Government has the means to shield us from higher fuel prices

02/07/2018. The petrol price is set to go up again this week. Picture: Thobile Mathonsi/African News Agency/ANA

02/07/2018. The petrol price is set to go up again this week. Picture: Thobile Mathonsi/African News Agency/ANA

Published Mar 10, 2022

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Opinion: At the end of last year, as South Africans planned for the December holidays, news broke that the petrol price had risen to above R20 a litre – a record high.

Today, with Russian troops in Ukraine and talk of the petrol price hitting R40 a litre, the December 2021 price seems like a bargain.

At R40 a litre, topping up a Toyota Corolla Cross (with a 47-litre fuel tank) or a Volkswagen Polo Vivo (45 litre fuel tank) would cost around R1 800. That’s about what those on a government pension survive on for an entire month.

With the petrol price that high, the cost of everything would rocket. But it doesn’t have to be this way. For once, our government has the means to shield us from higher fuel prices. It can do so dropping the taxes we pay when we fill up.

In December last year when the petrol price shot up to more than R20 a litre, Statistics South Africa provided a breakdown of where our petrol money goes.

About half went to buy the stuff. Just under 20% went to the refineries and retailers while about a third – 33% to be exact - went to taxes and levies.

We know the taxes and levies as the Road Accident Fund and the General Fuel Levy. The first is used to pay victims of motor vehicle accidents while the second goes into the pot of other taxes that pays for government expenditure.

According to Stats SA, in the 2019/20 financial year, the Road Accident Fund collected just over R41 billion while the General Fuel Levy raised R80bn. That’s R120bn in 12 months.

You are probably wondering how the government would make up for this shortfall if it stopped taxing fuel. The answer lies in the very conflict that is causing fuel prices to spike.

Russia is not just the world’s second-largest producer of crude oil after Saudi Arabia. It is also the second-largest producer of platinum group metals (PGMs).

The metals are used to reduce harmful emissions and are an important component in almost all modern cars. However, Russian mines will not be able to supply car manufacturers due to the sanctions that have been imposed on Vladimir Putin’s country. As a result, focus will shift to the world’s largest producer of PGMs – South Africa.

But that’s not all Europe and America would need from us. With Russian coal no longer accessible, ships are heading to Richards Bay harbour which is home to Africa’s biggest coal terminal.

South Africa’s mining companies therefore stand to benefit from the conflict in Europe. The profits they make will result in them paying more taxes to the government, which has the potential to make up for whatever is lost if it scraps the taxes and levies consumers pay for fuel.

If the rand strengthens due to greater demand for our goods, it will further cushion us against rising fuel prices. Then, suddenly, South Africa starts looking like a decent place to live in and a great investment destination.

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