Petrol price disaster in South Africa

Despite recent reprieves, South Africa’s fuel taxes have increased significantly over the past 16 years, making fuel increasingly expensive for motorists in the country.

MyBroadband compared the crude oil price per litre to the inland unleaded 95 price per litre in South Africa from January 2008 to July 2024.

This revealed that while South Africa’s fuel prices were still correlated with oil, they have diverged significantly, largely due to tax and margin increases.

Over this period, South Africa’s fuel price addons have skyrocketed, with the total tax per litre growing from R1.74 per litre in 2008/09 to R6.04 per litre in 2024/25, representing more than three-fold growth.

This includes just the Road Accident Fund (RAF) levy and the general fuel levy (GFL).

According to data from the Organisation Undoing Tax Abuse, South Africa’s RAF Levy and GFL were R0.47 and R1.27, respectively, in 2008/09. However, they have since grown to R2.18 and R3.86.

The South African government has held back on increasing the two fuel price addons in recent years.

During his 2024 budget speech, finance minister Enoch Godongwana said the government would also hold off on increasing these taxes in 2024/25.

“We are mindful of the already high cost of living and the impact fuel prices have on food and transport costs,” said Godongwana.

“As in the 2022 and 2023 Budgets, government again proposes no changes to the general fuel levy or the Road Accident Fund levy,” the National Treasury’s 2024 Budget Review document says.

It says this will result in tax relief of around R4 billion for South African motorists.

The retail margin on South Africa’s fuel prices has also increased significantly, growing from R0.65 per litre in 2008/09 to R2.33 per litre in 2022/23. This represents an increase of nearly 260% over 15 years.

The chart below tracks the inland price of unleaded 95 per litre in South Africa to the crude oil price per litre from January 2008 to July 2024.

Crude oil prices were converted to rands using the dollar-rand exchange rate at the time.

Reducing or eliminating fuel taxes could be disastrous

President Cyril Ramaphosa recently announced the government’s intentions to review South Africa’s fuel price formula, but eliminating or reducing the GFL tax will remove a substantial portion of the country’s annual revenue.

Director and chief economist at Econometrix, Dr Azar Jammine, recently said the government will look to recover the costs elsewhere.

“I think one should see the statement as one of a series of statements issued to try and appease consumers who are really feeling cash-strapped in the face of high interest rates and the high inflation that has prevailed for several years,” said Jammine.

“It’s very easy to bring down the fuel price by doing away with the fuel levy, but then the government would sacrifice about 5% of its annual revenue.”

He said the govenment will be forced to look at other income streams, such as income tax, to make up the difference.

“I don’t know that people would necessarily be prepared to pay higher income tax in order to fund lower fuel prices. That would be a case of robbing Peter to pay Paul,” Jammine stated.

Many South Africans may be unaware that the GFL levy isn’t ring-fenced to maintain the county’s 750,000km road network. Like various other taxes, it goes into the fiscus.

“I think motorists would be very happy to pay more for fuel if they knew that the funds were really being used to upgrade the roads and to prevent potholes and make it easier to commute,” said Jammine.

“The fact is that the fuel levy is not ring-fenced, and it forms part of the overall revenue take. That has been the case since it was introduced.”