Taxes make South Africans pay more than Namibians for the same petrol

It is more affordable to buy locally-made fuels in neighbouring countries such as Botswana and Namibia than it is to buy them in South Africa.

This is primarily due to exorbitant taxes and levies imposed on fuels in South Africa, according to the Automobile Association’s (AA) Layton Beard.

At present, there are several surcharges on petrol and diesel in the country comprising the general fuel levy (GFL), Road Accident Fund (RAF) levy, IP tracer levy, customs and excise duties, petroleum products levy, and slate levy.

Together, they account for approximately 26% of the price of one litre of petrol.

“[There are] very many arguments for and against scrapping [the GFL and RAF Levy],” Beard told 702.

“If you were to take that price off, as what happens in places like Namibia and Botswana to which South Africa supplies fuel, they actually have that fuel at a lot cheaper pricing than we do locally because they don’t add those taxes to it.”

The July 2024 prices of Petrol 95 between these countries are compared in the following table:

While the differing rates may not seem that significant upon first inspection, keep in mind that South Africa’s neighbours must also pay transport and import duties for locally-made fuel to be shipped across the border, which is accounted for in their selling prices.

South African petrol prices to be reviewed

In light of the country’s excessive fuel prices, President Cyril Ramaphosa recently declared that government would examine the way fuel rates are currently calculated in an effort to see where it can bring relief to the nation’s citizens.

“As the Government of National Unity, we will look to expand the basket of essential food items exempt from VAT and undertake a comprehensive review of administered prices, including the fuel price formula, to identify areas where prices can be reduced,” said Ramaphosa.

This was met with great fanfare from industry stakeholders such as the AA, however, the association warns that motorists should maintain a cautious optimism.

It is highly unlikely that government would be willing to compromise on taxes such as the GFL and RAF Levy.

It is projected that the GFL alone will generate over R89 billion for the national fiscus this year, making it one of the most lucrative and easiest revenue streams for government.

The AA fears that should the powers that be do away with the GFL, it may seek to recoup its losses through increases in other taxes such as income tax or VAT, which would harm the poorest of the poor the most.

The Department of Mineral Resources and Energy previously suggested that it would review industry margins.

Industry margins include retail and wholesale margins as well as storage and distribution costs – but exclude the basic fuel price (BFP) and government levies and taxes. They are used to pay things like pump attendant wages and other retailer expenses.

However, margins only make up a small portion of the total fuel price while playing a very important role, with industry participants stating that there is little room for change in these costs without the risk of doing lasting damage to fuel retailers.

The AA therefore contends that the RAF Levy should instead be scrapped completely as this would immediately slash R2.18 per litre from fuel prices across the board.

It highlights that the RAF is in a poor financial state and regularly mired in corruption controversies, and it is the average consumer who must shoulder the brunt of these issues through the payment of the RAF Levy.

“While we are cautious about simply scrapping these levies outright, we believe there is room for movement in specifically the RAF levy portion of the taxes,” said the association.

“We also believe a comprehensive review may highlight other areas within the fuel pricing formula that can be better dealt with to mitigate rising fuel costs.”

Furthermore, the AA calls on government to make the fuel price review an open and transparent process that involves civil society organisations that can act as a voice for motorists.

“The President has taken the bold step of announcing a fuel price review and that process must now unfold quickly. The outlook for fuel prices in August is bleak with little or even no relief forecast,” the AA concludes.

“Against this backdrop, and the major role fuel prices play in our economy and on personal budgets, the fuel price review is long overdue, and our hope is that it gets underway as soon as possible.”