Big announcement about petrol and diesel prices in South Africa
Mineral and Petroleum Resources Minister Gwede Mantashe said petrol and diesel should cost R14 per litre and that his department is in discussions with the National Treasury to decrease fuel prices.
Mantashe made these comments during the 2024 Africa Oil Week Conference, where he delivered the keynote address.
He said the global energy market has improved recently, leading to fuel prices decreasing for five consecutive months in South Africa.
“The price of fuel is part of the cost of living. When the fuel price goes up, the cost of living in South Africa increases. This is not good for society,” he said.
He said to make life more affordable for South Africa, the government started discussions regarding reducing administered prices.
Reducing administered prices is aimed at lowering electricity and fuel prices as part of a bigger initiative to address high living costs.
“The state must intervene to bring energy prices down in the interest of the South African community,” Mantashe told delegates.
The discussions include whether it is wise to include the fuel levy and road accident fund levy in the price of petrol and diesel.
Taxes and levies account for R6.40 of the price of a litre of petrol and slightly less of the price of a litre of diesel.
These are only the taxes levied by the National Treasury, which include the General Fuel Levy (GFL), Road Accident Fund (RAF) Levy, and a carbon tax.
Mantashe argued that these levies distort the price of fuel. “Let’s find a formula to separate the price of fuel and the levies. Let’s make it visible,” he said.
The minister said they are trying to conclude the discussions regarding the fuel price and administered prices “in the shortest possible time”.
He said the government of national unity is clear that energy is the flywheel to propel South Africa to realise its priorities.
These priorities include inclusive economic growth, job creation, reducing poverty and the cost of living, and building a capable developmental state.
President Cyril Ramaphosa first mentioned the plan on 18 Jul 2024 during his Opening of Parliament Address at the Cape Town City Hall.
Ramaphosa said one of the key priorities of the new Government of National Unity (GNU) was tackling poverty and the high cost of living.
As part of this priority, he said the government would undertake a comprehensive review of administered prices, including the fuel price formula.
This review aimed to identify areas where prices could be reduced. Simply put, the government wants to cut petrol prices by changing the fuel price formula.
More recently, Mantashe told Parliament that his department has already taken steps to lower the price of petrol and diesel.
He said his department removed a 15% premium from the freight rate last year. This is the cost of shipping fuel to South Africa from international markets.
The Mineral and Petroleum Resources Department also repealed the 10 cents per litre demand-side management levy on ULP 95.
Mantashe then highlighted that the Cabinet recently announced a Ministerial Task Team to ‘holistically review the fuel pricing formulae’.
Lowering or removing levies and fees from petrol and diesel prices may sound like a good idea. However, it will have significant tax implications.
If the government significantly changes the taxes it collects from fuel levies, it will have to compensate by increasing other taxes.
Collecting taxes through the fuel levy and related taxes is highly efficient and does not cause major unhappiness among citizens.
This means that changing the fuel pricing formula will mess with one of the country’s core revenue generators and put the government in an unenviable position.
Read: The only city in South Africa where petrol prices are taking a bad turn