Petrol tax hikes to hit South Africa: Absa

May 06, 2022

South Africa faces a R1.50/litre petrol price increase in June as the government’s intervention to ease the cost of high fuel prices comes to an end.

In March 2022, finance minister Enoch Godongwana said that using the country’s reserves would allow it to reduce the general fuel levy (GFL) included in the basic fuel price by R1.50/litre for the period between 6 April to 31 May 2022. A broad number of interventions will also be considered once the two-month period lapses, including a review of the basic fuel price, the minister said.

The increase has already been pencilled in by economists at Absa, with the bank also forecasting increases in fuel taxes in the coming year as part of the National Treasury’s annual adjustments.

“We assume a 10c/l rise in distribution margins each December and a 1.50c/l increase in fuel levies in June 2022 and a 35c/l increase in April 2023,” the bank said in a research note this week.

“Our assumed adjustments to fuel taxes and levies translate into annual average increases of 27.2% and 3.4% for 2022 and 2023, respectively,” Absa said.

This is well above the South African Reserve Bank’s assumptions which show that taxes and levies on fuel are expected to rise by 5.2% and 2.7% in 2022 and 2023, respectively.

The General Fuel Levy is currently pegged at R3.93 per litre and the RAF levy at R2.18 per litre. Combined they add R6.11 to every litre of petrol and diesel sold in the country.

The National Treasury opted not to increase these figures in its February 2022 budget as part of a move to ease rising fuel costs on motorists, but it is unlikely that government will introduce similar measures in its 2023 budget as the revenue generated is key for the operation of groups such as the Road Accident Fund.

FNB’s forecasts show that petrol prices of more than R20/litre are likely to be normalised over the next two years as oil prices maintain their steep levels against the rand.

The Automobile Association of South Africa has warned that the government will need to move quickly if it is to soften the blow ahead of the expected June increase.

“The government provided short-term relief through reducing the GFL, but this relief ends at the end of May going into June. If the GFL returns to its set rate, that will add another R1.50/l to petrol and diesel and will certainly push the prices of these fuels much higher.

“The question now is how the government plans to deal with the fuel price going forward, and how, ultimately, this will result in sustainable relief for South African consumers,” the AA said.-bustech

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