{"id":794111,"date":"2024-10-13T18:00:00","date_gmt":"2024-10-13T16:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=794111"},"modified":"2024-10-11T14:59:37","modified_gmt":"2024-10-11T12:59:37","slug":"warning-about-big-change-in-south-africas-petrol-price","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/energy\/794111\/warning-about-big-change-in-south-africas-petrol-price\/","title":{"rendered":"Warning about big change in South Africa\u2019s petrol price"},"content":{"rendered":"\n

Experts have warned that the government\u2019s plan to reduce petrol prices by reviewing South Africa\u2019s fuel pricing formulae will have significant tax implications.<\/p>\n\n\n\n

President Cyril Ramaphosa first mentioned the plan<\/a><\/strong> on 18 Jul 2024 during his Opening of Parliament Address at the Cape Town City Hall.<\/p>\n\n\n\n

Ramaphosa said one of the key priorities of the new Government of National Unity (GNU) was tackling poverty and the high cost of living.<\/p>\n\n\n\n

As part of this priority, he said the government would undertake a comprehensive review of administered prices, including the fuel price formula.<\/p>\n\n\n\n

This review aimed to identify areas where prices could be reduced. <\/p>\n\n\n\n

Simply put, the government wants to cut petrol prices by changing the fuel price formula.<\/p>\n\n\n\n

Ramaphosa did not provide details on what changes the government is considering or when they may be implemented.<\/p>\n\n\n\n

Mineral and Petroleum Resources Minister Gwede Mantashe reiterated the government\u2019s plan during a parliamentary question and answer session.<\/p>\n\n\n\n

Mantashe responded to Thalente Kubheka’s question about the steps his department has taken to lower the fuel cost.<\/p>\n\n\n\n

The minister said his department removed a 15% premium from the freight rate last year.  This is the cost of shipping fuel to South Africa from international markets.<\/p>\n\n\n\n

The Mineral and Petroleum Resources Department also repealed the 10 cents per litre demand-side management levy on ULP 95.<\/p>\n\n\n\n

Mantashe then highlighted that the Cabinet recently announced a Ministerial Task Team to \u2018holistically review the fuel pricing formulae\u2019.<\/p>\n\n\n\n

He did not provide further details on which parts of the formula would be reviewed. However, it is assumed that the taxes and levies will be targeted.<\/p>\n\n\n\n

More recently, Mantashe said<\/a><\/strong> petrol and diesel should cost R14 per litre \u201cThe state must intervene to bring energy prices down in the interest of the South African community,\u201d he said.<\/p>\n\n\n\n

Mantashe argued that these levies distort the price of fuel. \u201cLet\u2019s find a formula to separate the price of fuel and the levies. Let\u2019s make it visible,\u201d he said.<\/p>\n\n\n\n

To explore the issue, his department started discussion with the National Treasury about the fuel price formula and administered prices.<\/p>\n\n\n\n

If the government significantly changes the taxes it collects from fuel levies, it will have to compensate by increasing other taxes.<\/p>\n\n\n\n

Collecting taxes through the fuel levy and related taxes is highly efficient and does not cause major unhappiness among citizens.<\/p>\n\n\n\n

This means that changing the fuel pricing formula will mess with one of the country\u2019s core revenue generators and put the government in an unenviable position.<\/p>\n\n\n\n

Expert opinion about fuel prices and taxes<\/strong><\/h2>\n\n\n\n
\"\"<\/a>
Economist Dawie Roodt<\/figcaption><\/figure>\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.<\/p>\n\n\n\n

He explained that taxes account for R6.18 of the price of a litre of petrol and R6.06 of the price of a litre of diesel.<\/p>\n\n\n\n

These are only the taxes levied by the National Treasury, which include the General Fuel Levy (GFL), Road Accident Fund (RAF) Levy, and a carbon tax.<\/p>\n\n\n\n

The Department of Mineral and Petroleum Resources enforces additional levies, such as the slate levy and petroleum products levy.<\/p>\n\n\n\n

This means that R6.40 per litre of petrol goes towards paying taxes and levies \u2013 over 25% of the total price for fuel at the pump.<\/p>\n\n\n\n

The GFL is a major source of government revenue, making up around 5% of all taxes collected in South Africa and worth R93 billion in the current financial year.<\/p>\n\n\n\n

This tax\u2019s importance 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 GFL may be reduced from R3.85 per litre of petrol and R3.70 per litre of diesel over time.<\/p>\n\n\n\n

However, this is very unlikely to be touched in the short term.<\/p>\n\n\n\n

The Road Accident Fund (RAF) levy of R2.18 per litre of petrol or diesel goes straight to the RAF to fund its operations.<\/p>\n\n\n\n

The RAF is in dire financial straits and requires additional funding, which means that this levy is also unlikely to be touched.<\/p>\n\n\n\n

Implementing the government\u2019s planned changes to reduce the petrol and diesel prices would disrupt these revenue streams, which is dangerous.<\/p>\n\n\n\n

Economist Dawie Roodt is more positive<\/a><\/strong> about reducing fuel prices. He argued that the problem is excessive state spending and reliance on high fuel levies revenue.<\/p>\n\n\n\n

Roodt said the state is far too big and highly incompetent, which is costly and requires a lot of money.<\/p>\n\n\n\n

\u201cEffective management and cost-cutting within the fiscus could easily remove the need for the current levels of fuel levies, which would cut fuel prices in the country,\u201d Roodt said.<\/p>\n\n\n\n

\n\n\n\n

Read: Even more good news for petrol prices in November \u2013 with a warning<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

The government wants to reduce petrol prices by reviewing South Africa\u2019s fuel pricing formulae. <\/p>\n","protected":false},"author":10,"featured_media":785783,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9874],"tags":[20274,1293,12340,20263,2261,20632,2171,20631],"class_list":["post-794111","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-charles-de-wet","tag-cyril-ramaphosa","tag-ens-africa","tag-general-fuel-levy-gfl","tag-gwede-mantashe","tag-mineral-and-petroleum-resources-department","tag-petrol-price","tag-thalente-kubheka"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/794111","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=794111"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/794111\/revisions"}],"predecessor-version":[{"id":795139,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/794111\/revisions\/795139"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/785783"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=794111"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=794111"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=794111"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}