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Mineral and Petroleum Resources Minister Gwede Mantashe told the Africa Oil Week conference in Cape Town this week that fuel prices should be R14 a litre instead of R20 and discussions are taking place with the National Treasury on how this can be done.
Distortions introduced by two fuel taxes — the general fuel levy (GFL) and the Road Accident Fund (RAF) levy — have pushed prices up to around R20 a litre.
Money from the GFL goes to the National Revenue Fund for spending by the national government, with a portion allocated to the eight major metros.
More than 90 percent of the funds in the Road Accident Fund come from the RAF levy, which is used to settle claims from victims of car accidents.
These two levies bump up the price of petrol by R6,14 a litre, and diesel by R6,02 a litre – accounting for around 30 percent of the retail fuel price.
Mantashe said calculations done by his department show that prices should be R14 a litre, not R20.
He added that unless these levies are ring-fenced, it will not be possible to drop fuel prices.
Discussions are currently taking place with the National Treasury on the impact of the GFL and general living standards.
These two levies were the focus of discussions with the National Treasury, though other components of the fuel price are also being looked into.
What would replace the levies?
The GFL contributes close to R100 billion a year to the fiscus, and the RAF levy about R20 billion, which leaves a huge hole for the Treasury to fill should it decide to scale back or eliminate these.
“We’ve been asking for a review of [the] fuel pricing structure for many years,” says Automobile Association spokesperson Layton Beard.
“We’re not inherently opposed to the scrapping of these taxes, but if we do that, what then?
“Where are we going to find the roughly R120 billion currently generated by the fuel and RAF levies?” asks Beard. — Moneyweb
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