A significant amount of South Africa’s petrol price is made up of taxes, with the General Fuel Levy (GFL) and the Road Accident Fund Levy (RAF) taking up the biggest chunks, according to the Automobile Association (AA).
Increases to these taxes are announced by the Finance Minister in his annual Budget speech in February and typically come into effect in April each year.
The AA said that these levies are consistently above inflation and ultimately hurt the country’s poorest citizens, particularly as many of these citizens rely on public transport. An increase to the levies inevitably results in an increase to public transport rates.
The group said that increases to fuel prices also mean increases to goods which are transported across the country as operators recover these higher input costs through increases which are passed to consumers.
The fuel price in South Africa is comprised of four main elements:
- The GFL;
- RAF Levy ;
- Basic Fuel Price (freight and insurance costs, cargo dues, storage and financing);
- Wholesale and retail margins, and distribution and transport costs.
“Currently, the GFL is R3.77 which represents 31% of a litre of fuel inland (calculated against the current cost of R12.02/litre), and 32% of a litre of fuel at the coast (calculated against the current cost of R11.52/litre),” the AA said.
“Similarly, at its current rate of R2.07 a litre, the RAF Levy represents between 17% – 18% on every litre of fuel sold.”
Combined the levies total R5.84 – which remains the same for both inland and coastal prices.
“Collectively, at the current low prices for fuel, because of the record decreases, these levies comprise a whopping 48% – 50% of every litre of fuel sold in the country.
“Together government is projected to gather a total of around R135 billion from these levies with around R87 billion coming from the GFL (which goes directly to Treasury and which can be used for any purpose the government determines), and R48 billion coming from the RAF Levy.”
Using the current data, filling a 50 litre tank of fuel inland (93 octane) will cost R601 and R576 at the coast (95 octane). This means that you will effectively pay R292 every time you fill up in South Africa.
It must also be noted that this is a relatively low cost because the price of fuel is at levels last seen in 2016, the AA said.
In South Africa the fuel price is adjusted on the first Wednesday of every month and is determined by two main factors: the rand/US Dollar exchange rate and international petroleum prices.
“The Basic Fuel Price (BFP) is calculated based on costs associated with shipping petroleum products to South African from the Mediterranean area, Arab Gulf, and Singapore,” the AA said.
“These costs include insurance, storage, and wharfage (the cost to harbour facilities when off-loading petroleum products into storage). The current BFP is R2.64, which is dramatically lower than it was before the lockdown started.”
Other costs associated with the petrol price include transport costs, custom and excise duties, retail margins paid to fuel station owners (currently R2.11 on every litre sold), and secondary storage costs.
These costs currently total R3.54 for inland petrol and R3.02 for coastal petrol, the AA said.
“However, with economic activity slowly beginning to pick up worldwide, the cost of international petroleum is expected to also slowly increase. This will have a knock-effect on local prices which will also steadily increase,” it said.