South African motorists face a growing financial strain at the petrol pumps as prices remain stubbornly high.
However, analysts suggest that petrol should cost less than R20 per litre, given that fuel taxes and retail margins have increased over the years, Cape {town} Etc reports.
Also read: What you need to know about SA’s upcoming fuel price cuts
Over the past 16 years, fuel price add-ons increased the total tax per litre from R1.74 in 2008/9 to R6.18 in 2024/25. This includes the Road Accident Fund (RAF) levy, general fuel levy (GFL), and customs and exercise tax. This represents an overall growth of around R255%.
Data from the Organisation Undoing Tax Abuse (Outa) revealed that South Africa’s RAF levy and GFL were R0.47 and R1.27 respectively in 2008/9.
Since then, these amounts increased to R2.18 and R3.96.
Find your perfect set of wheels with these incredible deals on cars for under 100k. Find car listings here.
Between 2008/9 and August 2024, South Africa’s retail margin on fuel prices increased from R0.65 per litre to R2.86 per litre, representing an increase of nearly 340%.
Retail margins are portions allocated to fuel retailers to cover the costs of operating service stations, salaries, rent and the retailer’s profit.
However, while general inflation increased by 133% over the past 16 years, the cost of petrol increased even more due to higher taxes and retail margins. If petrol prices had kept pace with inflation, they would be R3.50 lower than they are now.
If prices were increased alongside inflation, taxes would equal R4.05 per litre with margins around R1.51, equating to R19.60 per litre at the pumps, including the add-ons.
Economist Dawie Roodt says these above-inflation increases are due to incompetence and that the tax isn’t the problem. Rather, he says, the state spends too much and thus needs the high revenue from fuel levies.
‘The state is far too big and highly incompetent, which is costly. Effective management and cost-cutting within the fiscus could easily remove the need for the current levels of the fuel levies, which would cut fuel prices in the country,’ he told BusinessTech.
In his opening address to parliament earlier this year, President Cyril Ramaphosa said a key priority for the newly established Government of National Unity (GNU) is to address poverty and the high cost of living, including reviewing the fuel price formula.
‘As the Government of National Unity, we will look to expand the basket of essential food items exempt from VAT and undertake a comprehensive review of administered prices, including the fuel price formula, to identify areas where prices can be reduced,’ he said.
The fuel levy generated R93.37 billion in revenue during the 2023/24 financial year, accounting for 5% of the government’s total tax revenue. The RAF, which was intended to fund the maintenance of road infrastructure, contributes around R48 billion.
Now, it forms part of the general revenue count.
Cape {town} Etc discount: Looking for things to do in the city, at half the price? Get exclusive offers here.
Also read:
Picture: engin akyurt / Unsplash