Turning to fuel levies as a source of revenue ‘dangerous’, AA warns Mboweni

The Automobile Association (AA) has warned Finance Minister Tito Mboweni against turning to fuel levies as a source of revenue as he prepares to deliver his 2020 budget speech in parliament on Wednesday.

According to the AA, Mboweni has the toughest job compared to his predecessors as he will be seeking relief from different sectors to ease the country’s financial burden.

Seeking relief from fuel levies will be “dangerous”, warned the AA.

“This places him in a tough position where he will have to meet the needs of the country while at the same time ensuring there is enough money coming into government coffers to satisfy demand.

“Previous years have seen higher than inflation-linked increases to the fuel levies – the General Fuel Levy, the Road Accident Fund levy, customs and excise taxes and the Carbon Tax. However, given the fact that many South Africans are buckling under severe financial constraints, such an increase this year will be more than detrimental, it could be catastrophic,” said the association.

The General Fuel and Road Accident Fund levies comprise about 40% of every litre of fuel sold in the country. Currently, these taxes amount to R5.59 on every litre of petrol and R5.47 on every litre of diesel.

Neighbouring countries who buy fuel directly from South Africa, however, do not add these taxes.

“We have seen in the past that any increases to the fuel levies is met with a swift increase to public transport fares – including those of taxis. While a slight increase, even one in line with inflation, may not seem drastic, it has an enormous impact on the lives of consumers who rely on every cent to make it to the end of each month. These increases are therefore extremely harmful to the majority of citizens and should be considered an absolute last resort by the finance minister.”

Any changes announced by the Mboweni on Wednesday will come into effect in April.

The AA announced earlier this month that steady declines in international oil prices set the stage for fuel price reductions at month-end.

Commenting on unaudited mid-month fuel price data released by the Central Energy Fund, the AA said petrol showed a drop of between 14 and 25 cents a litre, diesel around 55 cents, and illuminating paraffin 66 cents.

However, the Rand has weakened substantially over the same period, with the moving average against the US dollar slipping from just over R14.30 to R14.85, added the AA.

“This reflects underlying weak economic sentiment in South Africa, and we share the view of many commentators that further weakening is likely.”

Though the Rand’s poor showing was not enough to take the shine off the reduction of fuel prices, the AA said trends from now to month-end would determine whether fuel prices could stay the same.

“If the Rand continues to slip, we might see some reversal of the trend,” it said.

(Compiled by Vhahangwele Nemakonde)

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