Budget speech might reveal possible increases to the fuel levy

FINANCE Minister Malusi Gigaba will deliver his Budget Speech in Parliament on Wednesday, 21 February.

Part of that speech is expected to include an announcement on increases to the General Fuel and Road Accident Fund levies, both of which are included in the price of petrol and diesel. With a budget shortfall of around R50bn in 2017, this may seem like an ideal mechanism for the minister to source additional revenue.

However, the Automobile Association (AA) urges government to be careful in determining future hikes to these taxes, and must consider the impact these increases have on especially the poorest of the poor in the country.

“It will impact the poorest of the poor hardest, as they mostly rely on public transport. Road users in general are already under enormous financial strain, a big increase to these levies will certainly place an even greater burden on them,” said the AA.

Currently the General Fuel levy is R3.15 and the Road Accident Fund levy R1.63. Together these levies total R4.78, which roughly makes up 33 per cent of the total cost of a litre of fuel.

Last year, the levies increased by almost 9 per cent on the 2016 prices, way above the CPI inflation rate, recorded in November 2017 at 4.6 per cent.

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Since 2013 increases to the levies have been above inflation. In 2013 the levies climbed by more than 8 per cent while average CPI that year was 5.7 per cent. In 2015 average CPI ended on 4.6 per cent while the levies rose by 24.7 per cent, and in 2017 the levies increased by 7.33 per cent compared to an average annual inflation of 6.4 per cent.

“Clearly the rate of increases in the levies outstrips inflation considerably and motorists and road users may well feel aggrieved that they are seen as an easy source of revenue, at a time when they are having to tighten their belts. For this reason we are advocating for increases to the levies which are in line with average inflation of around 6 per cent.”

Should this happen the combined levies will cost R5.07/l, which is a 29c/l increase to the current levies.

“Any increases higher than inflation will constitute considerable rises to the fuel levies; we cannot support such hikes and urge government to make their decision carefully, and with the interests of all road users in mind,” said the AA.

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