General fuel levy temporary suspension extended to August

Wednesday, June 1, 2022

Government has offered much-needed short-term reprieve to motorists by extending the temporary reduction in the general fuel levy of R1.50 per litre.

Initially, the Ministers of Finance and Mineral Resources and Energy had on 31 March 2022 jointly announced a temporary reduction in the general fuel levy of R1.50 per litre from 6 April 2022 until 31 May 2022.

This was to provide limited short term relief to households from rising fuel prices following the Russia/Ukraine conflict.

On Tuesday, the two departments said 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.

“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. 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 percent next month.”

The departments said due to this significant monthly price increase, Finance Minister Enoch Godongwana on Tuesday 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, and then a downward adjustment to the relief for the second month to 75c per litre from 7 July 2022 to 2 August 2022,” they said.

They added that the temporary relief would be withdrawn from 3 August 2022.

The Chair of the National Council of Provinces was also been informed of this proposal.

The departments said the revenue foregone from the extension of the relief was estimated at R4.5 billion.

“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.”

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

They added: “As announced on 31 March 2022, government will also take further measures to help reduce fuel prices in a more sustainable manner. From 1 June 2022, the DMRE 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.

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.

The departments said a review on the Regulatory Accounting System would be completed by the DMRE to assess the potential to lower margins over the medium term.

The DMRE will publish further details within the next hour on the actual adjustment of fuel prices with effect from 1 June 2022. –