The call for a total review of South Africa’s fuel pricing calculations is not sensible and gives motorists false hope for relief.

That is according to the Fuel Retailers Association’s CEO, Reggie Sibiya, who criticised the Automobile Association of South Africa’s (AA’s) petition for a complete review of the petrol price structure.

The AA recently said the petition urging government to initiate a review of all the components of the fuel price and conduct an audit of all existing elements had garnered 25,000 signatures.

“Our call is for the Minister of Finance to announce such a review in his Budget Speech in Parliament on 23 February as a first step towards mitigating against rising fuel costs effectively for the benefit of all South Africans,” the AA stated.

In a recent interview with eNCA, Sibiya said the AA was too general in its call and should instead specify which elements of the petrol price required review.

“I am very wary of us as associations going out there and giving false hope. I think motorists are anxious enough,” Sibiya said. “We need to be very realistic about what exactly needs to be reviewed.”

Sibiya said the fuel price calculation was in the public domain, suggesting there was nothing to hide in this regard.

“Everybody can go to the DMRE [Department of Mineral Resources and Energy] website and see how the pricing is calculated,” he stated.

He also explained that 80% of contributors to the fuel price calculation could not be fixed through a review.

That is because external factors determine these elements.

The components were as follows:

  • The basic fuel price, according to the international oil price, set by the OPEC nations.
  • The rand/dollar exchange rate, determined by larger economic forces.
  • Fuel and road accident levies, set by government.

The remaining 20% of the price consists of retailers’ margins, which Sibiya said were also subjected to public scrutiny through an open four-year research and consultation process that ultimately established the Slate levy.

“The objectives of that study was to ensure that there is no over-compensation on the margins in the value chain. There was thorough work done. That study is available. The AA can request it from the DMRE.”

“The AA should be specific and say: ‘These elements in the pricing structure, we believe, are not properly calculated for’,” Sibiya said. “That, for me, would be more meaningful.”

Taxes and levies are big culprits

Several civil society organisations, including the Organisation Undoing Tax Abuse (Outa), pointed out that taxes and other levies have been one of the most significant fuel price contributors.

“In November 2011, the combined cost of the General Fuel Levy, the Road Accident Fund (RAF) levy and other levies amounted to R4.48 of each litre of 95 octane petrol.”

“That amount today is R10.10, some R5.62 (126%) higher than a decade ago.” This was much higher than the average inflation rate of about 5% over the past decade.

Outa also said that the weakening rand was not as uncontrollable as the government claimed — it is influenced by poor government policy and fiscal management.

Outa CEO Wayne Duvenage reiterated his organisation’s previous stance that the state has pushed the envelope on fuel levy increases too far and should seriously consider pulling back on seeking additional tax revenue.

He also warned that the government’s coffers could suffer due to the transition to electric cars.

“The current fuel tax revenues the state relies on — in particular, the General Fuel Levy (around R88 billion per annum) and the RAF levy (around R45 billion) – will come under significant pressure over the coming decade, as the transition to electric vehicles becomes a reality,” Duvenage said.

“The state will be hard-pressed to replace these revenue streams through other mechanisms and should seriously consider zero increases to fuel levies going forward, whilst exploring innovative ways to increase efficiency and reduce reliance on these levies.”