Populist calls for the scrapping of the fuel levy to help hard-pressed motorists don’t take into account the R90bn or so that it contributes to the fiscus every year; those making these calls would have to propose a realistic alternative if they are to be taken seriously.
The state can’t afford it, even if the suggested cuts in ministers’ entertainment and other frivolous expenditures were to be implemented.
Finance minister Enoch Godongwana is on record as saying the government wants to reduce, and even scrap, the fuel levy, but that it would be a long-term process, phased in over time.
More immediately, prices rise further on Wednesday for petrol (by R1.93/l- R1.97/l), for diesel (R1.60/l-R1.62/l) and for paraffin — a major cooking fuel for the poor, who will have to cough up an extra R2.14/l for it.
Motorists face a double blow, however, because the brief fuel levy respite — it was cut by 40% in April and May — is ending. So they can look forward to paying about R25/l for petrol from Wednesday.
Motorists face a double blow, however, because the brief fuel levy respite — it was cut by 40% in April and May — is ending
With the oil price now 51% higher than it was a year ago, and no end in sight to the war in Ukraine, global uncertainty is likely to remain high, and oil prices with it.
Saudi Arabia will have a budget surplus this year; its oil revenues are expected to be up about 60%.
Other oil exporters are benefiting too, not least Russia itself. Its tax take from oil is forecast to be 50% higher, in spite of European sanctions.
The US, too, is a major oil producer and there have been domestic calls to halt exports as a way of reining in prices at the pump. If the European Union intensifies its sanctions on Russian oil and punishes countries that buy it, prices could rise further.
The good news is that oil market experts do not expect price increases to be astronomical, though oil will likely hold at well over $100/barrel into the future. The price we pay in SA will in large part be determined by the value of the rand against the dollar and by our economic performance; if the latter booms, it boosts both the fiscus and investor confidence, which in turn strengthens the currency.
In the short term it seems the government, having eased our burden with a two-month cut in the fuel levy, will have to be more imaginative in finding ways to grant another few months of relief. It cannot be seen to be doing nothing while motorists endure pain at the pump, which in turn leads to a higher cost of living.
Scrapping the fuel levy in its entirety is not viable at the moment but we should be thinking in that direction.
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