The perfect way to scrap e-tolls

The South African fuel price has dropped R2.41 per litre since November thanks to plummeting oil prices, and this provides a golden opportunity to get rid of e-tolls.

This is according to investment strategist at Brenthurst Wealth, Magnus Heystek.

In a column on MoneyWeb, the investor says that South Africa “just got very, very lucky” thanks to a massive decline in the oil price.

The oil price has dropped to under half of what it was a year ago, plunging from an average of $120 a barrel in June to levels below $50 a barrel this week.

As an oil importer, South Africa is a winner in this scenario, according to Heystek.

Data from Oxford Economics shows that at $40 a barrel, the drop in oil could boost South Africa’s GDP by 1.3%.

And this provides the perfect opportunity to scrap e-tolls, and gain some extra cash for the fiscus, he said.

Crude Oil prices - 9 Jan
Crude Oil prices – 9 Jan

Golden opportunity

The drop in oil has given much relief to South Africans through continuous drops in the price of petrol over the past few months.

The South African fuel price has dropped by R2.41 per litre since November 2014, with the trend in oil prices looking set to continue downward.

Heystek opines that by increasing the fuel levy by R1.00 per litre, the government could add R25 billion per annum to the government coffers, all thanks to this “lucky” outcome.

“Consumers would not be paying more for fuel, only saving a little less than they would have, had the full benefits of the lower oil prices been passed on,” Heystek said.

“Were I in government, I would also scrap the e-toll system in one go and fund the building of new roads out of the additional income derived from the increased fuel levy.”

A case for the fuel levy

Sanral CEO Nazir Alli previously stated that in order to cover the maintenance needs of road infrastructure through a country-wide fuel levy, it would have to be increased by R1.00 per litre.

To address the remainder of the maintenance over the next 10 years, an additional R0.45 per litre would be needed.

Trade union Solidarity says its own research shows that a fuel levy increase of R1.48 per litre would be enough to cover the cost of Gauteng’s roads, but also settle the entire country’s backlog within 6 years.

Issues that have been raised regarding a fuel levy to pay for e-tolls include the inability to ‘ring-fence’ funds from the fiscus, and that it is “unfair” to make the entire country pay for Gauteng’s infrastructure.

More on e-tolls

E-toll fuel levy would add R1.00 per litre to pump price: Sanral

The R1.1 billion e-toll liability

E-toll collections ‘break-even’

Provinces reject fuel levy for e-tolls: report

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The perfect way to scrap e-tolls