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South Africa faces colossal petrol price increase

The Organisation Undoing Tax Abuse (Outa) wants the government to extend the R1.50 general fuel levy relief for another month to prevent an increase of around R2.50 in July 2022.

“We really do need to see longer-term solutions, but for now, the short-term solution is the only space [in which] government can provide some reprieve, and that is in the fuel levy,” Outa CEO Wayne Duvenage said.

“Outa believes it would be prudent for the minister of finance to consider extending the fuel levy reprieve of R1.50 per litre.”

Finance minister Enoch Godongwana extended the general fuel levy (GFL) relief on 31 May 2022, saying it would be R1.50 until 6 July, then drop to R0.75 until 2 August.

He said the GFL reprieve costs the government between R2.7 and R2.8 billion monthly.

At the time, Duvenage said that given the current situation, he believes the government had to find a way to reduce its costs by R2.7 and R2.8 billion a month rather than removing the R1.50 relief.

Despite the R1.50 reprieve being extended for June, the fuel price still increased by R2.33 for unleaded 93 and R2.43 for unleaded 95 at the beginning of the month.

“Petrol is extremely expensive now. It is impacting on inflation. It is impacting on commuter pricing. So instead of dropping it to R0.75 for another month, keep that R1.50 reprieve in place,” Duvenage stated.

If Godongwana reduces the GFL relief on 7 July, Outa said the fuel price could increase by nearly R2.50 per litre, pushing the price of unleaded 95 to around R26.70 per litre.

Chart depicting a breakdown of South Africa’s fuel price for the May-June 2022 increase

South Africans currently pay R23.94 for 93-octane and R24.17 for unleaded 95 inland.

The steep increases were driven by the Brent Crude oil price rising significantly due to Russia’s invasion of Ukraine and the sanctions imposed on it after that.

Although the Brent Crude oil price is primarily to blame for this year’s increases, the South African government takes a large portion of the fuel price we pay as tax.

Duvenage previously said fuel in South Africa is now more expensive than when oil prices were higher.

This can be attributed to the almost R11 worth of tax South Africans pay per litre of fuel. The charges include the R3.85 GFL, R2.18 that goes to the Road Accident Fund, and R4.66 split among 11 other taxes.

He explained that the fuel price in South Africa in July 2008 was R10.70, even though the oil price was $20 (R314) more per barrel than it is today.

“In 2008 in July, when the international oil price was $130 per barrel, we were paying R10.70 per litre of petrol back then. Today, at $110 a barrel, it’s going to be close to R25 a litre,” Duvenage said.

“The levies at that stage were about R3.60. They are now over R10 per litre.”

He added that while the weakening Rand was a contributing factor, increased fuel levies are primarily to blame for the high fuel prices we pay.

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