Article Sample: Financial Opinion

So last night saw the usual flurry of folk flocking to fill up with fuel. Alliteration aside, if you think that there are a lot of f-words in that tongue twister, wrap your head around this: unleaded petrol will now hit your wallet at the rate of R12.96 per litre inland, and R12.58 per litre on the coast. That's an increase of 52c per litre, though diesel outstrips that with a truly massive 76c.

Fuel users are broken down into two categories: those who will rush to the pumps the evening before a fuel increase, and those who do not. Judging by the queues and overworked staff, I'm guessing that the greater number of motorists falls into the first category. I fall into the second.

Let us, for the sake of argument, ignore diesel for the moment. In March of this year, we saw a very welcome reduction in unleaded fuel, by a whopping 69c. We all cheered. If we were honest with ourselves, we should have realised that this was pretty much a short-lived celebration.

Although my Modules in Economics were some time back, even I have to boggle at this comment from the Automobile Association, back towards the end of April, when commenting on and predicting the expected changes to the fuel price:

"The exchange rate showed a creditable strengthening during April. With a flat oil price, consumers could have expected the price of fuel to drop by up to 28 cents a litre. But the recent increase in international product prices means that diesel will only drop by three to four cents a litre, with a nine cent drop on the cards for illuminating paraffin.

They carry on to say:

"International petroleum prices have settled into a pattern of gains which are not always being overcome by recent Rand strength against the Dollar. We forecast steady rises in the price of fuel in South Africa in the short to medium term, with the possibility of larger spikes if the Rand comes under pressure."

Exchange rate? Flat oil prices? Pattern of gains? Rand coming under pressure? Does anyone speak English anymore? The average South African has not even the slightest clue as to what these things even really mean, never mind what they entail for future forecasts and pricing changes. No, what the average South African reads and understands in that statement are only the following words: “steady rises in the price of fuel in South Africa”. That's all.

So let's play a little game, and see if we can make head or tail of this.  The game is called 'What Are Our Priorities', and it goes like this: we cannot change the exchange rate, and we have no idea what the current flat oil price is. We don't know what a pattern of gain has to do with us, and we don't understand the forces that would make the Rand come under pressure. But there are two things we do understand, and these are our Priorities: we want to know how much money we'll have every month, after bills are paid, and we want to know (at least if we're somewhat engaged with the political and economic world around us) where the money we're paying is going to.

This then, is where your extra 52c per litre is going. Firstly, your fuel price is calculated monthly based on a number of factors, the main ones being international petroleum prices and the Rand/Dollar exchange (because we pay for petroleum in Dollars, okay?). Secondly, and for the point of simplicity, we're going to round the fuel price to R10.00 per litre. There is an Economics term for this but we've had more than enough terms already.

Broadly, the ten bucks per litre you pay at the pumps is broken down into four categories.  Of those, the Fuel Levy takes R2.39, and the Road Accident Fund levy takes R1.29. Thirdly, storage, wholesale and retail margins, distribution and transport and other costs related to this takes R1.96. Lastly, the Basic Fuel Price (the fee that we buy petroleum for from the Mediterranean area, the Arab Gulf and Singapore), freight and insurance charges, cargo dues, storage, financing and so on, makes up your remaining R4.36.

If we considered only those costs that got our petrol from the Gulf to the pumps, including all of the middlemen and sundries, we'd be paying R6.32 per litre. Not R10.00. Or, at current rates, we'd be paying R8.19 and not R12.66. This is important. It is important because the guy who owns the petrol pump makes approximately 7.9% of the total price per litre. That is almost a crime.

Another crime is the remaining R2.39 and R1.29. These are government levies. The latter, the Road Accident Fund Levy, is (despite the long description on the site) a fund providing indemnity cover to the people who cause road accidents, and personal injury and death insurance to victims of motor accidents and their families. According to the Mail and Guardian, in 2015, the Hawks launched an investigation into large-scale fraud within the Fund, including the laying of criminal charges against the RAF boss and board. It was alleged that the RAF even sued themselves in order to maintain cash flow (cash flow?), done "without the knowledge, instruction or consent of road accident victims." Although with 300 cases involving fraud and corruption to the tune of R300 million being investigated by the RAF's Fraud Investigating Task Team, the team was disbanded and for some inexplicable reason many of these fraud cases were removed from the court roll. Something smells bad here. Let's consider this to be R1.29 of your hard-earned cash down the drain. Or something. Who knows? Is it going to a fire-burned victim or a fire pool?

The largest crime is, perhaps, the R2.39. Yes, ladies and gentlemen, this one needs to further introduction: the Fuel Levy. It's supposed purpose? To fund general government expenditure, including the maintenance of roads. If the term 'general government expenditure' does not send a shiver down your spine, it ought to. The National Treasury shows a figure of R180 billion collected by this levy over a six year period. The Opposition to Urban Tolling Alliance (Outa) says no: it is closer to R238 billion. Whatever the number, where is it? Why, if we have collected such a vast sum of money, are roads still in the shape they are?

How do we explain electronic tolling of our major routes, if we already have the money? Why are people living without water and sanitation while we send money to neighbouring states that use it for their own self-aggrandizement while the people starve? Why is our esteemed leader buying a new plane and new cars for his wives? Where is the money coming from? If general government expenditure is what this money is for, then why are we not seeing general government expenditure?

More importantly, why are we not, every time we open our petrol caps to pay more money towards general government expenditure, not getting angry?