Less petrol pain? Calls for fuel pricing review committee intensify

Despite the last two months’ welcome cuts in petrol and diesel prices, South African motorists have been paying more than R20 per litre of fuel for well over two years now.

This as the government levies and taxes imposed on fuel continue to escalate.

Since 2021, both the General Fuel Levy (GFL) and the Road Accident Fund (RAF) levy have increased by about 5%, rising from R3.77 per litre to R3.96c/l and R2.07/l to R2.18/l, respectively.

The levies and taxes pose a scenario of a double-edged sword as state coffers every year stand to benefit billions from the additional charges on fuel prices.

Merger of ministries: Who will handle fuel pricing methodology?

Since the formation of the government of national unity (GNU), the energy portfolio has moved from Gwede Mantashe’s hands (the Department of Mineral Resources and Energy he headed is now the Department of Mineral and Petroleum Resources) to Kgosientsho Ramokgopa, who is now the minister of both electricity and energy.

It is unclear under which department the review of the fuel pricing methodology will fall.

Why the long wait for fuel pricing review committee?

According to the Motor Industry Staff Association (Misa), the former Department of Mineral Resources and Energy (DMRE) has failed to establish a committee to review the country’s fuel pricing methodology for the past two years.

The union’s chief executive officer of operations, Martlé Keyter, said that Misa was invited to participate in the promised committee by the department’s senior manager, Raphi Maake, back in July 2022.

No new developments have however transpired since then.

Keyter revealed that Maake did not attend a meeting last week of the National Economic Development and Labour Council’s (Nedlac) Cost of Living Rapid Response Task Team where he was supposed to give feedback.

Maake reportedly said on a previous occasion that the department approached National Treasury for funding for the fuel pricing methodology review.

This request was denied by National Treasury, who said the department must find the money in its existing budget.

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‘Easy source of income’

While the government is dragging its feet, Keyter said South Africans are continuing to pay crippling fuel levies and taxes, just because it is “an easy source of income to collect”.

From 1 May 2024, R6.40 per litre goes towards some form of tax or levy when buying petrol.

This is predominantly made of the fuel levy (roughly 18% of current prices) and the RAF (around 10% of current prices).

According to Keyter, the government expects to make around R89 billion from the general fuel levy in the current financial year, adding to the over R730 billion it has generated in the past decade.

“MISA approached the department more than two years ago because the union believes the skyrocketing fuel prices contribute to the ongoing dire economic situation,” Keyter explained.

Impact on retail motor industry

“In the retail motor industry, new vehicle sales fell substantially in June by 14% to 40 072 units, compared with the same month a year ago, as the ongoing downward slope in the market that started last August.

“The South African Reserve Bank (SARB) held the repo rate unchanged at a 15-year high of 8.25% since May 2023.

“This resulted in a weak economy where households can’t keep up with the increasing cost of living. Affordability is the decisive factor when customers want to buy a new vehicle,” said Keyter.

Fear that GNU merger will cause more delays in fuel pricing review

“Misa fears that the merging of departments in President Cyril Ramaphosa’s Government of National Unity will cause even more delays in the review of the fuel pricing methodology.

“We want to be a part of the solutions to find another source of income for the government, other than fuel. At the moment, it seems that this is the only reason why reviewing the fuel pricing methodology is not being taken seriously,” argued Keyter.

“Our dire economic situation requires swift responses. We can’t waste another two years. South Africans need to know if the high fuel levies and taxes can be justified.”

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PAPPI argues its within government’s power to reduce petrol price

The Organisation Undoing Tax Abuse (Outa) has also spoken out against the government levies and charges on fuel which have collectively surged by more than 125% over the last decade.

Speaking to Newzroom Afrika in September 2023, the People Against Petrol and Paraffin Price Increase’s (PAPPI) Visvin Reddy said the government echoed Misa’s call for the government to consider other alternatives to the General Fuel Levy and RAF levy to maintain its finances.

“That R95 billion [the estimated figure in 2023] doesn’t need to come from motorists and fuels. It can come from a special tax on the monopoly industry that sits on the JSE.

“Take that R95 billion from a special tax on those companies, and immediately reduce the price of petrol in this country by 35%,” Reddy argued at the time.