Fix fuel pricing model and leave levies alone, says AA ahead of Budget Speech

More must be done, and fast, to curb high fuel prices impacting consumers across the country, the Automobile Association (AA) has urged in a statement. 

The association once again renewed their call for government to review its current fuel pricing mode, not only for consumers, but the economy as a whole.

“Our economy is closely linked to the fuel price; it is a major input cost in the manufacturing, retailing and agricultural sectors. 

“We have noted before that a review of the current structure of the fuel price, as well as an audit of all the elements which comprise the fuel price, should be done sooner rather than later,” the AA’s statement read. 

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Leave fuel prices and levies alone 

As such, they are calling on Finance Minister Enoch Godongwana to initiate an overhaul of how fuel prices are calculated in the upcoming Budget Speech on 23 February. 

The AA is also urging Godongwana not to push up fuel levies, which are part of the fuel price, a move the association said would be “counter-productive” and will impact mostly the “poorest of the poor”.

“We know all too well of the economic challenges facing the country, and of the importance of the revenue raised through the two main levies. 

“We are also aware that, as was the case last year, delivering a Budget in the current economic environment is tricky and difficult and that the pressure to ease government’s financial burden is immense.” 

The general fuel levy currently sits at R3.93 per litre. In 2021, it was R3.77. The Road Accident Fund (RAF) levy is at R2.18, up from R2.07 in 2021. Combined, this adds R6.11 to every litre of petrol and diesel sold in South Africa. 

Any adjustments to be announced by Godongwana will be implemented in April, the AA explained. 

Neighbouring countries who purchase fuel from South Africa do not incur these levies, which means their fuel is ironically cheaper, the AA added. 

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Review RAF funding 

One immediate solution posed by the AA is to review the funding of the RAF. 

“Our reliance on the RAF is a direct result of South Africa’s poor road safety and that’s where more attention needs to be given for a long-term solution.”

In June last year, Transport Minister Fikile Mbalula conceded the current dispensation of the RAF was unsustainable, but that work was being done to create an equitable road accident benefit scheme. 

The RAF was branded by Mbalula as the “biggest liability after Eskom”, but assured the situation was improving. 

Between 1981 and 2005, the RAF’s annual deficit skyrocketed to R1.2 billion. As of 31 March 2021, R2.3 billion surplus was reported, compared to the R5.2 billion deficit of the previous year. 

“Our country faces enormous and complex economic challenges. 

“High fuel prices are adding to these challenges and instead of accepting the current model, we must seek solutions that benefit consumers, not place them in more financial distress.”

The AA is also planning on highlighting that any tax increases must be viewed in the context of current spending, corruption, utility fee increases and rising living costs – all when more people are financially constrained and unemployed than ever before. 

“We must accept that drastic intervention is needed if we are to grow our economy; one way we believe this can be done is by dealing more effectively with the fuel price than what we currently are,” the AA said.

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Compiled by Nica Richards. Additional reporting by Molefe Seeletsa.