The new slate levy on South African fuel prices is a self-adjusting mechanism that seeks to deal with the daily fluctuations of contributing costs.
This is according Reggie Sibiya, the chief executive of the Fuel Retailers Association, who spoke in an interview with the SABC – embedded below.
How it works
According to Sibiya, South Africa’s basic fuel price (BFP) only changes once a month when the Minister of Energy gazettes the new petrol and diesel prices.
The official BFP stays constant until the next month’s adjustments, but the “real” BFP effectively changes every day, he said.
The daily changes mean that on certain days consumers pay too much for fuel, while other days they pay too little. This is known as over-recovery or under-recovery situations.
The aggregate of the month’s over-recovery and under-recovery changes are calculated at the end of each period, and the additional costs or savings are passed onto motorists, said Sibiya.
What to expect in November
October’s mid-month estimates have made it difficult to predict whether there will be any changes to South Africa’s slate levy come November, said the Automobile Association (AA).
The association said the price of Brent Crude oil has broken the $85-per-barrel barrier, and that the basket of prices used to calculate South Africa’s oil price will likely follow the uptrend of Brent Crude.
Coupled with a much higher rand/US dollar exchange rate when compared to previous months, this has made the under-recovery in fuel prices in October more than usual.
“The under-recovery to date this month has been vast, and the government will, in our view, have no option but to increase the Slate Levy to recover this deficit, making for a bigger hike,” said the AA.
“South Africans are paying at the pumps for weak governance, as one of the key indicators of the price of fuel depends on the exchange rate.”