File picture: Karen Sandison / Independent Media.
File picture: Karen Sandison / Independent Media.

What the Budget Speech is likely to mean for motorists

By Motoring Staff Time of article published Feb 25, 2020

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Johannesburg - Although fuel prices remain stable for the time being, with March looking likely to bring another small decrease, the storm clouds are gathering for April with Finance Minister Tito Mboweni looking likely to raise motoring taxes once again at the 2020 Budget Speech in Parliament on Wednesday.

Mboweni will have to walk a tighter fiscal tightrope than most of his predecessors, and he will no doubt be seeking to bolster revenue from many different sectors in a bid to ease South Africa’s financial burden, the Automobile Association said.

“This places him in a tough position where he will have to meet the needs of the country while at the same time ensuring there is enough money coming into government coffers to satisfy demand,” the AA added.

The association however warned that using fuel levies to boost revenue is a dangerous game that will have many adverse effects, particularly for the poor as public transport fares are sure to rise quickly thereafter.

“Previous years have seen higher than inflation-linked increases to the fuel levies – the General Fuel Levy, the Road Accident Fund levy, customs and excise taxes and the Carbon Tax,” the AA said.

“However, given the fact that many South Africans are buckling under severe financial constraints, such an increase this year will be more than detrimental, it could be catastrophic”.

In 2019 Mboweni hiked fuel taxes by 29 cents a litre, with 15 cents forming part of the general fuel levy, 5 cents going to the Road Accident Fund (RAF) and a further nine cents forming part of a new carbon tax, of which absolutely nothing actually goes towards fighting climate change.

Given the current fiscal constraints, we are likely to see similar fuel tax increases in 2020, and while they don’t seem particularly steep, one should consider how they add up over the years.

Here’s the most disturbing way of looking at it - currently fuel taxes account for almost 40 percent of every litre sold in South Africa, which amounts to R5.59 on a litre of petrol. Of this, R3.61 goes to the General Fuel Levy and R1.98 finds its way into the RAF.

“Seen against the background of government spending, a bloated civil service, looming increases to electricity rates, bailouts of State Owned Entities to the tune of billions of rands, and minimal or no increases to salaries and wages over the same period, any increase to the fuel levies now is ill-advised and counter-productive,” the AA added.

IOL Motoring

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