Good news for South African motorists

Automobile Association (AA) of South Africa CEO Bobby Ramagwede said they expect the levy on fuel to stay the same this year.

The AA does not expect Finance Minister Enoch Godongwana to raise this levy at the upcoming National Budget Speech on 19 February.

The association called upon the Finance Minister to keep the levy the same or to reevaluate the levy structure because the National Treasury already allocates sufficient amounts to road maintenance.

Ramagwede said the road transport budget of the previous year had already amounted to more than R140 billion.

Furthermore, he said additional levies will only increase consumer pressure.

About 28% of what South Africans pay at the petrol pump goes towards levies.

The AA said that about 10% of the petrol price goes towards the Road Accident Fund levy and about 17% towards the general fuel levy.

Ramagwede said that these levies result in a much higher fuel price in South Africa than in neighbouring countries.

A higher fuel price directly affects consumer spending in South Africa, consumer welfare, and the ability of South Africans to contribute to the economy.

This is because the fuel price has a massive impact on inflation.

Oil prices have lifted due to US sanctions on Russian oil, while US economic conditions have held up, displaying solid growth in the world’s largest economy.

Additionally, rand weakness, or more accurately, US dollar strength, has added to the pressure on the rand oil price.

Furthermore, the price is largely determined by the cost of importing oil from international producers, including additional costs such as insurance, storage, and transport.

“The bigger jump in oil prices recently, and so likely fuel prices, would see quicker inflation,” said Investec chief economist Annabel Bishop.

The four main components of the fuel price are:

• General Fuel Levy
• Road Accident Fund (RAF) Levy
• Basic fuel price
• Wholesale and retail margins

The wholesale and retail mark-ups amount to nearly 15% of the petrol price.

This leaves the actual price of the fuel accounting for between 53% and 55% of the price South Africans see at the pumps.

Prioritise transport issues

The AA also urged the Finance Minister to prioritise pressing matters in the transport sector.

The association previously highlighted some issues that need to be addressed to reduce the need for such a high RAF levy.

These issues include but are not limited to improving governance and management of the RAF, improving road safety and better education and policing to have rule-abiding road users.

More recently, the AA also highlighted the need for the government to ensure the proper allocation of these funds to the various government departments.

Ramagwede said that the funds should be used for their intended purposes and not go back to the National Treasury for the lack of use.

He also said that public transport is unreliable and underfunded.

He referred to both the railways and taxis, which are the backbone of South Africa’s public transport sector.

He said that fixing dilapidated transport infrastructure and integrating various means of transport would improve the transport experience in South Africa.