Gauteng Business News

Send  Share  RSS  Twitter  01 Apr 2011

ENERGY: Pipeline Levy Will Cause Massive Job and Price Issues


Recent Gauteng Business News

The cost to the economy could be up to R1-billion annually and conservative estimates are that 40 000 jobs will be lost with the National Energy Regulator of South Africa’s (Nersa) pipeline tariff increase of 59.9%.

This has come to light amidst calls for a comprehensive macro-economic impact assessment of the proposed tariffs.

BP has been strongly opposing the increase, saying it could cost the economy up to R1-billion annually and will result in SA’s tariffs being among the highest in the world.

Sipho Maseko, BPSA CEO says: “Our analysis shows that these tariffs exceed the global average by over 400%. At these high input cost levels, business viability is at stake and will inevitably lead to major job losses in Gauteng.

“Nersa argues that the increase in the petrol price arising from higher tariffs is only a small fraction of the GDP of the inland provinces, which suggests that they view the magnitude of the increase to be insignificant. However their own figures show 40 000 job losses, which is very significant.”

“We have consistently argued for local pipeline tariffs to be benchmarked against those in other parts of the world,” Maseko says.

“Nersa’s disregard for this request violates many of the Act’s objectives, which include promoting the efficient, effective, sustainable and economic distribution of petroleum and the promotion of access to affordable petroleum products.”

Maseko further points out that the decision favours inland refiners, as the pipeline tariff increase will raise the cost of doing business in the inland market relative to the coastal markets. This poses major challenges for Gauteng as the main business hub, he said.

“Only about 50% of the proceeds from the tariff will accrue to Transnet. The remainder gives inland refiners a massive advantage. Nersa argues that locational advantage is a consequence of the import parity pricing (IPP) principle, which is based on an assumption of competitive markets.

“But this principle is only appropriate for unregulated markets where there is an equal playing field. Clearly, when one has to transport product from the coast to inland areas using state-owned assets such as Transnet, we are on the opposite side of the competitive spectrum and not a normal commodity market,” says Maseko.

In addition to the R1-billion per annum cost to the economy of the increase, by-products other than petrol such as gas, bitumen and the like will also incur the higher tariff when transported to the inland market. Nersa itself has estimated the cost of the proposed increase at around R500-million per annum.

BP has again urged Nersa to review the implications of the tariffs given its comparison with global benchmarks and the consequent implications for the competitiveness of the regional and South African economies.

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