Fuel price crisis – unfairly shifting responsibility to Bay businesses and individuals

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2024-10-16
Business In Action

Fuel is the lifeblood of economies.

 An accident in the Port of Port Elizabeth in June 2024 at the fuel berth closed this vital fuel supply artery to Nelson Mandela Bay, and now the cost consequences have been unfairly shifted to the local economy affecting local businesses, residents and visitors to the Bay alike.

Since the accident in the port, fuel wholesalers have been forced to collect petrol, diesel and paraffin from the Port of East London and transport it to the metro by road, incurring bulk transportation costs in the process. Until now, those additional costs were not recoverable by the fuel industry under the wholesale fuel price regulations.

 Since the announcement of the October fuel price adjustments by the Minister of Mineral and Petroleum Resources, Gwede Mantashe, consumers are now, accountable for additional costs of transporting fuel from East London to the metro as a result of an accident they were not responsible for causing.

 The Minister has, by “rezoning” Nelson Mandela Bay ,surrounding small  towns and agricultural areas in a wide radius “the affected region”, increased the fuel prices normally applicable in coastal zones to those of inland zones further away from the ports.

 The affected region would have received a considerable price decrease in the cost of petrol, diesel and paraffin in October, however, the rezoning by the Minister has resulted in a substantial portion of the nationwide decrease being wiped out with decreases of between 23 cents and 69 cents per litre, depending on the petroleum product in question, having to be borne by local businesses and individuals.

 In other words, while local prices did decrease from 1 October, we received a “significantly  reduced decrease” and  now have to pay more for fuel than other coastal zones. For example, on 95 unleaded fuel, with a price decrease of 83c/l instead of the coastal zone 114c/l, means that the PE/Gqeberha zone is losing out on 31c/litre of the price decrease; 30.7c/l on diesel, and 28c/l on illuminating paraffin.

 The disparity grows the further from the port, so Kariega loses out on 63c/l on 95 petrol, 62.91c/l on diesel, and 59.91c/l on paraffin. Kirkwood loses 69c/l of the price reduction on 95 petrol, 68.61c/l on diesel and 65.61c/l on paraffin. Agricultural areas surrounding the metro are even more negatively impacted. Costs of production, poverty and food security in these areas are grave concerns as is  effect on the pricing of fresh produce to the metro and for export.

On paper, it may look like just a few cents more per litre at the pump, but the wide-ranging impact on the economy is substantial.

 This decision has a rippling inflationary impact. Nelson Mandela Bay, like the rest of South Africa, has experienced tough economic circumstances for several years with increased interest rates and high inflation. The Nationwide decrease in the cost of petrol, diesel and paraffin earlier this month, provides desperate individuals with much needed relief. Unfortunately for the affected region, much of the relief that would have come to all in the region has been undone by the Minister’s rezoning. A decease consistent with the rest of South Africa would have gone a long way in assisting residents and families with costs of transport to work, school or job-seeking. Additionally, the Nationwide decease would have resulted in savings to businesses and farmers, positively impacting prices of food and essential goods.

The decision will have the greatest negative impact on the poor and lowest-income groups and erodes the pursuit of socio-economic justice.

 The rezoning is said to be temporary, until such time as repairs to the fuel berth in the Port of PE have been completed and it is recommissioned, likely in December/January we have been told.

Temporary or not,  this we believe to be inequitable, unjust, and blatantly unfair.

We are asking: In an area where the economy is in recession, with one of the country’s highest unemployment rates, why should consumers, already under extreme financial pressure, be expected to take responsibility for additional costs incurred in transporting fuel to  Nelson Mandela  Bay by road?

 Further, why should we be financially and competitively disadvantaged due to an accident in the harbour for which local businesses and individuals cannot be blamed?

 While we appreciate the negative business impact for fuel transporters and wholesalers that stems from the unavailability of the PE harbour fuel berth, we don’t believe that any need for relief should be at the expense of local businesses and individuals.

 The fact that we are now paying more for fuel than in, say, Cape Town or Durban impacts not only on personal finances and transport costs, business costs, and local prices of food and goods. It puts the entire local economy at a competitive disadvantage against other areas of the country in terms of locally produced goods sent into other local or international markets.

The pricing of goods brought into the affected region will also be impacted, due to the higher cost of refuelling trucks here.

 For the poorest of the poor, heavily reliant on paraffin for heating, lighting and cooking, the impact multiplies – higher costs of transport, higher costs of food, plus higher costs to prepare the food and for lighting that enables people to study – exacerbates hunger and poor living conditions.

 As a business chamber representing some 700 businesses, which together employ over 100000 people in the metro and surrounds, we are determined to challenge this injustice on behalf of business, their employees, consumers and the local community.

 We are exploring all available options for redress so that the affected region can return to an equal footing on fuel pricing to ensure that we are not unfairly disadvantaged. Failure to act will result in an even more depressed local economy and higher unemployment rates by having to shoulder the responsibility for other parties’ errors.

 Siyolo Dick is President of the Nelson Mandela Bay Business Chamber