The new Government of National Unity (GNU) through the Minister of Finance, Enoch Godongwana, has announced that a Fuel Price Intervention Plan will soon be tabled in Cabinet.
The announcement comes after President Cyril Ramaphosa said in July that the GNU would undertake a comprehensive review of the current fuel price formula to identify areas where costs can be reduced.
The new intervention plan is expected to be anchored on “measures to tackle high fuel prices…[and] ensure that South Africans can afford the fuel and the ability to transport,” said Democratic Alliance (DA) Spokesperson on Electricity and Energy, Kevin Mileham.
The finer details of the document have yet to be unveiled, however, industry stakeholders have put forward many suggestions on how the GNU could tackle bloated fuel costs.
These include a reduction of fuel levies as well as the removal of unnecessary regulatory fees.
Government’s golden goose
While motorists and civil rights organisations alike have celebrated the upcoming fuel price review, experts believe we should maintain a cautious optimism.
At present, one of the largest contributors to high fuel rates is taxes and levies, which account for roughly a quarter of the prices we see at the pumps.
Of the collective six taxes imposed on fuels, the two largest are the General Fuel Levy (GFL) of R3.96/litre for petrol and R3.84/litre for diesel, as well as the Road Accident Fund (RAF) Levy which is a flat rate of R2.18/litre for both propellant types.
These levies offer the most room for movement in terms of reducing the burden of fuel prices on consumers, however, they are the least likely areas government would want to compromise on.
When it was first introduced, the GFL was earmarked as a fund for road maintenance and infrastructure upgrades, but it was quickly funnelled into the general revenue stream and can now be used in any way the government sees fit.
It has thus evolved into one of the largest revenue streams for the powers that be, generating over R93 billion for government coffers during the 2023/2024 financial year, accounting for approximately 5% of all tax income.
Likewise, the Road Accident Fund (RAF) Levy, which is used by the RAF to compensate victims of road accidents, generated R48 billion over this same period.
These taxes are also among the easiest to collect. Motorists rarely think about the GFL or RAF Levy when paying for fuel at service stations, unlike how they can see deductions on their paycheque at the end of the month, leading to fewer protests against these levies.
It is therefore expected that the GNU would do everything in its power to avoid compromising on taxes and levies, and instead focus on other areas within the fuel price structure.
Previous suggestions included a revision of industry margins, the introduction of a price cap on petrol 93, deregulating petrol prices, removing guidance on diesel prices, bi-weekly price changes instead of once a month, and a review of how inland transport costs are determined.
While these interventions would bring a certain level of relief, they are not expected to be as effective as the scrapping of inflated taxes and levies.
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