Push for tax changes and a fuel price cap in South Africa

The Congress of South African Trade Unions (Cosatu) has called for new legislation to help reduce the tax burden on motorists and consumers in the country.

Cosatu is the largest trade federation in the country with an estimated membership of 1.8 million workers.

The trade federation said that the transport department needs to finalise both the Road Accident Fund (RAF) and Road Accident Benefit Scheme Bills, which were meant to set the RAF back onto a sustainable path and to ensure that payments reach claimants.

“Currently, increasing the fuel levy only serves to feed a bankrupt Road Accident Fund that has been mismanaged into the ground. The RAF’s deficit of almost R300 billion is the greatest threat to the fiscus after Eskom’s debt burden.

“We are also still waiting on the government to release the research report that was conducted by the department of energy looking into the possibility of a fuel price cap,” it said.

Current estimates show that around 40% of the petrol price goes to some form of government taxation. Commenting on the fuel price increases for April, the Automobile Association said that, given the weaker rand and rising oil prices, fuel taxes are where the government has the most ‘wriggle room’ to intervene on price hikes.

The association said these taxes need to be reviewed, as the petrol price will now be a record high of R18.20 per litre from Wednesday (4 August).

Price increases to hit workers the hardest 

The petrol price will rise by 91 cents per litre for both grades, while the price of diesel will increase by between 54 and 55 cents per litre.

These price hikes will exacerbate increases in things like electricity which already came into effect in July – all while South Africans and workers have to deal with things like load shedding and high levels of unemployment, Cosatu said.

“These increases will create more hardship for the working class and the poor that is already suffering from record-high levels of unemployment and stagnant or declining real wages. This spells disaster for many households,” it said.

“Small-medium enterprises are struggling after the recent lockdowns restrictions and the riots that have wrecked the economy of both KZN and Gauteng. These two provinces of KwaZulu-Natal and Gauteng constitute over 50% of the economy.

“These higher fuel and electricity prices will worsen an already bad situation, and this will retard economic recovery and further weaken workers’ buying power and erode wages in the context of unemployment and wage cuts.”

Petrol price cap

The idea of a petrol price cap was first mooted by former energy minister Jeff Radebe in October 2018.

However, despite confirmation that the department was still considering the issue in April 2019, there has been no further communication around it.

In 2019, a spokesperson said that the department had concluded one-on-one engagements with all relevant stakeholders, and was still waiting for written submissions on the matter – the final date for which was 28 March 2019.

“The fuel cap is still on the cards,” the spokesperson said at the time. “The draft report is being discussed internally at the moment. The department will issue a media statement once the internal consultation is concluded.”

Read: Warning over rising petrol prices – as South Africans get ready to pay over R18 a litre this week