South Africa’s petrol price nightmare

3 years ago 2

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Fuel taxes and profit margins in South Africa have tripled over the past 15 years, with the various levies and retail and wholesale margins now making up 45% of the total fuel price.

Year-on-year fuel tax and margin increases have exceeded the consumer price index (CPI) every year since March 2009, bar two — the 2014/15 and 2022/23 financial years.

MyBroadband spoke to Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage about historical fuel prices in South Africa.

Outa also provided fuel price statistics from the 2008/09 financial year to 2022/23.

In recent years, fuel prices in South Africa have been subject to hefty hikes over the basic fuel price (BFP). According to Duvenage, prices per litre are comprised of the following components:

The BFP — the cost of the petrol before any money is spent on the many other taxes and levies applied.
“Other levies” — these comprise transport, secondary storage, distribution costs, and one or two smaller charges.
Wholesale and retail margins — the markup wholesalers and retailers are allowed to add.
Fuel levy — the tax on each litre of fuel sold.
Road accident fund (RAF) — levy placed on fuel to fund the RAF.

While the BFP has increased significantly — approximately 145% — since the 2008/09 financial year, the rise isn’t as sharp as the spike in fuel price add-ons over the same period.

Between the 2008/09 and 2022/23 financial years, the total charges added to the BFP price almost tripled from R3.45 to R10.29.

The chart below shows how margins and taxes have inflated the South African fuel price over the years. It excludes the basic fuel price.

Despite a slight decrease in the fuel levy in 2022/23, the tax has almost tripled since 2008/09.

South Africa saw a slight fuel levy decrease in 2022/23 after government was forced to reduce the tax to R1.50 per litre from April to June 2022 and by R0.75 in July 2022 to provide relief from rising fuel costs resulting from the Ukraine war.

However, the levy that has seen the highest relative increase belongs to the RAF.

The charge per litre sat at R0.47 in 2008/09, which has since risen to R2.18 — an increase of almost 364%. The RAF levy has remained constant since March 2021.

As part of the government’s tax relief efforts, it will also not increase this year.

“In addition to the tax measures I have announced to promote investments in renewable energy, the general fuel levy and the Road Accident Fund levy will not be increased this year,” finance minister Enoch Godongwana said in his 2023 budget speech.

It should be noted that the retail margin has also risen sharply over the past 15 years. It increased from R0.65 to R2.33 per litre.

On the other hand, the wholesale margin has remained relatively steady over the same period.

The “other levies” component increased significantly since 2008/09 — from R0.64 to R1.87 per litre.

Fuel tax increases vs CPI

To compare fuel price tax and margin increases to inflation over the years, we plotted them against the average annual consumer price index (CPI).

The year-on-year increases in fuel taxes and margins exceeded CPI in all but two years between the 2009/10 and 2022/23 financial years.

The 2015/16 financial year saw the highest tax and margin increase at 16.27%. This was compared to a CPI value of 4.60% in 2015 and 6.40% in 2016.

South African motorists also suffered a significant fuel tax and margin increase three years prior. During the 2012/13 financial year, the BFP add-ons increased by 13.59%.

The chart below compares CPI to year-on-year fuel tax and margin increases over the past 14 years.