Petrol price hike warning for South Africa

 ·25 Jan 2022

While a January petrol price decrease softened the blow for motorists at the start of the work year, the nature of fuel price fluctuations suggests that it is only a matter of time before the R20/litre barrier is breached again, warn analysts at professional services firm PwC.

In the third week of January, international oil prices climbed to a seven-year high, suggesting fuel prices will again increase in early February, the firm said in an analysis on Tuesday (25 January). PwC said that fuel prices are expected to continue rising in 2022, meaning South African companies will have to adjust accordingly.

The possibility of R20/litre or higher will also lead to renewed calls for a review of the fuel price structure, the firm said.

“At present, only about 45% of the price paid at forecourts goes towards funding the actual liquid fuel received by the buyer. The remainder is divided between wholesale, retail and distribution margins (~15% of the total cost) as well as a list of taxes, levies and duties (~40%).

“This includes a fuel levy of nearly R4/litre that is not directly allocated to transport-related functions — the money goes into the general government revenue pool.”

Finance minister, Enoch Godongwana, and energy minister, Gwede Mantashe, both confirmed in December 2021 that the government is looking at options to lower the cost of fuel to consumers.

“Progress could be slow, however — updates on a potential fuel price cap first investigated in 2018 have quietly evaporated,” PwC said.  “The upcoming budget speech will hopefully provide more information.”

Complete review needed 

The Automobile Association of South Africa has launched a petition calling for a complete review of the country’s petrol price and how it is calculated.

A comprehensive, long-term analysis of the components of the fuel price needs to be done as a matter of urgency, and all calculations relating to the fuel price should be audited to determine if they are still relevant and appropriate to South African conditions, it said.

“The General Fuel and Road Accident Fund levies contribute significantly every litre of fuel sold, but citizens don’t see tangible benefits from these taxes. However, several questions relating to the allocation and utilisation of these funds are raised. For instance, the country continues to fund the Road Accident Fund through fuel taxes but it is poorly managed, and a drain on the country’s resources.

“Apart from poor management, the issue of whether the country has fully explored alternatives to compensate victims of crashes, and, critically, has the private sector been consulted for their inputs?”

The AA said private sector involvement in dealing with rising fuel costs has now become inevitable, and it remains committed to working with the government in the interest of consumers.

Read: $100 oil price on the way, say experts

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