Government scraps plans to hike fuel levy to pay for e-tolls
Transport minister Fikile Mbalula says the South African government will ‘for sure’ announce a solution to e-tolls in October, but the government is unlikely to rely on a controversial petrol price change to pay for the scheme.
Briefing media on Thursday (30 June), Mbalula said finance minister Enoch Godongwana will announce the government’s plan for e-tolls either during or before his Medium Term Budget Policy Statement (MTBPS) later this year.
“We agreed even last week. Our teams are working on the issues that need to be worked on before we make a final decision.” Mbalula also revealed that his department is no longer considering raising the money to replace e-tolls through South Africa’s general fuel levy.
“There was a decision that was taken by cabinet on the e-tolls which was taking us in the direction of the fuel levy. The fuel levy story has become very messy over time and is no longer an option we can consider.”
Controversial proposal
The government’s proposal to scrap e-tolls would most likely have involved an increase in the fuel levy, says Outa chief executive Wayne Duvenage.
He noted that a decision on e-tolls, promised since July 2019 but still awaited, is expected to formally scrap the e-toll scheme and announce an alternative funding solution for the Gauteng Freeway Improvement Project (GFIP).
This came four months after the Sanral board passed an urgent resolution in March 2019 stating that it will no longer pursue criminal action against motorists with outstanding e-toll debt.
“We are aware that the e-toll decision has already been made by cabinet, which has been commented on by the minister several times since last year,” says Wayne Duvenage, OUTA CEO.
“We are also aware that this decision would most likely have involved an increase in the fuel levy to generate the necessary revenue to pay for the maturing GFIP bonds, as was confirmed by the Minister. However, the fuel levy option they had planned has become a headache in today’s environment of soaring fuel prices. That horse has now bolted.”
Duvenage said Outa will never endorse an increase in the fuel levy at this late stage to cover the GFIP bonds.
“The option of a 10c increase in the fuel levy was proposed by us in 2011, when the fuel levy was R1.78 per litre, and was viable back then. Had they followed our advice, and allocated the additional R2.2 billion raised per annum from a 10c fuel levy increase to the GFIP bonds, the R18 billion borrowed for the overpriced freeway upgrade would have been settled by now.”
National Treasury has increased the general fuel levy by R2.07 per litre since 2011 and has already allocated an additional R14 billion over the past six years to Sanral for the GFIP bonds. This funding by the government is what Outa has repeatedly suggested, he said.
“There is no reason for the government to continue procrastinating on the e-toll decision. The scheme should be scrapped as soon as possible, to free up unnecessary administration costs allocated to the scheme.”
Petrol price
The Department of Mineral Resources and Energy is yet to publish the latest fuel price adjustments for July, which is expected to take effect on Wednesday (6 July).
Month-end data from the Central Energy Fund pointed to a R1.60-R1.80 per litre hike for petrol and a R1.55 per litre hike for diesel on the cards for the month. However, with the halving of the government’s R1.50 general fuel levy intervention for July, another 75 cents per litre is expected to be added back to the price on top of this.
This could see petrol prices being hiked by as much as R2.35-R2.55 per litre, and diesel by R2.30 per litre.
Civil action groups have been pushing for the government to extend its interventions further, but there has been no word from the department in this regard.
Whether the interventions are extended or not, the BER noted that there is more petrol pain to come, with a hefty fuel price increase expected on Wednesday.
“The levy relief is expected to fall away completely next month (August). The under-recovery part of the fuel increase is largely due to higher international oil product prices, with a somewhat stronger rand at the start of the month capping the rise slightly.”
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