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Friday / 24 May 2024
HomeFeaturesPetrol tax changes expected for South Africa in February

Petrol tax changes expected for South Africa in February

The prospects for fuel prices in South Africa are less than ideal for 2024, as there are various factors that are expected to drive up the price of the crucial liquid over the course of the year.

As of January 2024, local motorists are paying R22.49 per litre for petrol 95 at inland rates, while diesel 0.005% is sitting at R20.73 per litre, and these figures are likely to change on the back of adjustments to the country’s fuel taxes, and external factors like the US dollar/rand exchange rate and international oil prices.

Taking a look back

South Africa has six different taxes that affect the price of fuel, though the majority of added fees come from two – the General Fuel Levy (GFL) and the Road Accident Fund (RAF) Levy.

Both adjustments are announced during the Finance Minister’s annual Budget Speech in February, and are implemented at the end of the first quarter in March.

The GFL is based on the international oil price, and it currently contributes 396.00c/l for petrol (R3.96/l) and 382.00c/l for diesel (R3.82/l).

You can see a breakdown of how the GFL has been adjusted over the last five years below:

  • 2019 – Increase of 15c per litre
  • 2020 – No change
  • 2021 – No change
  • 2022 – Increase of 20c per litre
  • 2023 – Increase of 17c per litre

Notably, there were no changes in 2020 and 2021 as part of a pandemic relief measure, but in other years, the adjustment has hovered between 15-20c/l.

Driving this change is the fluctuation in oil prices, which is based on a number of factors, from global demand to supply chain disruptions and geo-political events.

Below is a list tracking the trading price of Brent Crude oil at the start of every year since 2019:

  • 2019 – $54.06 per barrel
  • 2020 – $67.05 per barrel
  • 2021 – $50.37 per barrel
  • 2022 – $78.25 per barrel
  • 2023 – $80.36 per barrel
  • 2024 – $76.24 per barrel

Right now, the lower price of oil bodes well for a minimal adjustment to the GFL, if at all, though economists have warned that oil costs may be in for a rough time this year due to the widening conflicts in the Middle East disrupting supply chains.

More important is the rand/dollar exchange rate, which has been on an upward trend for several years now and is not expected to change anytime soon, as illustrated by the exchange value at the start of each year:

  • 2019 – R13.71
  • 2020 – R14.37
  • 2021 – R15.05
  • 2022 – R15.24
  • 2023 – R17.11
  • 2024 – R18.87

Naturally, the worse the exchange rate, the more expensive it becomes to import fuel, making it the bigger determiner of the final cost at the pump than the original dollar price.

Looking at other factors, the Road Accident Fund still adds 218.00c (R2.18) to every litre of fuel, as it was not adjusted in 2023.

There’s the Customs and Excise Duty for the Southern African Customs Union (SACU) that South Africa is a member of, which adds 4.00c/l.

There’s the Petroleum Products Levy for pipeline users adding 0.330c/l, a wholesale margin of 69.80c/l, a storage cost of 36.60c/l, a secondary distribution cost of 17.20c/l, and a retail margin of 285.70c/l.

The largest determiner of the final cost of these levies is of course the Basic Fuel Price (BFP), which is based on the import parity, namely what it would cost a South African importer of petrol to buy the petrol from an international refinery, transport the product from that refinery, insure the product against losses at sea and bring it here, according to the Department of Energy.

This is currently set at 1,146.87c/l (R11.47/l), which works out to roughly half of what motorists are paying for at the petrol station.

The official adjustments to each of these factors affecting the cost of fuel in South Africa will be announced during the Budget Speech in February.

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