Will I really see relief at the pump? - Four questions about the fuel levy reduction answered

Government is set to reduce the general fuel levy from next Wednesday until May 31. 

Finance minister Enoch Godongwana made the announcement in parliament on Thursday. 

Godongwana  proposed a R1.50 per litre temporary reduction in the general fuel levy included in the basic fuel price starting on April 6.

The proposal, which was debated by MPs, is part of government’s efforts to provide relief to cash-strapped citizens and “cushion” the impact of rising oil prices.

HOW MUCH IS THE TEMPORARY REDUCTION? 

“To mitigate the impact of escalating fuel prices, I hereby table the following proposal which will be included in the 2022 Rates and Monetary Amounts and Amendments of Revenue Laws Bill for consideration by this house. 

“A temporary reduction in the general fuel levy of R1.50 per litre for the period April 6 to May 31. This will reduce the levy for petrol from R3.85 per litre to R2.35 . The levy on diesel will be reduced from R3.70 per litre to R2.20,” said Godongwana. 

He said no changes were made to other fuel levies such as the Road Accident Fund and carbon fuel levies.

HOW WILL IT BE FINANCED?

The minister said the reduction would be financed by the sale of oil reserves so there would not be a budget shortfall.

“The revenue will be recouped through the sale of strategic crude oil reserves held by the Strategic Fuel Fund, which is a subsidiary of the Central Energy Fund (CEF). The sale would be required to raise about R6bn,” Godongwana said.

MORE REDUCTIONS IN COMING MONTHS?

Godongwana also explained a set of long-term measures. 

He said government is looking to implement the following changes in fuel prices from June 1:

• a reduction in the basic fuel price by 3c per litre in line with the review done by the department of mineral resources and energy;
• the Demand Side Management Levy (DSML) of 10c per litre on 95 unleaded petrol sold inland will be scrapped;
• an introduction of a price cap on petrol, meaning retailers can sell below regulated prices;
• there will be a review of diesel pricing to promote greater competition, and;
• interventions will be considered to ease paraffin costs.

HOW MUCH WAS FUEL SUPPOSED TO INCREASE BY?

Last month, the CEF stated the petrol price could increase by more than R2 per litre and diesel by more than R3 this month. 

Petrol hit R21 litre for the first time last month after a R1.46/l increase. 

After the temporary cut in the general fuel levy, petrol prices may rise by between 23c and 31c.  

“The intention of the temporary reduction in the general fuel levy is to support phasing in the fuel price increases we are expecting in the short term. This will go some way to assist South Africans to adjust to the new reality,” said Godongwana.

“The combined effect of the two proposals will not have an impact on the fiscal framework adopted by parliament following the 2022 budget.”

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