Call to cut fuel taxes in South Africa

 ·2 Feb 2023

South Africa’s largest labour union, the Congress of South African Trade Unions (Cosatu), says the government needs to stop pretending things are business as usual in the country and fulfil its promise to intervene on petrol prices.

On 31 January, the Department of Mineral Resources and Energy published the official fuel price adjustments for the second month of this year. From Wednesday (1 February), diesel prices increased by 9 cents per litre (or decreased by 1 cent per litre for 0.005% diesel), with petrol 93 and 95 going up 28 cents per litre.

Currently, inland prices for fuel are:

  • 95 Petrol: R21.38 per litre
  • 95 Petrol: R21.68 per litre
  • 0.05% diesel: R21.32 per litre
  • 0.005% diesel: R21.41 per litre

The department reported that the rise in fuel prices was largely due to the increase in Brent crude oil prices reaching $85.08, as well as the higher international prices for petroleum products and the strengthening of the South African currency (the rand) against the US dollar.

Cosatu said that this increase hurt all South Africans – however, the working poor bear the brunt of the financial pain. Low and moderate-income families are expected to be plunged further into debt as wages fail to keep up with the cost of living, the union said.

“Whilst there is little that government can be done about the international oil price volatility, it can, as it did in 2022, provide relief to commuters and the economy by lowering our fuel taxes.”

“This will have the additional benefit of reducing inflation and the insatiable temptation by the Reserve Bank to raise the repo rate and thus further impoverishing workers and suffocating the economy,” Cosatu said.

The rising cost of living – which will be exacerbated by the recently-approved electricity price hikes – is underlined by food price inflation and rising interest rates, which will likely push thousands of workers to default on their loans and risk losing their most important assets, such as homes and cars, Cosatu said.

On top of cutting taxes, the union said the government also needs to act in the public’s best interest by considering increasing and expanding subsidies for public transport alongside making extensive investments in the country’s public transport system.

The union said the government can’t keep acting like it is “business as usual” and needs to intervene.

It said the government need to release the research report on the feasibility of a fuel price cap in South Africa, and also lay out its plans comprehensive review of the fuel price regime with the intention of reducing the taxes.

“This unfulfilled commitment was made by then Minister for Energy, Jeff Radebe in September 2019 and Ministers for Mineral Resources and Energy and Finance, Gwede Mantashe and Enoch Godongwana in April 2022,” the union said. There has been no further update on these measures since.

The government brought some relief to motorists in 2022 by cutting the fuel levy by R1.50 per litre in the wake of Russia’s invasion of Ukraine, which caused fuel prices to spike. The relief was only in effect for a couple of months, being reduced to 75 cents per litre by the end.

However, contrary to Cosatu’s calls for a tax cut, Efficient Group founder and chief economist Dawie Roodt said in January that the government is more likely to hike fuel taxes in February as it seeks easy revenue.

“I am sure we will see an increase in the petrol price because the finance minister always increases the fuel levy during his February (budget) meeting,” he said. “The increase in fuel taxes is very painful, but a tax on petrol is less damaging to the economy than an increase in company or personal income taxes.”

Finance minister Enoch Godongwana will present the Budget at the Cape Town City Hall on 22 February 2023, where tax changes are expected to be announced.

According to Cosatu, taxes make up 32% of the petrol price in South Africa. This changes each month, however, as the fuel price comprises taxes, levies and basic costs – that last of which, changes month to month.

Taxes and levies account for 30% of the current fuel price.

The most significant levies that apply to diesel and petrol are the government’s fuel levy (18% of the retail price) and the road accident fund levy (about 10%), with the balance being made up of smaller duties.

The table below shows the current levies imposed on the base fuel price (February):

Cost 95 Petrol (per litre)
Basic fuel price R11.22
General fuel levy R3.94
Road Accident Fund levy R2.18
Transport cost 67.90 cents
Slate levy 17.54 cents
Retail margin R2.41
Customs and Excise 4 cents
Petroleum products levy 0.33 cents
Wholesale margin 56.60 cents
Secondary storage 28.80 cents

Read: Here is the official petrol price for February

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