Govt talks to reduce fuel taxes at advanced stage, says Mantashe

Stephen Grootes gets comment from Layton Beard, spokesperson for the Automobile Association (AA), and RMB chief economist Isaah Mhlanga.

Is a reduction in fuel prices in the offing for South Africans?

Mineral and Petroleum Resources Minister Gwede Mantashe says discussions around providing some relief for motorists are at an advanced stage.

Mantashe was speaking on the sidelines of the Africa Oil Week conference taking place in Cape Town.

He noted that current taxation means R6 from every R20 we pay for a litre of petrol, goes to the Road Accident Fund (RAF) and General Fuel Levy (GFL).

'The fuel price has been decreasing for the past five months, and the impact is not visible because there is RAF and fuel levy attached to the price', he said.

Stephen Grootes gets comment from Isaah Mhlanga, chief economist at Rand Merchant Bank (RMB) and Automobile Association (AA) spokesperson Layton Beard.

While the Minister's statement was a significant one, says Beard, it was 'very thin on detail'.

And how will it play out with National Treasury, as these taxes contribute a combined R150 billion rand to the fiscus?

"I can picture Treasury officials pushing back and saying 'this is one of the biggest taxes we collect - we generate R100 billion through the GFL and R50 billion through the RAF levy; how are we going to fill that gap?'"

"In our view, South Africans are angry paying it because they don't see a return on investment... if potholes were fixed and roads worked I dont think people would have as much of a problem paying it as when they see crumbling infrastructure.

"The second issue is this one of corruption, and that money just going to somebody's pocket."

Layton Beard, Spokesperson - Automobile Association 

Mhlanga makes the point that if these levies were to be removed wholesale, the 'missing' money would have to be raised through other means.

His view of any discussions between National Treasury and Mantashe's department is that they'll take the form of a review of the formula for how fuel prices are determined, to make it more market-related.

"That perhaps can introduce some efficiency in the pricing of fuels, but to take out the fuel levies in their totality leaves significant gaps from a funding perspective. Where would the funding for the RAF come from - you would have to find an alternative funding mechanism."

"One way or the other, that funding (from the fuel taxes) will have to be raised through, I imagine, some form of taxes; so it's simply shifting the burden from one type to the next and it doesn't really resolve the underlying issue."

Isaah Mhlanga, Chief Economist - Rand Merchant Bank

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