Why you’re paying over R20 per litre for petrol – It’s not the oil price

Even though oil prices have skyrocketed in the wake of the US attacks on Iran, fuel taxes and levies remain the fastest-growing component of the petrol price in South Africa.

This includes the General Fuel Levy (GFL), Road Accident Fund (RAF) Levy, and various “margins,” which make up the majority of the final retail price motorists see at the pump.

According to Codera Analytics, the RAF Levy is the single fastest-growing component of the fuel price, increasing by more than 500% since 2008.

The GFL and other administrative costs have seen similar hikes, massively inflating the price of petrol and diesel.

The RAF Levy is a tax on every litre of fuel sold in South Africa. It is intended to generate revenue for the Road Accident Fund to pay victims of vehicle-related accidents who have incurred medical expenses or a loss of income.

However, the state-owned entity has been severely mismanaged over the past decade and is technically insolvent with debts in the billions of rands.

The government’s solution to this issue has been to hike the RAF Levy to generate additional revenue for the failing entity.

At the same time, the GFL has increased over 250% since 2008.

The GFL was introduced in 1983 and was originally meant to fund the construction and maintenance of South Africa’s road network.

This fund is not ring-fenced, however, meaning that the money goes into the state’s general account to be used as it see fits.

The GFL is also one of the most easily applicable and widespread taxes in South Africa, since fuel costs apply to virtually every citizen, unlike personal income or corporate tax.

As a result, the government is now heavily reliant on the GFL to boost revenue to support its ailing finances.

According to the National Treasury, the GFL generates nearly R100 billion in revenue for the state.

While the GFL and RAF Levy are the two largest fuel taxes, there are also a number of smaller “margins” that often get overlooked when discussing South Africa’s fuel price.

This includes retail margins, transport costs, and wholesale margins, which are collectively the second-fastest growing element of the fuel price since 2008.

These margins are set by the government and are meant to cover the cost of storing and transporting fuel, as well as ensure that forecourts make a fixed profit margin on the sale of petrol.

The real reason why South Africa’s fuel price is so high

All three of these factors – the GFL, RAF Levy, and various margins – have been a more significant driver for the high price of petrol and diesel than the Basic Fuel Price (BFP).

The BFP is the value of fuel before the administrative costs are factored in. It is determined by the international oil price and the US dollar/rand exchange rate.

Essentially, the BFP represents the cost of buying and importing oil and finished petroleum products to South Africa.

The war between Iran, the US, and its allies has caused the global price of oil to shoot through the roof since the end of February, leading to a significant increase in the BFP.

Even with these recent geopolitical events, South Africa’s fuel taxes are still the single largest driver of high petrol and diesel prices.

The following graphs from Codera Analytics show how each of these elements has increased since 2008: