Fuel importers will soon be allowed to keep some of the tax paid when global petroleum product prices fluctuate, thanks to a new proposed change to South Africa’s slate levy procedures.
The proposed change, gazetted by the Department of Mineral and Petroleum Resources (DMPR), won’t affect the price at the pump or the slate levy amount, but rather aims to protect importers and wholesalers.
Currently, South Africa’s fuel prices are adjusted monthly, with some suggestions that this be done more frequently; however, global commodity prices fluctuate daily.
This creates a gap between what fuel suppliers pay to import petrol products and what they charge motorists at the pump, which is tracked by the Central Energy Fund’s (CEF) recovery system.
When these fuel importers pay more to import fuel than they charge at the pump, the result is a temporary loss, recorded as an under-recovery, whereas when they charge more than they pay, it becomes an over-recovery.
The South African government tracks the cumulative gains and losses in the slate account, and when it shows a significant deficit, the slate levy is added to fuel prices.
The CEF collects the slate levy to reimburse wholesalers and importers for their temporary losses, but the new regulations could conditionally allow companies to retain the levy collected from consumers.
This would only occur when importers or wholesalers record a cumulative negative balance exceeding the reimbursement threshold set by the department.
The retained funds, which would serve as partial reimbursement for verified under-recovery losses, would be stopped once the under-recovery balance drops below R500 million.
If implemented, companies would still need to comply with the CEF’s reporting, reconciliation, and audit requirements, as it would be tasked with tracking all records to ensure funds match losses.
These changes would allow the Minister to make additional changes or implement measures to monitor the temporary arrangement.
The proposed changes aim to remove administrative constraints and long waits for reimbursement in times of severe deficits.
Easing the burden on fuel importers
These gazetted changes were proposed to offer South Africa’s petrol suppliers relief from the surge in oil prices caused by the ongoing conflict in the Middle East.
Shortly after the conflict began on 28 February, global oil prices rose to over $120 a barrel, leading to fuel price surges worldwide and causing local petrol and diesel prices to increase by R5 and R10 in April.
This prompted the government to step in, with the National Treasury trimming R3 off the fuel levy, shielding motorists from the worst surges.
However, prices continued to rise in May, and by June, the taxes were partially reinstated, cutting the benefit of stabilising oil prices, and in July, the tax relief ended.
For a while, fuel prices looked to have stabilised, but when the conflict between the US and Iran flared up again, it led to another diesel price increase at the start of the month.
Petrol prices were mostly spared, thanks to the easing of the slate levy in preceding months helping to push prices into a relatively small cut.
That being said, current recoveries point to a petrol-price increase of 79 cents per litre and a R2.93-per-litre increase for diesel in September.
This would mean that petrol will be more than R6 more expensive than in February, while diesel could be nearly R12 more expensive than before the war.
Thus far, fuel importers and wholesalers have been footing the bill and waiting for the CEF to reimburse them from the slate account, but with the proposed changes, they will be able to retain some of those to ease the burden.
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