Finance Minister Enoch Godongwana has announced emergency measures to shield South Africans from rising petrol prices.
Speaking in Parliament on Thursday (31 March), Godongwana said rising oil prices, which have been worsened by the Russia-Ukraine conflict, have placed significant pressure on local fuel prices.
Godongwana announces petrol prices relief measures
According to Godongwana, the petrol price relief measures will be in two phases. The first phase will entail a temporary reduction in the general fuel levy (GFL) by R1.50 per litre from Wednesday, 6 April 2022 to Tuesday, 31 May 2022.
“This will reduce the general fuel levy for petrol from R3.85 per litre to R2.35 per litre and reduce the general fuel levy for diesel from R3.70 per litre to R2.20 per litre for two months. These amounts exclude other levies such as the Road Accident Fund levy and the carbon fuel levy,” Godongwana explained.
This reduction will result in the government losing R6 billion in tax revenue. However, the loss will be recouped by selling strategic crude oil reserves held by the Strategic Fuel Fund.
This means that the fiscal framework adopted by Parliament after the 2022 Budget will not be affected. Godongwana formally tabled the temporary GLF reduction proposal before Parliament for approval as part of the 2022 Rates and Monetary Amount and Amendment of Revenue Laws Bill.
Phase two of the relief measures, which will start on 1 June 2022 after phase one measures end, will entail the following:
- A reduction in the Basic Fuel Price of 3c/I, in line with the recommendations of the review done by the Department of Mineral Resources and Energy (DMRE).
- The termination of the Demand Side Management Levy (DSML) of 10c/I on 95 unleaded petrol sold inland.
- The introduction of a price cap on 93 octane petrol, following from the previous DMRE proposal and consultation. This will allow retailers to sell at a price below the regulated price.
- The termination of the practice to publish guidance by the DMRE on diesel prices to promote greater competition.
- The Regulatory Accounting System (including the retail margin, wholesale margin and secondary storage and distribution margins) will be reviewed to assess whether adjustments can be made to lower the margins over the medium term. Interventions will be considered by the DMRE to reduce the price pressure for illuminating paraffin over the medium term.
“The sale of strategic crude oil reserves requires will be authorised by the Minister of Mineral Resources and Energy, with the concurrence of the Minister of Finance, in terms of the Central Energy Fund (CEF) Act,” Godongwana said.
“Funds from the sale must be deposited into the Equalisation Fund at the Central Energy Fund. The Minister of Finance and the Minister of Mineral Resources and Energy have the authority to approve the release of funds from the Equalisation Fund into the National Revenue Fund in terms of the Act. They are expected to do so during the 2022/23 fiscal year.”
The GFL reduction will effectively reduce the petrol price by R1.50 per litre for two months. South Africa has seen record petrol price increases in recent months.
According to estimates from the Central Energy Fund, motorists were likely to pay between R1.73 and R1.81 per litre more in April. The measures will therefore come as a slight relief.
In his Budget presented to Parliament in February, Godongwana also said the government will not raise the GFL and Road Accident Fund levy, thereby providing a tax relief of R3.5 billion.