Expect big gasoline price hikes in South Africa in the coming months

Finance Minister Tito Mboweni will deliver his speech on the 2021 budget on February 24th. Fuel taxes should again be an obvious revenue target.

Tax experts at law firm ENSAfrica said motorists should expect increases in fuel taxes and contributions to the traffic accident fund.

“This is probably at least 19 cents per liter for the fuel levy and another nine cents per liter for the traffic accident fund.

“This is slightly above the rate of inflation and will help increase overall revenue. This is a tax that is easy to manage and the increase of which is less obvious than other taxes. “

These concerns were raised by Dr. Francois Stofberg, chief economist at Efficient Group, confirms that around 38% of the current gasoline price – around R 5.88 – is made up of these two taxes.

He added that hiking these taxes is a favorite for finance ministers in South Africa – it’s a broad tax and easy to manage,

“Like VAT, but a bird of a different feather. Fuel tax isn’t equated with VAT, so it’s easier to come by for voters, annoying unions, and party members.

“Given the poor state of our public finances and the difficulty of increasing sales tax or taking more from employees through higher personal taxes or property taxes, we expect fuel-related taxes to rise by as much as 1.50 rand in the minister’s next term will be budget address later in February. If we are lucky it will only increase by R1.00. “

Stofberg said global oil prices are also expected to drive local gasoline prices higher in the coming months.

As global production returns to pre-pandemic levels and expectations of a new global wave of growth solidify, which will be good news for our commodity producers in South Africa, higher demand will support higher oil prices, Stofberg said.

“And then there’s the weather. Colder winters in the northern hemisphere, such as currently in the US, usually increase demand and cause oil prices to rise.

“Or socio-political tensions in the Middle East that can add a few dollars to the price of oil.”

Stofberg said the price of oil should therefore not exceed $ 70 a barrel and averaging $ 65.

“However, those two factors, the international dollar price of crude oil and the value of our rand, only make up the base price of fuel in South Arica. The taxes levied on fuel in South Africa are far more worrying. “

Hike expected in March

Fuel tax increases announced by Mboweni will not take effect until April.

Drivers should still prepare for a gasoline price in March, however, according to data from the Central Energy Fund as of mid-month.

CEF data shows a general under-recovery in prices, expected to rise by 56 cents per liter for gasoline and 48 cents per liter for diesel.

While the mid-month data serves as a snapshot, the Department of Energy makes adjustments based on a review of the entire period. In addition, the outlook can change significantly before the end of the month.

Mid-month prices are a strong indicator of moving trends. Prices are influenced by two main components – the rand / dollar exchange rate and changes in the international cost of petroleum products, which largely depend on the price of oil.

From mid-February, the ZAR / USD exchange rate will contribute to an overtake of around 12 cents per liter. Rising international product prices, however, lead to an under-recovery of around 70 and 60 cents per liter of recovery for petrol and diesel, which is what causes the deficit.

Read: Brent oil costs $ 65 a barrel

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