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NO, NO, no! The increase in the retail margin on every litre of fuel to enable your local filling station to increase petrol attendants' wages is totally wrong - from whatever angle you look at it.
Even the petrol attendants themselves might feel cheated if they start punching numbers into a calculator.
Labour unions and the fuel industry, with the help of Energy Minister Ben Martins, succeeded in forcing motorists to fork out for the pay increases of filling station employees.
After three weeks, striking petrol attendants are back at work after the National Union of Metalworkers of SA agreed on an 11.6% wage increase.
On the other hand, the Retail Motor Industry Association has negotiated an increase of 4.9c per litre in filling stations' profit margin. This means that consumers will, effectively, pay the wage increase directly - and even more.
The minister has already approved the increase in the retail margin. So, the petrol price will not decrease by the expected 25c per litre, but by only 20c.
The attendants at my local garage tell me that they earn just more than R16 per hour, meaning that the wage agreement will give them an increase of less than R2 per hour - R1.85 to be exact.
A single sale of 37 litres at the new retail margin, which might take five minutes to complete, will cover the wage increase. The additional profit from other cars served during the rest of the hour will go straight to the filling station owners' bank account.
All these cents add up, because petrol stations sell a lot of fuel. Small filling stations struggle to survive on less on 200 000 litres a month, while large businesses pump in the region of 500 000 and 600 000 litres per month.
A garage selling 300 000 litres per month can be regarded as a medium-sized business. The increase of 4.9c per litre in the retail margin will increase its gross profit by R14 700 per month.
If it has five attendants on duty day and night, the owner's total wage bill will rise by less than R7 000. Effectively, the strike might benefit the owner more than the employees.
Another concern is the ease with which the minister of energy affairs changed the retail margin. Firstly, it implies that politicians are gaining more control over the operating affairs of private businesses, for instance being able to facilitate wage demands a few months before an important national election.
The second concern is even more serious: would a small levy today - only 4.9c per litre - leave the door just a teensy bit open for other increases? There has already been talk of replacing the proposed e-tolls to finance Gauteng's new roads with a national fuel levy.
Lastly, it is ironic that an increase in fuel prices causes an increase in the fuel price: petrol attendants went on strike for higher wages because of a rise in the cost of living, largely caused by transport cost hikes.
And the solution is to increase the fuel price to pay the higher wages?
- Fin24
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at Nelson Mandela Metropolitan University. Views expressed are his own.
Even the petrol attendants themselves might feel cheated if they start punching numbers into a calculator.
Labour unions and the fuel industry, with the help of Energy Minister Ben Martins, succeeded in forcing motorists to fork out for the pay increases of filling station employees.
After three weeks, striking petrol attendants are back at work after the National Union of Metalworkers of SA agreed on an 11.6% wage increase.
On the other hand, the Retail Motor Industry Association has negotiated an increase of 4.9c per litre in filling stations' profit margin. This means that consumers will, effectively, pay the wage increase directly - and even more.
The minister has already approved the increase in the retail margin. So, the petrol price will not decrease by the expected 25c per litre, but by only 20c.
The attendants at my local garage tell me that they earn just more than R16 per hour, meaning that the wage agreement will give them an increase of less than R2 per hour - R1.85 to be exact.
A single sale of 37 litres at the new retail margin, which might take five minutes to complete, will cover the wage increase. The additional profit from other cars served during the rest of the hour will go straight to the filling station owners' bank account.
All these cents add up, because petrol stations sell a lot of fuel. Small filling stations struggle to survive on less on 200 000 litres a month, while large businesses pump in the region of 500 000 and 600 000 litres per month.
A garage selling 300 000 litres per month can be regarded as a medium-sized business. The increase of 4.9c per litre in the retail margin will increase its gross profit by R14 700 per month.
If it has five attendants on duty day and night, the owner's total wage bill will rise by less than R7 000. Effectively, the strike might benefit the owner more than the employees.
Another concern is the ease with which the minister of energy affairs changed the retail margin. Firstly, it implies that politicians are gaining more control over the operating affairs of private businesses, for instance being able to facilitate wage demands a few months before an important national election.
The second concern is even more serious: would a small levy today - only 4.9c per litre - leave the door just a teensy bit open for other increases? There has already been talk of replacing the proposed e-tolls to finance Gauteng's new roads with a national fuel levy.
Lastly, it is ironic that an increase in fuel prices causes an increase in the fuel price: petrol attendants went on strike for higher wages because of a rise in the cost of living, largely caused by transport cost hikes.
And the solution is to increase the fuel price to pay the higher wages?
- Fin24
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at Nelson Mandela Metropolitan University. Views expressed are his own.
