Mantashe says motorists should pay up to R560 less per tank

Minister of Minerals and Petroleum Resources Gwede Mantashe says petrol and diesel should cost around R14 per litre in South Africa, with the general fuel and Road Accident Fund (RAF) levies distorting the price to around R20 per litre.

Depending on the capacity of their car’s fuel tank, South African motorists could pay between R317 and R564 less per tank of fuel if the petrol price was R14 per litre.

However, removing the RAF and general fuel levies from current inland unleaded 95 prices would bring the price per litre to R15.01 per litre, resulting in slightly lower savings of between R272 and R483 per tank.

Speaking at the African Oil Week in Cape Town on Tuesday, 8 October 2024, the minister said that fuel prices will continue to pressure South Africans despite the recent relief this month.

Therefore, the government is discussing how fuel prices in the country can be lowered further.

“In the fuel price, there is the general fuel levy, there is the Road Accident Fund, linked to the price of fuel. So instead of buying a litre of fuel for R14, you buy it for R20,” Mantashe said during his address.

“Our argument is: you are distorting the price of fuel. Let’s find the formula for separating these two things and have the price of fuel visible.”

“We intend to conclude this discussion in the shortest possible time,” he added.

In a media briefing following his address, Mantashe said his department’s calculations suggested that the proper price per litre of fuel should be R14.

MyBroadband used October 2024’s inland unlead 95 prices to determine how much motorists would save when filling their tanks if fuel was reduced to R14 per litre. We used various fuel tank sizes for the calculations: 45, 50, 55, 60, and 80 litres.

Potential unwanted consequences

While Mantashe called for the separation of the general fuel and RAF levy from the fuel price, organisations like the Fuel Retailers’ Association have called for the scrapping of the RAF.

However, this could hurt some South African motorists because if the fund is scrapped, South Africa could join countries like Australia, Germany, and the UK, where third-party vehicle insurance is mandatory for motorists.

When it announced its stance in March 2022, the Fuel Retailers’ Association said it favoured third-party vehicle insurance over the RAF scheme, arguing that it shouldn’t be linked to the petrol pump price.

Road safety expert and Driving.co.za managing director Rob Handfield-Jones agrees.

“Let’s ignore the fact that the RAF is — and always has been — technically bankrupt, just like the Multilateral Motor Vehicle Accidents Fund before it,” he told MyBroadband.

“Instead, let’s focus on the real issue, which is that the fundamental cost base of the RAF is predicated on the crash and fatality risk figures of three decades ago.”

Handfield-Jones said that since the 1990s, when the RAF was established, fatality risk has increased at least four-fold.

Therefore, the RAF is at least four times underfunded. Probably more, considering that medical inflation routinely exceeds the Consumer Price Index.

“The RAF levy would need to be at least R12 to R15 per litre to adequately fund the current injury disaster on our roads, and that is simply not politically palatable,” said Handfield-Jones.

He said a more sensible solution than hiking the RAF levy to match the level of road carnage and medical inflation in South Africa is to scrap it and force all motorists to take out comprehensive insurance.

This must then be expanded over time to include injury cover.

The RAF is essentially third-party injury cover for all road users in South Africa. Motorists and pedestrians can claim injuries and loss of earnings through the fund if they are involved in a motor vehicle accident.

Without the RAF, motorists would be without such cover, making third-party vehicle insurance critical.

While the Fuel Retailers’ Association supports the scrapping of the RAF, the Organisation Undoing Tax Abuse told MyBroadband that it will never support it.