Bad news about R6.40 petrol price cut plan
The government’s plan to significantly reduce the price of petrol, potentially even to R14 per litre, by reducing the levies collected at the pump is unlikely to be implemented as it will result in a substantial hit to state revenue.
A more severe outcome may be that other taxes, such as VAT or personal income tax, are increased to make up for the shortfall if the levies are scrapped.
The government expects to receive R93 billion in revenue from the General Fuel Levy (GFL) in the current financial year, making a significant contribution to the fiscus.
The government can use the money collected on the GFL as it wishes, while the revenue from the Road Accident Fund (RAF) Levy is used to fund the organisation’s operations.
From the beginning of June, around R6.40 per litre of petrol goes towards paying taxes and levies at the pump – over 25% of the price. R3.85 per litre of petrol goes to the GFL, while for diesel, it is R3.70 per litre.
This levy is at the centre of the government’s plan to reduce the price of fuel in South Africa. President Ramaphosa said earlier this year that it would review the fuel price formula.
During the 2024 Africa Oil Week Conference, Minister of Mineral and Petroleum Resources Gwede Mantashe said his department is in discussions with the National Treasury to bring down the price of fuel in South Africa.
Mantashe said the discussions centre around changes to the levies charged at the pump, such as the GFL and RAF Levy.
“The price of fuel is part of the cost of living. When the fuel price goes up, the cost of living in South Africa increases. This is not good for society,” he said.
“The state must intervene to bring energy prices down in the interest of the South African community.”
Mantashe said the levies charged on fuel distort the price of petrol and diesel in South Africa, with a more accurate price being around R14 per litre.

Higher taxes
Reductions to the levies charged at the pump will likely be met with fierce resistance from the National Treasury due to the implications for government revenue.
Furthermore, fuel taxes are relatively easy to collect and have a broad base as every South African filling up has to pay them.
“Our big issue at the moment is that the statement is very thin on detail, and we would like more information about the discussions between the DMPR and the Treasury,” AA spokesperson Layton Beard told Newzroom Afrika.
“If the GFL and RAF Levy were to be scrapped entirely from the petrol price, the government would have to look for alternative ways to generate R93 billion in revenue.”
Beard said this may result in tax increases in other areas, such as VAT, to compensate. These increases would potentially have a larger negative impact on South Africans than the GFL.
This is a major hurdle for the government to overcome regarding changes to the fuel price in South Africa, and it is unlikely it would give up R93 billion in revenue. However, this does not mean the plan will not be implemented in some form.
“It is hugely significant that the minister is mentioning this publicly at a function like the Africa Oil Week,” Beard said.
This indicates that there is some level of discussion occurring within the government, with the details not clear.
It would also be irresponsible for the government to raise hope regarding relief for consumers without following through, he said.
The Organisation Undoing Tax Abuse (OUTA) said the government has tried this all before and come up short with no substantial changes to the fuel price formula.
The organisation echoed Beard’s concerns that changes to the GFL and RAF Levy would result in the government needing to increase taxes.
It said VAT and PAYE are the most likely candidates to make up the shortfall.
The only other way we could manage such a drastic reduction in taxation would be to remove the wasteful expenditure caused by maladministration and corruption throughout all levels of government.
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