South Africans could pay R330 less per tank of petrol

The Department of Mineral Resources and Energy recently increased South Africa’s fuel prices, hiking petrol by 75c per litre.

This has driven the price of unleaded 93-octane petrol to R20.07 per litre, while unleaded 95-octane petrol sells for R20.29.

While the increase was primarily driven by a weakened rand and climbing crude oil prices, South Africans also pay a substantial amount of tax on every litre of petrol.

If it weren’t for the taxes levied on petrol, a litre of 95-octane would be R12.85 — 37% less.

This amounts to a saving of R335 on a 45-litre tank, or R446 if you are filling up a 60-litre tank.

Even if we accept that South Africans will have to pay some tax on petrol, the price at the pump could be much lower than it is today.

Transport specialist and Stellenbosch University professor Stephan Krygsman has argued that the Road Accident Fund levy should be completely abolished.

According to the Organisation Undoing Tax Abuse (Outa), this currently adds around R2.18 per litre to the price.

Krygsman and Wits University professor Rod Crompton have also called for the deregulation of South Africa’s petrol price.

Currently, government sets the wholesale and retail profit margins on petrol.

Both professors believe that deregulating margins will allow pricing competition, resulting in lower prices.

The wholesale price margin is currently R0.41 per litre, while the retail margin is R2.23.

If we keep the current profit margins and assume the tax reduces to 15% of the retail price — the same as VAT — then 95-octane petrol would cost R14.78 per litre.

On a 45-litre tank, this works out to a saving of R220. On 60 litres of petrol, the saving is R331 per tank.

While Outa has stopped short of calling for the various levies on petrol to be reduced, the civil action group has written to finance minister Enoch Godongwana calling for a halt to the annual fuel levy increase.

The levy increases are announced in February in the annual Budget.

“While we understand that we are a cash-strapped nation, we can no longer afford to burden society with higher taxes and levies applied to the price of fuel,” said Outa CEO Wayne Duvenage.

“We have witnessed substantial increases to the price of petrol and diesel, as a result of ongoing above-inflation increases to the basket of 12 other levies and charges, which have collectively increased by over 125% over the past decade.”

At an average of 8.5% per annum, Duvenage said these increases have been well above inflation.

“The result is a compounding effect that makes the collective cost of levies and surcharges more than R10.00 per litre of petrol, before one drop of the basic fuel price is added.”

Outa said the combination of the fuel and road accident fund levies raise roughly R135 billion per year. This figure was around R55 billion a decade ago.

Duvenage’s comments follow energy minister Gwede Mantashe’s remarks that the scrapping of e-tolls will result in a fuel levy hike.

Outa has been a vocal opponent of e-tolls and has repeatedly called on government to scrap the scheme and fund the Gauteng Freeway Improvement Project from taxes.

However, Duvenage believes the money to scrap e-tolls can be found elsewhere.

“Instead of reaching out to extract higher taxes from the citizens every year, government should look for savings and improved productivity and other efficiencies within the state’s spending and processes,” says Duvenage.

“To add another hike in fuel taxes in 2022 would be a slap in the face of overstretched citizens and would add more burden to everyone in the country”.

Now read: Expect petrol price hike if e-tolls get scrapped — Mantashe