Fuel tax increases to hit motorists in South Africa from April

Fuel tax increases to hit motorists in South Africa from April

The National Treasury has announced an increase in the general fuel levy and Road Accident Fund levy to take effect from 7 April 2021.

The increase will see motorists pay an inflation-related increase of 15 cents/litre in the general fuel levy and a higher-than-inflation increase of 11 cents/litre in the Road Accident Fund levy.

While the increases are largely in line with expectations leading up to the budget speech, further increases in the fuel levy will likely have inflationary effects and increase transportation costs.

Dr Francois Stofberg, senior economist at the Efficient Group, said that around 38% of the current petrol price –  roughly R5.88 – is made up of these two taxes.

The latest tax increases will take this closer to R6.15, Treasury said.

Stofberg said that hiking these taxes are a favourite for finance ministers in South Africa – it is a broad tax and easy to administer.

“Like VAT, but a bird of another feather. Fuel tax is not seen the same as VAT and therefore easier to get by voters, pesky unions, and party members,” he said.

Stofberg said that the global oil price is also expected to push the local petrol price higher in the coming months.

As global production returns to pre-pandemic levels, and as the expectation about a new global growth-wave solidifies which will be good news for our commodity producers in South Africa, greater demand will support higher oil prices, Stofberg said.

“And then there is the weather. Colder winters in the northern hemisphere, like the one currently in the United States (US), usually increases demand, causing oil prices to rise.

“Or socio-political tensions flare-up in the Middle East, which can add a couple of dollars to the oil price.”

Stofberg said that oil prices should therefore not exceed $70 a barrel, and average at levels around $65.

“But these two factors, the international dollar price of crude oil, and the value of our rand, only make up the basic price of fuel in South Africa. The taxes levied on fuel in South Africa is far more concerning.”

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