Fuel levy increases will hurt the poor (and everyone else)

Brian Joss – The 52 cents a litre increase in the General Fuel and Road Accident Fund levies announced by Finance Minister Malusi Gigaba in yesterday’s Budget Speech is cause for great concern, notes the Automobile Association (AA).

The increases amount to a total increase of 11 percent on the current levies from R4.78 to R5.30. The increases comes into effect on 1 April, along with other increases, such as the increase of VAT from 14% to 15%. 

Gigaba announced the General Fuel Levy will increase by 22 cents 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).

Price hike: 52c hike is cause for great concern, says AA. Picture: Quickpic

In January we urged government to be careful in determining future hikes to the levies, and must consider the impact the increases have on especially the poorest of the poor in the country.

“At the time we also argued that any increases should be in line with inflation which, we note today, is at its lowest since March 2015 at 4.4%.

Instead the increases are sizable, and more than double current inflation,” says the AA.

The Association says the increases will place an extra burden on all road users, but especially on the poorest of the poor who mostly rely on public transport.

Based on current fuel prices inland and coastal, these increases will now comprise 38% and 39% respectively of a litre of 93 unleaded petrol. Currently a litre of unleaded 93 octane fuel inland costs R13.90. This will increase to R14.42. A litre of unleaded 93 octane at the coast costs R13.49 which will increase to R14.01. Note these increases are based on February fuel prices which may increase or decrease before the implementation of the levy price increases in April.

This 52 cents a litre hike in the fuel levies more than wipes out the 30 cents gain realised in the fuel price in January, and the AA’s predicted decrease of 28 cents going into March; these decreases were gained mainly through the strengthening of the Rand as a result of the change in leadership of the ruling party.

“Coupled with the increase in VAT, the increase to the fuel levies means South Africans, especially the poor, will, in our opinion, be faced with substantial hikes in their day-to-day living expenses. Many of these people will simply not be able to absorb them,” notes the Association.

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