Government is looking at changes to South Africa’s petrol price – here are 4 options
Finance minister Enoch Godongwana has called for changes to how the fuel price is calculated in South Africa as the country’s motorists pay record-high prices.
Answering in an oral Q&A session in parliament on Friday (10 December), Godongwana said that he was concerned about these increases to the extent that government may have to intervene and reform the price of petrol.
Energy minister Gwede Mantashe confirmed that the government was considering several ways to lower the cost of fuel – including separating the fuel levy from the basic fuel price.
“At this point in time, a big part of the price increases is the levy,” he said. “The way of countering price increases is an urgent matter for review, and that is on the table.”
Civil society groups and trade bodies have been pushing for a review of the country’s petrol price for several years – with specific concerns raised about taxes attached to the fuel price, which now make up as much as 50% of the total cost.
1. Complete review
Parliament’s Portfolio Committee on Mineral Resources and Energy held a series of meetings in April to discuss South Africa’s basic fuel price.
The committee subsequently advised the Department of Mineral Resources and Energy to review the basic fuel price, including alternatives on the taxation aspect.
Presenting to parliament, the Automobile Association of South Africa (AA) has called for a total review of how the country’s petrol price is calculated as a matter of urgency.
Among the key recommendations made by the AA to the Portfolio Committee on measures to mitigate rising fuel costs were:
- An investigation of current pricing model;
- Recalculation and audit of existing elements within the pricing model;
- Reduction of the cost of the Road Accident Fund (RAF) to motorists through measures such as better management, improved road safety and better policing;
- Better allocation and utilisation of funds from the General Fuel Levy (GFL);
- Investment in alternatives to the country’s current reliance on fuel.
2. Deregulation
Trade union Solidarity has called on the government to ‘deregulate’ South Africa’s petrol price by making changes to the country’s existing fuel levies.
In a letter addressed to Godongwana in November, the union said that when the retail price of diesel was deregulated, it saw a significant price drop almost immediately.
Currently, petrol is about 20c more expensive than diesel when imported at R9.37 per litre. However, the price difference is often more than R2 per litre at the retail level, with R16.66 being the lowest diesel price Solidarity could trace – a difference of R2.88 per litre, the group said.
“As the diesel price indicates and is proof of, deregulation is in the public interest. We, therefore, call on the Minister of Mineral Resources to deregulate the price of petrol at both wholesale and retail level and to also deregulate the price of diesel at the wholesale level,” Du Buisson said.
3. Petrol price cap
Trade federation Cosatu has also called for changes to South Africa’s fuel price, including a petrol price cap. A cap would effectively set a limit on which motorists pay for petrol in South Africa, with any additional costs above this amount absorbed by the fiscus.
“Currently, increasing the fuel levy only serves to feed a bankrupt Road Accident Fund that has been mismanaged into the ground. The RAF’s deficit of almost R300 billion is the greatest threat to the fiscus after Eskom’s debt burden.
“We are also still waiting on the government to release the research report that was conducted by the department of energy looking into the possibility of a fuel price cap,” the federation said in August.
Former energy minister Jeff Radebe first mooted the idea of a petrol price cap in October 2018. However, despite confirmation that the department was still considering the issue in April 2019, there has been no further communication around it.
4. A halt on tax increases
Civil society group Outa has called for a block on further petrol levy increases in the February 2022 budget.
In a letter sent to Godongwana in November, the group said the combination of the fuel levy (FL) and road accident fund (RAF) levy feed roughly R135 billion per annum into the National Treasury’s coffers.
Outa believes that the government is extracting enough from society from these two levies and should seriously consider not increasing these levies in 2022 to cushion the impact of higher-than-inflation increases from the past.
“Instead of reaching out to extract higher taxes from the citizens every year, the government should look for savings and improved productivity and other efficiencies within the state’s spending and processes,” said Outa chief executive Wayne Duvenage.
“To add another hike in fuel taxes in 2022 would be a slap in the face of overstretched citizens and would add more burden to everyone in the country.”
Read: How much you now pay in tax when filling up on petrol in South Africa
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