More on Food and Fuel Prices…

 

 

 

 

 

 

A thought occurs…

 

Eskom, as we are all probably aware by now, seems to be hell-bent on hiking their tariffs to the ordinary South African electricity consumer by 53% this year and by a similar amount next year.

 

I now wonder if, just maybe, we poor and long-suffering victims of the South African corporate and political robber barons might reasonably expect a small glimmer of light at the end of this seemingly endless tunnel of despair in which we find ourselves.

 

In the vein of any good communist or socialist government, it was recently announced by our inefficacious Minister of Health that certain (unspecified) interventionist steps were being considered on the present crisis over rocketing food prices.

 

Just to digress for a moment – why such an announcement should be made by the Minister of Health rather than the Minister for Trade and Industry or the Minister of Finance I find to be confusing. Whilst I am sure that there are public health concerns to be considered if the very poor cannot afford to buy their staple foods, I do feel that any interventions – even in the form of food stamps – would be better managed as part of an overall economic and financial strategy led by the Department of Finance and whose Minister has shown some reasonable degree of competence over the past few years.

 

Anyway, to get back to the point I wish to make…

 

Now, if the South African government is demonstrating a willingness to change its stance and to interfere with normal market forces on food prices then surely, in order to be consistent, it should also consider a similar intervention on fuel and electricity prices.

 

There are several ways in which considerable assistance could be offered to the consumer without necessarily distorting the market and its operations.

 

For example:

1.       VAT could be reduced or removed for all foods, fuels and power supplies;

2.       Eskom could be required to either cease the supply of one third of our total production of electricity for export at the ridiculous price of eleven cents per kilowatt or to export it at prices which would give a far better return, thereby obviating the need to impose punitive tariff hikes on South African domestic consumers;

3.       The fuel industry could be de-regulated so that competition could be allowed on the forecourt and so that supplies of oil could be sourced in a manner that would free South Africans from the artificial and arbitrary pegging of spot prices to the Singapore market;

4.       Introduce new trading rules to control and penalize the exorbitant profiteering in the various commodity (particularly foodstuffs and fuel) markets that results from the unfettered and unnecessary trading, re-trading and re-re-trading of essential goods and commodities.

5.       As previously advocated by Spearpoint, the government could also abolish all direct and indirect taxes (e.g. income, provisional, dividend, corporate, payroll, VAT, fuel levies, compensation, UIF, provincial, municipal, etc. etc. etc. etc….) and replace them with a single, simple “consumer” tax on all goods and services (excepting food, fuel and electricity) in various bands. Thus, incomes would be maximized and protected and the tax burden for individuals and companies would be defined by how much they spent within all sectors of the economy. The tax could be designed and collected on much the same basis as VAT, thereby saving vast amounts in collection costs and public service staffing costs.

 

I am sure that there are other ways in which commerce could be stimulated whilst making the sharing of the tax onus across the entire population far fairer than it is at present. It just requires a little imagination on the part of the government.

 

Most importantly, however, the government, through its own initiative on food prices, has now opened the door to the possibility of constructive intervention in other, critical, sectors of the market economy.

 

Now they must get on with it…

 

 

Spearpoint.

13 May 2008