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Petrol pain: Govt needs to recoup about R2bn for fuel subsidy

Nov 18 2018 15:56

The state will likely recoup the R2bn that it subsidised the fuel price in November over two months rather than taking it all back in December.

This is according to Efficient Group chief economist Dawie Roodt, who added that rather than using the standard formula for calculating the fuel price, the government would directly play a role by deciding how much of the so-called Slate levy it wanted to recoup.

"The state is out of pocket by around R2bn as a result of subsidising the fuel price in November. My expectation is that they will recoup it over two months rather than taking it all back in December in which case we could be looking at a reduction in the petrol price of around R1.50 a litre while diesel will drop by about 90 cents a litre."

The current coastal price for unleaded 95 octane petrol per litre is R16.49. If it were to fall by R1.54 per litre, it would cost R14.95. The cost for the same grade of petrol inland would be R15.54 per litre.

"After months of sustained pressure on the fuel price, fuel users will receive a substantial breather at the end of November going into December if the current fuel price trends continue," said the AA in a statement on Thursday.  

"The main driver of lower prices has been an accelerating decline in international oil prices, which have trended downwards since the beginning of this month."

Roodt further warned about a bleak overall economic outlook for South Africa.

He was was of the view that more jobs will be lost on a month-by-month basis while inflation-related pay increases will be few and far between.

"The one exception is government which continues to pay well above inflation-related increases to its bloated staff."

Roodt said if the government doesn't urgently act to drastically reduce its debt, which now stands at about 55% of GDP, South Africa would edge closer to having to ask the International Monetary Fund to bail them out.

He warned that this would result in immediate austerity measures being imposed on the country.

"We could be looking at a situation similar to the one that which brought massive poverty and hardship to Greece when the IMF had to bail them out," Roodt said.

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petrol  |  sa economy
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