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Economic Wrap: Fuel price drop and Makate’s fight with Vodacom over ‘Please call me’

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This week, motorists are paying less at the pumps after the Energy Department’s announcement the price of all grades of petrol decreased by 9c a litre. In other news, Deputy Finance Minister David Masondo said government officials need to be more prudent about spending if they are going to help drive up growth in the economy.

Masondo was delivering an opening address at the virtual Spending Review Conference this week.

Also making news, ‘Please Call Me’ Inventor, Nkosana Makate was back at the North Gauteng High Court in Pretoria. He wants the court to set aside the R47 million Vodacom offered him for his invention.

Government spending

Deputy Finance Minister said the immediate solution to curb growth in public debt is for government departments to save more and spend less.

Masondo said raising more taxes at this stage is out of the question as it would deter potential investors and further erode the economy.

Masondo emphasised that any further spending needs to be aligned with the performance of the economy.

“As you increase tax rates, you will get some revenue. But as you go on increasing your tax rates, you’ll reach a tipping point that undermines your tax revenue in that economic agents will start to find it irrational to invest, to engage in economic activities because they know that their income will be eaten up by larger tax rates.”

Treasury concerned about increasing government debt:

Cargo markets

The International Air Transport Association (IATA) released its March 2021 data for global air cargo markets this week. The new data showed that that air cargo demand continued to outperform pre-COVID levels (March 2019) with demand up 4.4%.

March demand reached the highest level recorded since the association began tracking cargo demand back in 1990.

African airlines’ cargo demand in March increased by 24.6% compared to the same month in 2019. This has made Africa the strongest of all regions.

Robust expansion on the Asia-Africa trade lanes contributed to the strong growth.

“Air Cargo continues with a bright spark for aviation, with Africa as the strongest of all regions and globally, March 21, showed demand up 4.4% over the same period, with the improvements driven by increased demands for exported goods. Despite this, however, capacity remains 11.7% below pre-COVID-19 levels due to the ongoing grounding of passenger air crafts. The gains made in the air cargo business are insufficient compensation for the lost passenger revenues,” the Association said.

Fuel price

Economists this week warned the fuel price may remain high in 2021 despite the price drops taking effect from Wednesday this week.

Mineral Resources last week announced that the price of petrol would decrease by 9c a litre. The price of diesel will decrease by as much as 31c per litre and illuminating paraffin will be lower by 23c per litre.

Relief for motorists as fuel prices decrease:

The department says the price drops are on the back of lower oil prices and a stronger rand.

Economist at Absa Miyelani Maluleke says this does not fully offset fuel price hikes.

“It’s important to kind of highlight that it does not sort of fully offset the fuel price hikes that we’ve seen since the start of the year. If you look at where we would be even after this adjustment, fuel prices could be quite a lot higher. And going forward, we’ll have to keep a close eye on what happens with international oil prices and the exchange rate. But it does look like over the course of this year. South African households will, in general, be paying quite a bit more for a litre of oil compared to what we saw last year.”

Eskom at Zondo Commisson

Former Eskom Acting CEO Matshela Koko was back at the Commission of Inquiry into State Capture this week. The former CEO admitted that he had deviated from policy when he imposed a BEE partner on Anglo-American to supply coal to Eskom from the New Largo Mine.

In 2013, Eskom said any new coal suppliers to its power stations must be 50% plus black-owned.

Koko told the commission that truck owners were brought in to remove possible threats to the supply of coal at Eskom power stations.

“We give them a partner and that partner will be 2 000 truck owners on the road. We can’t leave them on the streets. We don’t give BEE partners to Eskom suppliers, but I thought this was an exceptional circumstance.”

‘Please Call Me’ dispute with Vodacom

In other unrelated news, Mobile operator, Vodacom this week dismissed ‘Please Call Me’ inventor, Nkosana Makate, model for a compensation offer as exaggerated.

In the North Gauteng High Court in Pretoria, Legal representatives for Vodacom argued that the Makate model is flawed and relied on the incorrect set of data.

Lawyers representing ‘Please Call Me’ inventor justify a R10 billion compensation offer:

Makate wants the court to review and set aside Vodacom’s compensation offer of R47 million. The two sides have differed on the revenue Makate’s invention has generated for the mobile operator, particularly on the number of daily Please Call Me’s and the duration of the subsequent call.

The court is yet to give an update and announcement on its decision on this case.

‘Please Call Me’ inventor explains reasons for R10 billion ask from Vodacom:

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