President Cyril Ramaphosa has taken a bold and much needed step in promising a review of the fuel price, but this process should unfold quickly, the Automobile Association (AA) warns.

During his speech at the opening of Parliament on Thursday, July 18, Ramaphosa announced that his newly formed Government of National Unity (GNU) would look to expand the basket of essential food items that are exempt from VAT, and undertake a “comprehensive review” of certain administered prices, including the fuel price structure.

This, Ramaphosa said, would help to identify areas where prices can be reduced.

The AA welcomed last week’s announcement, labelling it as an extremely important step in the right direction, as such an assessment of the fuel pricing formula is necessary to determine whether all components are properly calculated and still necessary in the current structure.

In addition to transportation, storage, wholesale and retail-related costs, South Africa’s fuel price structure comes with a heavy tax burden of R6.14 for every litre of petrol and R6.02 for each litre of diesel sold.

This consists of the General Fuel Levy, at R3.96 for petrol and R3.84 for diesel, as well as the Road Accident Fund (RAF) levy that’s pegged at R2.18.

“While we are cautious about simply scrapping these levies outright, we believe there is room for movement in specifically the RAF levy portion of the taxes,” the AA said.

“We also believe a comprehensive review may highlight other areas within the fuel pricing formula that can be better dealt with to mitigate rising fuel costs,” the association added.

The AA has been calling for such a comprehensive review since 2019.

Fuel prices have risen substantially in the past five years, with the cost of 95 Unleaded at the coast having increased from R15.17 in July 2019 to R22.47 today.

“The President has taken the bold step of announcing a fuel price review and that process must now unfold quickly,” the AA added.

“The outlook for fuel prices in August is bleak, with little or even no relief forecast. Against this backdrop, and the major role fuel prices play in our economy and on personal budgets, the fuel price review is long overdue, and our hope is that it gets under way as soon as possible.”

According to the latest fuel price data released by the Central Energy Fund on July 22, 95 Unleaded petrol is looking set for a decrease of around six cents per litre, while 500ppm diesel is likely to fall by about eight cents per litre. This follows a 99 cent decrease in July and R1.24 price cut in June.

IOL Motoring