Fuel levy hike will negate lower fuel prices in April

2018-03-16 12:18
Fuel levies: The spotlight will fall on fuel hikes in April when the 52 cents per litre increase in the fuel levies comes into effect.

Although basic fuel prices are showing signs of further decreases at month end, the overall price of fuel is set to increase because of the addition of increased fuel levies in April. This is according to the Automobile Association (AA), commenting on unaudited mid-month fuel price data released by the Central Energy Fund.

“The Rand/US dollar exchange rate has been virtually flat since the beginning of the month, with the local currency having weakened against the dollar by around two cents,” the AA says, noting that over the same period, international oil prices have retreated slightly in favour of South African fuel users.

The Association says diesel is indicating a likely decline of around 18 cents a litre, petrol 12 cents a litre and illuminating paraffin 13 cents. However, the Association says despite these predicted decreases to the basic fuel price, the additional 52 cents to the fuel levies will push the overall price of fuel at the pumps up going into April.

“Even though there’s a decrease of 18 cents a litre to the basic price of diesel, the overall price will jump 34 cents in April because of the increases to the General Fuel and Road Accident Fund levies announced by former Finance Minister Malusi Gigaba in his Budget Speech in February,” says the AA.

The Minister announced the General Fuel Levy will increase by 22 cents a litre from R3.15 to R3.37 (7% increase), and the RAF Levy will increase by 30 cents from R1.63 to R1.93 (18% increase). At present, 38% and 39% of a litre of 93 octane unleaded petrol inland and coastal goes towards taxes (levies).

A litre of unleaded 93 octane fuel inland currently costs R13.54. With a predicted basic fuel price decrease of 12 cents (in April), this will move down to R13.42. But, the overall price of a litre will increase to R13.94 with the additional 52 cents a litre on the levies.

A litre of unleaded 93 octane at the coast currently costs R13.13. With the predicted decrease of 12 cents, this will move down to R13.01 a litre but, again, the overall price will increase to R13.53 with the increase to the levies.

The Association says the increases to the levies is concerning and will impact the poorest of the poor the hardest.

“The increases are way above inflation and will have a knock-on effect on other prices, including public transport. The poor, who are already under enormous financial strain, will bear the brunt of these increases, which come at the same time VAT is increasing to 15%. These increases will unfortunately result in a heavier burden for the very people who need relief the most,” concludes the AA.

And let’s not forget the trucking industry. The 52 cents per litre hike in the fuel levies is going to add many millions of Rands to the industry’s monthly fuel bills and operators will not be able to absorb this. It will have to be passed on which is, without doubt, going to have an inflationary effect across the board.

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