Azra Hoosen | ah@radioislam.co.za
26 July 2024 | 12:45 CAT
2 min read

In his Opening of Parliament Address, President Cyril Ramaphosa announced a comprehensive review of several key issues, including the fuel price formula. Details on the potential changes were not disclosed, likely due to the complexity of the matter.

The Automobile Association (AA) welcomed the announcement, calling it a crucial step to assess whether the current fuel pricing components, including high taxes and levies, are justified. But urge that the review process begin promptly, given the persistent high fuel prices and their impact on the economy and personal budgets.

Layton Beard from the Automobile Association explained that the price of fuel is determined by various components and adjusted monthly. The rand-to-US dollar exchange rate plays a significant role, as international oil and petrol prices, combined with a weaker currency, lead to higher costs for consumers.

Currently, South Africa’s fuel price includes significant taxes: R6.14 per litre for petrol and R6.02 per litre for diesel, divided into a General Fuel Levy and Road Accident Fund (RAF) levy. While the AA cautions against eliminating these levies entirely, they suggest that revising the RAF levy and other components could alleviate rising fuel costs.

“The general fuel levy is a very easy tax to collect. The government relies on it heavily, and most people don’t even know they are paying it. The general fuel levy generates about 95 – 100 billion rand to the fiscus annually. They are paying close to R4 a litre in tax every time to put petrol in vehicles,” said Beard.

Additionally, consumers are paying R2.18 per litre to the Road Accident Fund (RAF) levy, which the AA believes provides no tangible benefit.

“People are not getting value for the tax they pay on every litre of fuel. The money for the RAF, which is a poorly managed institution which requires huge amounts of intervention, is going into a pit, and people are not benefiting from it; people wait extremely long to get payouts,” he added.

Beard explained that in countries like Namibia, Botswana, and Swaziland, which source their fuel from South Africa, the per-litre price is lower because these countries do not impose the same taxes on fuel.

“Other countries pay a lot less, but in terms of the price we pay in South Africa, we are mid-range compared to the rest of the world. But the issue is whether we are getting value for our money, and whether there is a way to make it cheaper for fuel; that is what we are asking the government to have a look at,” he said.

Beard expressed that if the review concludes that there are no issues with the fuel price structure, AA will publicly affirm that there is no cause for concern. However, they have not yet been informed about the timing of when this review will be completed.

Recent data indicates a slight decrease in fuel prices, with 95 Unleaded petrol expected to drop by six cents per litre and 500ppm diesel by eight cents per litre.

LISTEN to the full interview with Ml Habib Bobat and Layton Beard, from the Automobile Association, here.