Term: ADMINISTERED PRICE

Prices of certain products in South Africa are determined, not by the forces of supply and demand, but by various government departments and institutions. For example, water, paraffin, electricity and petrol, the cost of bus and train fares, elements of telecommunications, electricity and so on. These prices are periodically adjusted, usually by a supposedly independent authority such as NERSA (the National Energy Regulator). Clearly, this approach to pricing distorts the free market system of supply and demand with an inevitable consequent cost. The price of petrol throughout South Africa, for example, is the result of a complex calculation which is updated monthly and adjusted according to changes in the international oil price, the strength of the rand against hard currencies and any changes in the taxation of fuel. These calculations are made by a government department at a considerable on-going cost to the tax payer. This contrasts with the British system where every supplier of fuel is free to obtain it from whichever source offers the best price. Thus, in London petrol stations advertise the current cost of various grades of petrol to the consumer.

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