The government has moved to lessen the burden of rising fuel hikes with a proposal to cut prices as early as next Wednesday
In a joint statement Thursday, Finance Minister Enoch Godongwana and Mineral Resources and Energy Minister Gwede Mantashe announced a two-phase proposal to alleviate anticipated fuel hikes.
The joint statement said Phase 1 was a proposal for a temporary reduction in the general fuel levy to be funded by a liquidation of a portion of the strategic crude oil reserves.
“The minister of finance proposes that the general fuel levy is temporarily reduced by R1.50 per litre from Wednesday 6 April 2022 to Tuesday 31 May 2022,” said the statement.
“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.
“It is estimated that the partial reduction in the fuel levy will cost around R6 billion in foregone tax revenue for the two-month period,” said the statement.
The mineral resources and energy minister proposes that the revenue foregone be recouped through a sale of strategic crude oil reserves held by the Strategic Fuel Fund (a subsidiary of the Central Energy Fund).
The sale would be required to raise around R6 billion.
“The combined effect of the two proposals will not have an impact on the fiscal framework adopted by Parliament following the 2022 Budget,” said the statement.
In Phase 2 the mineral resources and energy minister proposes a package of additional measures to be introduced after the expiry of the temporary measures from Wednesday 1 June 2022 that include a reduction in the Basic Fuel Price of 3c/l, in line with the recommendations of the review done by the DMRE.
The minister also proposed the termination of the Demand Side Management Levy (DSML) of 10c/l on 95 unleaded petrol sold inland.
He also suggested 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,” said the statement.
“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.”
The minister proposed that interventions will be considered by the DMRE to reduce the price pressure for illuminating paraffin over the medium term.
Legislative Process Proposed reduction of the general fuel levy
“The minister of finance has tabled the temporary reduction in the general fuel levy in the National Assembly today,” said the statement.
The oil prices hike is due to rising demand as the global economy recovers and Covid-19 restrictions are eased.
In addition, the conflict between Russia and Ukraine has placed significant pressure on domestic fuel prices, as well as other goods and services.
