Consumers cannot afford fuel levy hikes, says AA

The Automobile Association (AA) says finance minister Enoch Godongwana must think carefully about the negative impact on consumers of increasing fuel levies before making any decision when he delivers his budget speech in parliament on Wednesday.

The AA says the two largest levies on fuel — the General Fuel Levy (GFL) and the Road Accident Fund levy (RAF) — constitute R6.13 on every litre of petrol and diesel sold in the country, and already generate billions of rand in revenue for the government.

The GFL is pegged at R3.95/litre and the RAF levy at R2.18/l. Neighbouring countries who buy fuel directly from South Africa do not add these taxes making their fuels cheaper.

“As we have noted in the past, these levies comprise a significant portion of the money spent on fuel, and many South Africans, rightfully, question how this money is allocated, and whether they receive any benefits from paying these taxes,” says the AA.

“Apart from that, the impact of increasing the levies will be felt by all because they will result in higher input costs across various sectors and will be recovered through higher prices at the till.”

In April, May, June and July 2022, the government slashed the GFL by R1.50/l amid significant fuel increases at the time. However, the levy rates returned to their former levels in August that year and have remained at those rates since.

“We are concerned that the levies — left unchanged since late 2022 — will now be targeted for increases. We warn, however, that raising the rates of these levies will be counterproductive and cause more financial hardships for already embattled consumers. We know that consumers face rising costs of living while they either don’t have any income at all, or their salaries and wages are not adjusted because of prevailing weak economic conditions,” says the AA.

The AA has for several years called for a review of the fuel pricing structure, particularly since fuel is so closely linked to the country’s economy. It said an audit of the fuel pricing structure is long overdue and the government must act without hesitation to establish ways to mitigate against rising fuel costs.

“South Africans are struggling, and the situation of millions of people is getting progressively worse each month with many not able to afford basic goods. Rising fuel costs result in more expensive goods and services which push people even deeper into financial hardship.

“While we accept minister Godongwana will have to walk a financial tightrope in crafting his budget — as all his predecessors have also had to do — we call on him not to ignore the most important element in his speech: the South African public. Lumping the country with increased fuel taxes will not, in our view, serve any useful purpose and will, effectively, place a harsher burden on citizens at a time when they already cannot carry their current burden any longer,” the AA said.

Any adjustments to the fuel levies announced by Godongwana on Wednesday will come into effect in April.