Government announces last minute petrol price intervention for South Africa

South Africa’s government has extended its general fuel price levy intervention until the beginning of August.

Treasury and the Department of Energy initially announced a temporary reduction in the general fuel levy of R1.50 per litre between April and May 2022 to provide limited short term relief to households from rising fuel prices following Russia’s attack on Ukraine.

The relief was to be funded by a liquidation of a portion of the strategic crude oil reserves.

“Since this announcement, the continuation of the Russia/Ukraine conflict, supply chain bottle-necks and a tightening of global monetary policy have led to further unfavourable changes in the two key drivers of the regulated petrol price, the exchange rate and the global oil price,” Treasury said.

These events have led to even larger increases in fuel prices compared to a few months ago when the temporary fuel levy relief was introduced, it said.

“The withdrawal of the temporary relief in the general fuel levy on 31 March 2022, as per the original announcement, would contribute to an increase in petrol prices of close to R4 per litre, and push prices of 95 octane unleaded petrol (ULP) to above R25 per litre, an increase of just under 20% next month,” Treasury said.

Extension

Due to this significant monthly price increase, finance minister Enoch Godongwana has submitted a letter to the Speaker of the National Assembly, requesting the tabling of a two-month proposal for the extension of the reduction in the general fuel levy.

This will take the form of a continuation of the relief of R1.50 per litre for the first month, from 1 June 2022 to 6 July 2022.

It will be followed by a downward adjustment to the relief for the second month to 75 cents per litre from 7 July 2022 to 2 August 2022.

The revenue foregone from the extension of the relief is estimated at R4.5 billion, Treasury said.

“Unlike the previous announcement, this proposal is expected to have an impact on the fiscal framework as it will not be fully funded through a sale of strategic oil stocks. Government remains committed to the fiscal framework outlined in the Budget 2022.

“The proposed temporary reduction in the fuel levy will be accommodated in the current fiscal framework in a manner that is consistent with the fiscal strategy outlined in the Budget. Any changes, if required, will be announced at the time of the 2022 Medium Term Budget Policy Statement.”

Other changes 

The temporary reduction in the general fuel levy will only smoothen the impact of persistently higher fuel prices on consumers and businesses, as the economy will need to adjust to this new reality, Treasury said.

Other changes include:

  • From 1 June 2022, the Department of Mineral Resources and Energy will remove the demand side management levy of 10c per litre that has been applied to inland 95 ULP.
  • After a review and consultation by the DMRE, it is proposed that the basic fuel price also be decreased by 3c per litre in the coming months.
  • The government intends to continue with consultations and proposals to remove the price cap on 93 ULP, which will partially deregulate the market and introduce more competition to lower pump prices.
  • review of the Regulatory Accounting System, which includes the retail margin, wholesale margin and secondary storage and distribution margins, will be completed by the DMRE to assess the potential to lower margins over the medium term.

The official June 2022 petrol price will be published later on Tuesday, Treasury said.

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