The Automobile Association (AA) welcomes the announcement by President Cyril Ramaphosa last night that the Government of National Unity “… will look to expand the basket of essential food items exempt from VAT and undertake a comprehensive review of administered prices, including the fuel price formula, to identify areas where prices can be reduced”.
The announcement by the President validates the AA’s calls for a fuel price review to mitigate rising fuel costs which continue to add pressure on already embattled consumers.
“As far back as 2019 the AA called for a review of the fuel pricing structure, and an audit of all the components that comprise the fuel price. We noted at the time that fuel prices impact on all South Africans and that an assessment of the fuel pricing formula is necessary to determine whether all components are properly calculated and still necessary on the current formula.
“While we have been making the call for a fuel price review in the best interests of South African consumers, little has been done to initiate such a review. The announcement by President Ramaphosa in his address at the opening of Parliament last night was therefore extremely significant and a step in the right direction,” notes the Association.
Fuel prices have increased steadily in the past five years. In January 2022, for instance, a litre of ULP 95 inland cost R19.61. In January this year, that same fuel cost R22.49/l. In June, the cost for ULP95 was R24.25/l, an increase of almost R5 on the January 2022 price. Added to this is the inclusion of two substantial taxes on fuel – the General Fuel Levy, currently pegged at R3.96/l for petrol and R3.84/l for diesel, and the Road Accident Fund (RAF) levy, currently pegged at R2.18/l for petrol and diesel. Combined these levies contribute R6.14 to every litre of petrol and R6.02 to every litre of diesel sold in South Africa.
“While we are cautious about simply scrapping these levies outright, we believe there is room for movement in specifically the RAF levy portion of the taxes. We also believe a comprehensive review may highlight other areas within the fuel pricing formula that can be better dealt with to mitigate rising fuel costs,” the AA says.
The AA says a fuel price review should be an open process that involves civil society organisations such as itself and others.
“The President has taken the bold step of announcing a fuel price review and that process must now unfold quickly. The outlook for fuel prices in August is bleak with little or even no relief forecast. Against this backdrop, and the major role fuel prices play in our economy and on personal budgets, the fuel price review is long overdue, and our hope is that it gets underway as soon as possible,” the AA concludes.
