Almost half of what South Africans spend per litre of fuel is taxes, the Automobile Association of South Africa (AA) has revealed.
In its annual breakdown of the cost composition of the inland and coastal fuel prices in South Africa, the AA found a substantial part of the fuel price consists of government’s levies.
“South Africa’s fuel price is comprised of many different elements, some of which make fuel in the country more expensive than that in neighbouring countries to which South Africa exports,” the AA stated.
The AA’s figures are based on 93 octane fuel (inland) and 95 octane (coastal).
“It must be noted that the dramatic drop in fuel prices in April and May are record decreases, and will unlikely be seen soon again, if ever,” the AA said.
“And while these figures bring the overall basic fuel price down, the data relating to the taxes does not change monthly, and remains constant from April to April.”
The two main taxes paid on every litre of fuel are the General Fuel Levy (GFL) and the Road Accident Fund Levy (RAF).
Increases to these taxes are announced by the Finance Minister in his annual budget speech in February and come into effect in April, the AA said.
The AA said it has always raised concerns that increases to these levies which are consistently above inflation ultimately hurt the country’s poorest citizens, particularly as many of these citizens rely on public transport; an increase to the levies inevitably results in an increase to public transport rates.
“Increases to fuel prices also mean an increase to goods which are transported across the country as operators recover these higher input costs through increases which are passed to consumers,” the AA said.
The AA explained the fuel price in South Africa consists of four main elements:
- The GFL
- RAF Levy
- Basic Fuel Price (freight and insurance costs, cargo dues, storage and financing)
- Wholesale and retail margins, and distribution and transport costs
“Currently the GFL is R3.77 which represents 31% of a litre of fuel inland (calculated against the current cost of R12.02/litre), and 32% of a litre of fuel at the coast (calculated against the current cost of R11.52/litre),” the AA said.
“Similarly, at its current price of R2.07 a litre, the RAF Levy represents between 17% and 18% on every litre of fuel sold.”
Combined these levies total R5.84 – which remains the same for both inland and coastal prices.
“Collectively, at the current low prices for fuel because of the record decreases, these levies comprise a whopping 48 to 50 percent of every litre of fuel sold in the country,” the AA said.
“Together government is projected to gather a total of around R135 billion from these levies with around R87bn coming from the GFL (which goes directly to Treasury and which can be used for any purpose the government determines), and R48bn coming from the RAF Levy.”
Cost per tank
In South Africa the fuel price is adjusted on the first Wednesday of every month and is determined by two main factors: the Rand/US Dollar exchange rate (how fuel is purchased), and international petroleum prices (how much the fuel costs to purchase), the AA explained.
Taking the Basic Fuel Price (BFP) and other costs such as those associated with transportation, custom and excise duties, and retail margins paid to fuel station owners, the AA calculated the current cost to fill a typical fuel tank.
Using the current data, filling a 50 litre tank of fuel inland (93 octane) will cost R601 and R576 at the coast (95 octane).
The AA noted this is a relatively low cost because the price of fuel is at levels last seen in 2016.
“However, with economic activity slowly beginning to pick up worldwide, the cost of international petroleum is expected to also slowly increase. This will have a knock-effect on local prices which will also steadily increase.”
Below are breakdowns of the inland and coastal prices of petrol per litre.