A decade of petrol tax hikes in one graph

Taxes and levies have accounted for a considerable portion of local fuel prices over the past 10 years.

In fact, the Basic Fuel Price (BFP) – which is what a litre of propellant costs to import to South Africa based on factors such as international oil prices and the rand/US dollar exchange rate – only took up, on average, 48% of the prices we saw at the pumps in the last decade.

The remaining 52% was attributed to elements such as the General Fuel Levy (GFL), Road Accident Fund (RAF) Levy, storage and distribution, as well as wholesale and retail margins, according to an infographic developed by the Organisation Undoing Tax Abuse (Outa):

The graph shows that the BFP’s fluctuations over the last 10 years were largely due to changing oil prices.

During the 2020/21 period when demand dropped during the height of the Covid-19 pandemic, the average price of Brent Crude oil was around $41 per barrel.

This in turn reduced local petrol prices from an average of R16.16/litre the prior year to R14.65/litre, despite the rand/US dollar exchange rate being 13% up on the prior year at an average of R16.49/dollar.

“This gives one a clear indication of the power of international geo-political forces on our petrol price,” said Outa.

The graph further reveals how the international oil price escalations that began in 2021/22, taking Brent Crude from $65 to $96/barrel, pushed our petrol prices over R20 per litre and have generally kept them floating above the R23/litre mark since then.

The recent few months’ reductions from a high of R25.49/litre in May this year to R21.05/litre in October have largely been off the back of a combined strengthening of the rand (down by 6.5%) and the lower oil price (down by 17%), which has reduced the BFP component to below R10 per litre for the first time since February 2022.

“Current tensions in the Middle East between Iran and Israel could very well reverse these gains and our petrol price could escalate back up to R23/R24 per litre levels in a short space of time,” said Outa.

Less talk, more action

The Minister of Mineral and Petroleum Resources, Gwede Mantashe, recently announced that government is actively looking at potential changes in the GFL and RAF Levy as part of the new Fuel Price Intervention Plan that aims to reduce the cost of propellants in South Africa.

While celebrated by the general public, Outa warns there might not be anything to come of these discussions.

“The South African public has been listening to politicians talking about removing the tax components in order to lower the price of petrol for many years now, but nothing has really come from these not-so-bright suggestions,” said Outa.

“The only relief the public has seen was a brief reduction in the General Fuel Levy in 2022 when the Russia-Ukraine war pushed up the international oil price, which sent the Basic Fuel Price component of our petrol price soaring.”

In February 2022, National Treasury announced that there would be no increases to the GFL nor the RAF Levy for that year in an effort to protect motorists against soaring fuel prices brought about by record oil rates at the time.

The decision to freeze these taxes was repeated in 2023 and once more in 2024, though it may not be extended again after this year.

Had Treasury not taken this initiative, petrol prices would have been around R1.00/litre higher than what they are today, said Outa.

Nevertheless, a temporary halt on levy increases is unfeasible over the long term and does not address the underlying issues.

Outa contends that the complete removal of the GFL and RAF Levy will certainly result in lower fuel prices, however, it would be impossible without raising taxes in one or more other areas, such as VAT or income tax, to make up for the approximately R130 billion per annum lost to Treasury as a result of this decision.

“Given our current state of affairs, the only other way we could manage such a drastic reduction in taxation would be to remove the wasteful expenditure caused by maladministration and corruption throughout all levels of government, combined with trimming the fat of a bloated administration, which is hardly likely to happen in the next few years,” concluded Outa.