon which this assumption was made because he does not see that the oil and gas resources are at the point of having such a supply chain within that timeframe. The earliest that he can anticipate this is probably in seven to ten years.

He asked what the impact of South African Refining closing down was. Was this a factor in determining the fuel price that the consumer and business are paying at the pump? He observed that one of the presentations stated that there is a move towards larger refineries, which is mirrored in South Africa, as the smaller refineries are unable to compete effectively. He asked about the impact that this would have on the fuel price that is paid at the pump.

He asked how the country could secure a line of supply that would ensure that the country is not adversely affected by conflict situations and sudden spikes in oil prices, etc., and also how that would minimise the impact on the pump price.

Ms V Malinga (ANC) said that she agreed with the first sentiments that Mr Mileham had uttered, in terms of the self-interest between the different sectors. She commented that the seven percent that is left for the fuel retailer is very high because it excludes shop profits. She referred to the SAPIA presentation and asked why there was stock financing in the Basic Fuel Price. She asked why there were coastal storage costs in the BFP when refining storage is part of the cost of product and refining is deregulated. She asked why the country’s risk premium in Basic Fuel Price is at 15% when the country faces no risk.

Mr M Wolmarans (ANC) said that, across all of the presentations, there is eminent danger if the factors that have been attested to are not attended to by the authorities. He observed that most of the presentations spoke of a review of the levies and VAT because at a large scale it seems that this is where some sort of reduction can be affected. Although, at the same time, whatever reduces the levies or VAT would have a burden on another sector. He noted that SAPIA said that the Basic Fuel Price is not within their control, but said that it does have an impact on the entire industry.

He agreed that with the inputs from the presentations, the Committee should facilitate a discussion on clear recommendations.

Responses

Mr Tshifularo referred to Mr Mileham's concern about the appeared self-interest between the sectors, and the question about the concrete steps that the country can take to minimise the impact of rising fuel prices. He replied that, when crafting the SAPIA presentation, they tried to be as objective as possible, but their interpretation was that SAPIA would be expected to reflect on the impact of the rising fuel prices on its membership. He explained that in as much as the users of their products are experiencing hardship, SAPIA is also experiencing hardship in terms of the procurement of the products in the international market. Given that this is a full supply chain, if there is hardship at the beginning then it is bound to affect the entire value chain. He agreed that there is a need to consider all of the options that need to be considered. All the stakeholders need to properly consult and, for instance, look into the Basic Fuel Price and whether it is serving South Africa as a whole. This would provide an opportunity for all stakeholders within this industry to really take an informed decision. He said that SAPIA has presented what they think could be done, but they do not have the solutions as these are quite technical issues that would require thorough work to be done to arrive at a point of having steps that would have the potential to minimise the impact of rising fuel prices.

He referred to the question of the impact that South African refining closing down would have on fuel prices. He replied that the pricing of petroleum products has nothing to do with the refining or the products that are produced locally. It is based on the Basic Fuel Price mechanism that considers the realistic, market-related costs of importing substantial volumes of liquid fuels into the country. Substantial volumes refer to millions of litres, if not billions of litres. When looking at the actual production cost, of each individual refinery and aggregate them, then it does not make the South African refineries competitive. Various studies are completed to review and benchmark the local refineries to their peers. The refineries need to compete against their peers around the globe or their competitors. “It is critical that there is a mechanism like the Basic Fuel Price that enable us to bring international competitiveness into the mechanism”, he added. In summary, the refinery operation has no impact whatsoever on the fuel prices at the pump.

On the question pertaining to how the country could secure a line of supply that would minimise the price at the pump: he replied that oil products are global commodities. He explained that the pain is felt amongst the importing nations like South Africa. The nations that are really smiling at this point in time are the oil-producing nations, such as Nigeria, Angola, Libya, Saudi Arabia and the Middle Eastern countries, because they are gaining and have the means of protecting their local producers since their prices by implication are subsidised. In terms of the long-term suggestions, once a nation reaches a stage where its industry has large access to local oil fields, then in a market that is regulated, it can come up with a mechanism to do so. However, in the short-to-medium term, there is no such opportunity. These prices are courted in the international market. As much as the Rand is strong, the country does not see the benefit because the prices are nearly impossible.

Mr Morkel agreed that the theme for this meeting was specifically about the alternatives and solutions that could be provided by the industry to the volatility of the fuel price in South Africa. He said that SAOGA tried to answer the question in as much detail as possible, not only from their perspective as an oil and gas body but within the broader context. This is why it focused on the geopolitical context and the South African policy context. SAOGA does not operate outside of the broader context. Although it has vested and commercial interest in the sector, it wants to see South Africa succeed and become both resource-rich and energy-rich. SAOGA wants to see affordable prices for energy, including the fuel at the pump and where fuel is used for electricity generation. There is a requirement from Section 217 of the Constitution that does not only consider the least cost but also considers the risk and socioeconomic benefits. In the broader context, SAOGA tries to deal with the national interest by offering a solution.

The solution proposed by SAOGA is that, in the medium-to-long term, the country exploit its indigenous oil and gas resources. For the short-term solution, LNG can be imported as part of a procurement process that has its own timeframes. If there were no red tape and regulatory framework constraints, then it would be possible to import LNG within a period of weeks. The opportunity to fill a vessel takes about 17 hours at an LNG export terminal. It can take up to 25 days for a voyage from an LNG export terminal to any of the nine commercial ports, where that LNG can be transferred into storage and moved either after regasification or in containers to any consumers that would use it. If there was no red tape, he would estimate that there could be LNG deliveries within a maximum timeframe of a month and a half. However, the solution is to deal with the long-term challenge of fuel price hikes, given the history of fuel price hikes and the fact that the country is price takers and not price makers. He explained that to become price makers, the country would have to look at its indigenous oil and gas resources. If the country could become producers instead of importers, then the country would set the price and a portion of local production should be considered for set-aside. When the Committee processes the Upstream Petroleum Resources Development Bill, it is proposed that the Committee considers the proposal made to include a provision in that legislation that would enable a set-aside portion of local production that could be priced in local currency to avoid the risk of rand/dollar exchange rate fluctuations. It would then also remove that portion of production from a global index price because that can be negotiated as part of the implementation of the future Upstream Petroleum Resources Development Act.

On the question relating to the timing and volume of gas available: he replied that he would stick to the assumption that three to five years is possible, based on the feedback from upstream right holders that he has had the opportunity to communicate with, to discuss their geological data that has been verified independently and according to internationally accepted standards. SAOGA believes what they claim to have in terms of volume and the time to exploit those indigenous gas resources. On the volume, in particular, the Petroleum Agency SA has the geological data to attest to how much we actually have based on those individual upstream right holders. Collectively, the Alliance could have as much as 10 trillion cubic feet of indigenous gas, which would equate to almost the whole coal fleet being transformed from coal to gas-fired power in South Africa. That would also leave enough gas to convert diesel and petrol internal combustion engines to become natural gas users, as has already been done in Gauteng with compressed natural gas. 

Mr Morgan said that the industry is changing and that the oversight of this Portfolio Committee is one way to balance the different agendas that were mentioned by various stakeholders. The Committee is also an oversight of the Department. He supported the response from SAPIA that there are no holy cows in this discussion and that the LFWA would consider any option that is made. However, when speaking about the spike in fuel prices and the opportunity to assist the motorists, the LFWA does not believe that this is within its realm of decision making. He concluded that the LFWA would welcome any discussion with this Committee.

Mr Mbatha said that the FRA is on the end of the stick. The motorists feel the impact of the high prices at the pump. Unfortunately, the FRA collects all or most of the money on behalf of other stakeholders. But because the public does not know of the value chain, they then assume that the fuel retailers have everything to benefit. That is why the FRA presentation sought to educate and explain the entire value chain, and also why he spoke of the 7% that is all that is left for the fuel retailer. He appreciated the sentiments raised by the Members that it seemed to be a very self-centered approach. However, while it may look like that, there are various parties in the value chain, but he can only speak of fuel retailing, which is the segment that is at the end of the value chain.

He referred to Ms Malinga’s comment on the seven percent left for the fuel retailer, which excludes the shops' profits. He replied that the discussion for today was purely on the fuel and he would not want to deviate, because the shops have their own mechanisms.

Ms Malinga requested that Mr Mbatha should answer her question.

The Chairperson advised that Mr Mbatha continue to answer the question as far as its impact on the fuel retailer.

Mr Mbatha said that the shops have absolutely no relationship with the fuel prices whatsoever. Some of the shops in the service station environment are franchised with the major retailers, who have their own terms and conditions. The franchise fees are a totally different structure altogether. He explained that, if he were to continue on this subject, then it would deviate from the real discussion on the solutions as far as the motorists are concerned. He would rather focus on the fuel element.

The Chairperson said that Mr Mbatha would not be deviating from the discussion. He said that it was enough that Mr Mbatha said that there was no relationship between the shops and the fuel prices, but he should give details on how they operate.

Mr Mbatha concluded that the shops have no material bearing on the fuel price. In terms of the Road Accident Fund, he clarified that there is currently a R2.18 that motorists must pay that directly goes towards the Road Accident Fund. The FRA recommended that this system of deriving it from the fuel price be scrapped and replaced with insurance that is a flat fee. This would save the motorist about R109 per fee on a 50-litre vehicle. It would have a material impact on the motorist that fills up four times a month. A motorist would immediately feel the positive impact of such an intervention.

Mr Premlall referred to the benchmarking exercise on developed economies and neighbouring states. He said that there may be opportunity for research to identify further possibilities. He reiterated an important point about the hype created around pricing and the period of pricing and what that does in terms of the consumer eye, which drives perception and has a direct influence on the consumer goods basket. He said that there is definitely a solution that lies in reducing or consider moving the price review adjustment period to a quarterly instead of monthly basis.

Follow-up discussion

Mr S Kula (ANC) referred to the FRA presentation and said that he was concerned that the industry is already approaching 4 000 retrenchments, especially considering the high unemployment in this country and the rising cost of living. He asked the FRA to explain what could be done to avert these retrenchments.

In terms of the FRA transformation targets, he expressed that it is quite concerning that the industry only represents 5% of African women. On anticipated increase in Black-owned service stations, he asked how the industry would deal with the element of fronting. The issue of fronting is very rife in this sector, where Black people are just used as a smokescreen to “colour-block”, as if there is transformation taking place.

He said that he had heard Mr Morgan speak on a radio station, where he had said that the main intention is not to reduce the fuel price, but it is about the sustainability of the industry. If there is no product to sell, then the price is a moot point. He asked about the key suggestions to keep the industry afloat, besides the intention to reduce the fuel price. He observed that Mr Morgan also acknowledged that the pace of transformation in the liquid fuel value chain is low. Mr Kula said that the pace of transformation is generally slow in all the sectors, but it is quite a concern. He asked Mr Morgan if he had any suggestions to fast-track the transformation in the liquid fuel value chain.

Overall, he agreed that there needs to be a wider discussion on the alternatives that would involve all of the stakeholders. With import-reliant economies like South Africa, the risk of geopolitical impact is much higher. Without crude refining capacity, then South Africa is even more at the mercy of global markets. He recalled that, in another committee meeting, its Members discouraged the closure of refineries in this country.

The Chairperson said that for now, the Committee is just soliciting the views of others, but next week Tuesday, before recess, the Committee will deliberate on the report, to give its own recommendations on what needs to be done with regards to this crisis that the country is facing.

Responses

Mr Morkel said that he would like to comment on a key issue that was raised. When fuel prices are high, it then increases the input cost for various goods that are produced for the domestic market and export markets. The way to deal with this is to become price makers and not price takers. In another debate, in the broader context of the role of oil and gas within a just energy transition, the argument was presented that, if South Africa should not reduce its carbon footprint and its products are then exported to the European Union, it would then face carbon border tax. This would prevent South African goods from being exported there. The reality has now hit home in Europe – a continent that has now redefined its definition of sustainable energy to not only include renewable energy but also gas, besides nuclear.

Mr Morgan said that the comment that he made on radio about the price of fuel being moot was to give a message that there are price spikes and there are long term concerns. There is a difference in the way these two need to be addressed. A price spike can have a short and sharp solution, but the long-term sustainability is of critical importance to the industry, because of the long-term sustainability of the industry, particularly the independent wholesalers actually – which goes into the whole area of transformation. If the industry is attractive enough then it will be able to attract the right people into the industry. LFWA fully supports the Minister’s comment that South Africa needs an upstream industry in the future itself, because that is the way to buffer some of the geopolitical concerns.

Mr Mbatha said that there were questions directly posed to the FRA. In terms of the concerns on the transformation targets, he replied that the FRA is not the primary enabler of transformation but there are two key players for the enablement of transformation in this sector – the oil companies as well as the Department of Mineral Resources and Energy (DMRE). The oil companies are basically the ones to issue the franchise agreements to suitable candidates that qualify according to the criteria that they set. The second key player is the DMRE, through licensing: it is at this point where issues of fronting can be addressed because part of the requirements by the DMRE is ensuring the ownership of the business. There is a lot of due diligence that would lie in the DMRE to ensure that the issues of fronting are addressed.

Mr Motlalepula Motsoane, President, FRA, said that he would respond to the retrenchment concerns within the industry. He said that, for retailers and employers, for one person to lose their job is too much, because this immediately means that three to four mouths are without bread. In October 2021, it was a record and unfortunate month where just under 4 000 pensions were paid out to the applicants who had lost their jobs; this was just for the October month. It was a shock for everyone as this has happened throughout Covid-19 and even before Covid-19 when the industry was in recovery. There was no assistance from oil companies, and there was no assistance from government. Some of the businesses dropped by 80% and it is still a battle for them to get back to normal. When looking at the drop in the volume, his main worry is that, if it gets to a point of creating an impact on the profitability of the fuel retailer based on what was heard in the media, it would be like the last nail in the coffin for this industry. He is worried about the 81 000 people employed within this sector. The retrenchment information was provided by MIBCO. At the end of the day, the FRA is more worried about unemployment.

Closing Remarks by the Chairperson

The Chairperson said that, while the Committee seeks to find solutions, it is important to apply some degree of patience but also for all stakeholders to continue to recognise each other as people sitting in the same boat. He is pleased that the Committee has invited all the stakeholders that the Committee thought would assist them in shaping an intervention plan for the situation that is faced. These challenges of increased fuel prices are not new, but they have been in existence for a long time. There is quite a substantial number of oil-producing countries in the African continent, but the issue of the global market price determination becomes a challenge.

There are concerns that the Committee would have to take into consideration, moving forward – for example, the taxed-based issues, the storage charges and issues that relate to the Road Accident Fund. He explained that the rising fuel prices have implications that go beyond what is seen – for instance, it has implications on the food prices. The Committee would have to consider and justify its solutions for the short-term and long-term. He concluded that this is a national interest that calls upon the Committee to primarily focus on how to mitigate against the actual pricing of fuel.

The Chairperson thanked all the Members for attending the meeting and thanked the guest delegations for appearing before the Committee.

The meeting was adjourned.