South Africa faces biggest petrol price hike in history

The Organisation Undoing Tax Abuse (Outa) says finance minister Enoch Godongwana has no choice but to extend fuel price relief measures. This is despite the R1.50 fuel levy reduction costing government R2.7 to R2.8 billion each month.

“That would be the best thing because we believe the negative impact on society, on the economy, and inflation would be a lot worse,” Outa CEO Wayne Duvenage said during an interview with 702.

Godongwana reduced South Africa’s general fuel levy on 16 April, intending to start charging the full tax again from 1 June 2022.

According to Duvenage, several organisations — like the Congress of South African Trade Unions and certain political parties — are pushing for finance minister Enoch Godongwana to extend the relief.

Duvenage said he believes that Godongwana doesn’t have a choice but to extend the relief, adding that government should work to decrease its expenditure to make up for the revenue loss.

“I think the pressure is being brought to bear on government on this one now,” he said.

“There was no reduction in the international oil price. In fact, it went slightly up. So, I don’t think he’s got a choice.”

However, Duvenage said that if Godongwana doesn’t extend the relief, the expected increase of around R3.50 will be the highest once-off hike South Africa has ever seen.

“If he doesn’t, this is a R3.50 increase in one shot. That will be the highest once-off increase we’ve had and the highest price we’ve ever paid,” he stated.

“In this time, with the crisis that we are under, I think government has to find a way to reduce their cost by R2.7 to R2.8 billion a month.”

He added that Godongwana now has the opportunity to rally his colleagues to decrease the government’s expenditure.

“This gives the opportunity to the minister now to look at all his colleagues and say, ‘we have to cut our expenses in order to pass these savings onto society’,” he said.

Breakdown of South Africa’s fuel price

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

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,” he said.

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

He said that the rand’s strength had an impact — it was R8 to the dollar then, compared to almost R16 to the dollar today — but explained that increased fuel levies are primarily to blame for the high prices we pay today.

“You’ve got the Road Accident Fund and so many other fees added on. There are 11 fees before you pay for the basic fuel price,” Duvenage said.

Now read: Bad news for new car buyers in South Africa

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South Africa faces biggest petrol price hike in history