Just two months ago, South Africans were enjoying the lowest fuel prices in four years. How times have changed.
The war in the Middle East has sent global oil prices spiralling, and a weaker rand has also piled pressure on South Africa’s fuel price structure, together leading to record fuel price increases in April, with petrol rising by R3.06 per litre and diesel by up to R7.51.
Prices could spike further in May, unless the imminent ceasefire negotiations prove successful and oil prices fall below current levels for the remainder of April.
Although the government has given South Africans a temporary tax reprieve, with the General Fuel Levy having been reduced by R3, from R4.11 to R1.11, for the month of April, there is currently no indication of whether this will be extended into May or June. Government has, however, stated that the situation will be reviewed again at the end of April.
Without this temporary relief measure, South Africans will be paying a total of R6.58 in taxes on every litre of fuel, factoring in the Road Accident Fund Levy of R2.25, carbon tax of 19 cents and customs duty of 4 cents. This follows tax increases totalling 21 cents, which were announced during the Budget Speech in February.
Bobby Ramagwede, CEO of the Automobile Association, strongly believes that government should abolish the tax structure in its entirety, knowing full well that this oil price storm will not be short-lived.
“The biggest concern we face is that South Africa is a petroleum-driven economy, and any sharp rise in the cost of fuel leads to prices rising across the economy,” Ramagwede told IOL.
“Government is crying about a tax loss of R6 billion a year, but they’re haemorrhaging far more through corruption.”
Can Treasury think past 12 months?
Scrapping fuel tax is the most sensible and rational move available to Treasury at present, Ramagwede added, given that the knock-on effect of higher inflation will push people out of purchases and many out of jobs too, as companies scramble to cut costs, leading to far bigger losses down the line.
“This is all because you didn’t want to let go of the short-term gain.
“We stand for the whole tax structure to be set aside completely until this conflict is over,” Ramagwede said.
Further to that, the Automobile Association has on numerous occasions urged the government to conduct a review of the current fuel pricing structure.
In an earlier interview with IOL, AA CEO Bobby Ramagwede said the current fuel pricing model invites scrutiny on many fronts.
“Our headline position has always been that the composition of the fuel price needs to be reviewed and, naturally, revised downwards, because there are a lot of mitigating actions that can be taken to justify reductions in the various levies.”
Asked whether there were likely any inefficiencies in the current fuel price structure, Ramagwede said there were numerous factors that could be looked at.
“If we could just have transparency in the breakdown of the basic fuel price, you’ll quickly realise that there is probably a lot of stagnation in the pricing components there.
“Possibly money that’s not being ringfenced properly, not being scrutinised and reviewed. It’s akin to leaving your insurance premium as is. If you don’t check in with your insurer and ask for a reprice, chances are that price is going to continue to move north.”
On the subject of road safety, he said that improved road infrastructure and, more critically, improved policing would certainly reduce the need for RAF funding through a reduction in the number of serious crashes.
Ramagwede said the age-old K53 driver’s test also warranted scrutiny.
“Until today, K53 is taught to drivers, but drivers are not taught how to drive through K53. It’s merely an examination of whether or not you know the levers that you need to pull to operate the vehicle, and road signs, but not necessarily how to operate a vehicle within a live environment.”
The Organisation Undoing Tax Abuse (OUTA) said it is particularly concerned about the continued increase in the RAF levy.
“The annual fuel levy for the RAF contributes over R45 billion per annum, which falls well below the long-term provisions for the fund at R387.4bn, and is expected to increase to R426.2bn by 2028/29,” said OUTA CEO Wayne Duvenage. “Increasing the levy by a further R1.5 bn per annum, without fixing the structural failures of the RAF, simply shifts the burden to motorists while liabilities continue to grow,” he added.
“South Africans are paying more into a system that remains fundamentally broken.”
IOL Motoring
