The second<\/strong> is to undertake a comprehensive review of administered prices, including the fuel price formula, to identify areas where prices can be reduced.<\/p>\n\n\n\n Ramaphosa did not provide details on what changes may be implemented to the fuel price formula. This may be because of the complexity associated with the issue.<\/p>\n\n\n\n South Africa\u2019s fuel price is comprised of many elements, some of which make petrol and diesel more expensive than in neighbouring countries.<\/p>\n\n\n\n The fuel price is calculated using four main elements:<\/p>\n\n\n\n Increases in the GFL and RAF levies are usually announced in February during the Finance Minister\u2019s annual Budget speech and come into effect in April.<\/p>\n\n\n\n With effect from 03 April 2024, the fuel levy in the price structure of petrol and diesel increased to 396.0 c\/l and 384.0 c\/l, respectively.<\/p>\n\n\n\n The road accident fund levy in the price structure of both petrol and diesel remained at 218.0 c\/l.<\/p>\n\n\n\n Furthermore, finance minister Enoch Godongwana announced increases to the carbon fuel levy of 1 cent per litre on petrol and 3 cents per litre on diesel.<\/p>\n\n\n\n Petrol and diesel price changes are implemented on the first Wednesday of every month and are determined by two main factors:<\/p>\n\n\n\n The basic fuel price is calculated based on costs associated with shipping petroleum products to South Africa from the Mediterranean, Arab Gulf, and Singapore.<\/p>\n\n\n\n These costs include insurance, storage, and wharfage – the cost to harbour facilities when off-loading petroleum products into storage.<\/p>\n\n\n\n It also accounts for transport costs from the harbour to inland areas, customs and excise duties, retail margins paid to fuel station owners, and secondary storage costs.<\/p>\n\n\n\n These are hard costs, which means that Ramaphosa\u2019s promised fuel price formula review will not impact these costs.<\/p>\n\n\n\n Therefore, it leaves the two main taxes, the general fuel levy and the road accident fund levy, to reduce petrol prices.<\/p>\n\n\n\n Charles de Wet, an executive at ENS Africa\u2019s Tax Practice, explained that fuel taxes are a gold mine for the government. Fuel taxes are easy to collect and impossible to evade.<\/p>\n\n\n\n If all taxes are considered, including the Department of Mineral and Petroleum Resources\u2019 slate levy and petroleum products levy, R6.40 per litre of petrol goes towards taxes.<\/p>\n\n\n\n The fuel levy alone generated R93.37 billion in revenue in the 2023\/24 financial year, making up around 5% of the government\u2019s total tax revenue.<\/p>\n\n\n\n The Road Accident Fund (RAF) levy, used to fund the RAF, contributes around R48 billion to state coffers.<\/p>\n\n\n\n De Wet said fuel taxes have become such a large component of the fuel price because the government has poorly allocated money.<\/p>\n\n\n\n \u201cWhat we have seen previously is that the fuel levy has been used to boost government revenue and try to balance the budget,\u201d he said.<\/p>\n\n\n\n When the levy was first implemented, it was intended to fund the maintenance of road infrastructure.<\/p>\n\n\n\n However, it was swiftly moved into the general revenue account and can now be used however the government sees fit.<\/p>\n\n\n\n This tax’s importance in government revenue and the ease with which it can be collected mean that the state is unlikely to reduce this levy.<\/p>\n\n\n\n De Wet said the general fuel levy may be reduced from its current levels. However, this is very unlikely to be touched in the short term.<\/p>\n\n\n\n It is a significant portion of the total fuel tax levied in South Africa, but it is not the only levy imposed at the pump.<\/p>\n\n\n\n It is unique because its revenue goes into the general revenue account. In comparison, the Road Accident Fund (RAF) levy goes straight to the RAF to fund its operations.<\/p>\n\n\n\n\n
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Big changes are unlikely<\/strong><\/h2>\n\n\n\n
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