In March Finance Minister Enoch Godongwana announced a R1.50c reduction to the general fuel levy. This came as a welcomed relief to motorists as it meant that any increase to the price of fuel would be R1.50c less than what it would have been.
Unfortunately for motorists, this was only a temporary relief measure. While it was in place for April and May, it is set to end in June. This could result in a R1.50 increase in the price of petrol, on top of the monthly fuel price adjustments.
The Automobile Association (AA) has warned that the price of petrol could increase by more than R3 per litre in June.
Econometrix director and economist Dr Azar Jammine explained that if the reduction of the general fuel levy remained in place for a year, it would cost the government around R36 billion. For the two months, it was in place, it has already cost the government around R6 billion.
The reason why the reduction of the fuel levy costs the government this much is that fuel tax is the fourth largest tax revenue for the state. Fuel tax is only behind personal income tax, value-added tax (VAT) and company tax.
Jammine says the petrol price could rise to above R25 per litre in June. This is because the factors that contribute to the monthly fuel price adjustments have not been favourable to South Africa. These factors include the global price of oil and the weakening rand to the US dollar exchange rate.
He said, “This is not a unique situation unique to South Africa, many countries in the world are now facing sharply higher fuel prices as a result of the sharp increase in the price of oil especially following the Russian invasion of Ukraine and its one of the key reasons why inflation rates, even in the likes of the United States have gone to eight and a half percent and the United Kingdom nine percent”.