Fuel retailers rebuked for raising fuel levy and tax issues

Fuel retailers have been rebuked by the Department of Mineral Resources and Energy (DMRE) for raising tax-related matters and the Road Accident Fund (RAF) and fuel levy issues when criticising the government about retail fuel margins.

Tseliso Maqubela, deputy director-general of minerals and petroleum regulations at the DMRE told the Fuel Retailers Association (FRA) conference last week that the industry “needs to be cautious and steer clear of politicising issues”.

“My plea is for the industry to stay within the sector issues, not to veer into tax-related matters. That is a strong view from ourselves.

“The industry must talk margins, BFP [Basic Fuels Price] issues, not Road Accident and fuel levy issues. There are people who are elected to deal with those issues.

“The constant threats to government and the constant criticism, which in my view is misplaced, needs to come to an end because it is not helpful,” he said.

Maqubela was responding to complaints and criticism by FRA representatives about retail margins, the illegal wholesaling of fuel, diesel adulteration, and the deregulation of fuel and the resulting potential job losses.

Adulteration is the illegal introduction of a foreign substance into diesel using illuminating paraffin or similar substance, resulting in the product not conforming to specifications.

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Perspective

Maqubela stressed that some of the biggest beneficiaries of the current high oil prices are the major oil companies.

“The oil majors cannot deflect and start pointing fingers at government when they are making super profits. It cannot be allowed,” he said.

Maqubela said inadequate recoveries are a result of the high prices but are being blamed on “taxes and everything else” when nobody is talking about those in the value chain that benefit from the high oil prices.

Maqubela stressed that taxes are a global reality and cannot be wished away, especially in South Africa.

The government in the past three months has cushioned the impact on motorists and the economy of sharply higher fuel prices through a temporary R1.50 per litre reduction in the general fuel levy.

This temporary reduction will reduce to 75 cents per litre from next month, with this relief measure scheduled to end in August.

Maqubela said this has cost the state no less than R10 billion, adding the government is still committed to looking at all possibilities in assisting the economy to adjust to the disruptive geopolitical events that have led to high crude oil prices.

Energy as a weapon

Maqubela said the outlook is bleak because as China emerges from the lockdown, the crude oil price is going to increase significantly.

“The use of energy as a weapon in global conflicts is affecting developing countries disproportionately. We therefore must be careful that our debate focuses on the causes of these high fuel prices.

“It is my view that cutting off the Russian Federation from global oil supply is a mistake because developing countries are the biggest victims,” he said.

Read: Who is buying Russian crude oil and who has stopped

Maqubela said the DMRE believes the retail fuel margin is fair but admitted it might not be adequate.

He believes illegal activity is impacting the margins of retailers.

Deregulation?

Maqubela said it has always been an aspiration of government to deregulate the fuel price.

“What we need to think about is whether you do it in the middle of a global economic war. The answer is that it is not advisable to do that on a wide scale.

“Our proposal was that we start with ULP 93. The issue of deregulation of ULP 93 remains on the table but it is up for discussion. We have never mentioned anything about deregulating ULP 95.

“In addition, let me be very clear, we do not foresee any situation where self-service will be allowed. Therefore the threat to jobs will not materialise,” he said.

FRA ‘surprised’

FRA president Reggie Sibiya referred to Maqubela’s appointment of a company in 2016 to conduct a study which concluded that fuel retailers in South Africa are underrecovering by a minimum of 12 cents per litre.

“I am surprised to hear you talking about the fair amount of the margin we are making and yet the company you appointed gave you results that we are underrecovering by 12 cents and … still today nothing has happened,” he said.

Maqubela said it was decided that the outcome of that study would not be implemented because it contained flaws, but the DMRE has committed to looking at pricing holistically, with the retail margin forming part of that process.

FRA deputy president George Nkosi questioned how the retail margin may not be adequate – but is fair with regards to credit card transactions being permitted on fuel service station forecourts from 2010, while fuel retailers have not been compensated for the credit card costs.

Fuel retailers have also not had any increase in the retail margin in the past year or two despite other associated expenses continuing to increase annually, such as Eskom tariffs and rentals, he said.

Maqubela believes the Regulatory Accounting Systems margins try as far as possible to compensate everyone but there may be areas that “need to be tweaked”.

“We are going to reopen the calculations and let’s see. That is why I said there won’t be any changes unless we have sat down with all of the industry players and society in general to unscramble what we currently have and then see where the inadequacies may be.

“I don’t think a piecemeal approach is going to help us in this regard,” he said.

Issues

Maqubela said the importation of illuminating paraffin continues to increase and the DMRE does not believe this is only due to legitimate demand.

He confirmed that the department is picking up samples at service stations that confirm adulteration.

“We want to make it clear that those service stations found with adulterated diesel are going to be reported to the revenue services. In addition, they may face closure and prosecution,” he said.

“We are serious about this and would like to plead with all retailers to be cautious about the sources of their fuel. We are now investigating a marker that will improve traceability.”

Maqubela said fuel theft is another scourge that is bedevilling the sector, especially pipeline hot-tapping. Hot tapping allows an opening to be cut or drilled into a pipe that is carrying product under pressure.

But Maqubela expressed confidence that law enforcement agencies and Transnet will get on top of this criminal activity and said “we are having successes already”.

“Tracer dyes are going to play a role in dealing with this permanently,” he said.

Maqubela added that as the DMRE strengthens compliance, it will “get” the illegal wholesaling wrong-doers.

The petroleum industry must also help by pointing out all those illegal wholesaling operations, he said.