The Nightmare of the Fuel Prices Hitting Consumers in SA

The burden of escalating petrol prices in South Africa continues to weigh heavily on consumers, driven not only by global market forces but also by a significant portion of taxes and levies imposed by the government.

Since the 2014/15 financial year, these governmental add-ons to the fuel price have nearly doubled, constituting around 32% of the total price per litre paid by South Africans.

Finance Minister Enoch Godongwana, in his 2024 Budget Speech, declared a freeze on increasing the Road Accident Fund (RAF) and general fuel levies for another year, marking the fourth consecutive year that the RAF levy has remained unchanged at R2.18 per litre.

Godongwana emphasized the government’s recognition of the strain on consumers, with fuel prices affecting essential expenses such as food and transportation. This decision is anticipated to provide approximately R4 billion in tax relief.

Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse (Outa), delineates the various components contributing to South Africa’s fuel prices:

• Basic Fuel Price (BFP): Initial cost before taxation.
• “Other levies”: Encompasses transport, secondary storage, distribution costs, and ancillary charges.
• Wholesale and retail margins: Added markups.
• Fuel levy: Tax per litre.
• RAF levy: Contribution to the Road Accident Fund.

While the RAF levy has remained stable, the General Fuel Levy (GFL) has experienced an upward trajectory, rising from R3.42 in 2022/23 to R3.86 in 2023/24, maintaining this level throughout the 2024/25 fiscal year.

Analyzing historical data provided by Outa reveals a substantial increase in combined add-ons, nearly doubling from R4.09 in 2014/15 to R7.52 in 2023/24, excluding retail and wholesale margins. Including these margins, fuel price add-ons amounted to R10.67 in 2023/24, comprising approximately 45% of the total price per litre.

Although the BFP has also surged over the past decade, reaching R12.72 in 2023/24 from R7.25 in 2014/15, there was a slight decrease from its peak of R12.88 in 2022/23.

Despite a minor reduction in the fuel levy in 2022/23, taxes increased substantially by approximately 72% between the 2014/15 and 2023/24 fiscal years. The “other levies” segment has similarly expanded from R0.80 in 2014/15 to R1.48 in 2023/24.

The RAF levy has witnessed the most significant relative increase, climbing from R1.04 in 2014/15 to R2.18 currently, remaining steady since the 2021/22 fiscal year. This freeze aims to alleviate pressure on motorists, although tracking back reveals a tripling of the RAF levy over the past fourteen years.

Despite governmental efforts to mitigate fuel price impacts, factors beyond its control, such as geopolitical tensions and currency fluctuations, have led to substantial price hikes in 2024. The recent increase in February, attributed to Houthi attacks on fuel cargo ships and a weakened rand, is expected to be followed by another significant rise in March, exacerbating the strain on consumers.

Source: MyBroadband