On the day the diesel price jumped nearly R3, the government finally announced that it would help South Africa’s motor industry transition to building electric vehicles. The diesel increase isn’t hard to view as a cynical move by a government that makes a sweet profit margin on selling this fuel. Diesel, too, is the main source of juice for generators when load shedding happens. This… ‘alternative’ power has become the only way major retailers can keep their fridges cold.
Each litre of diesel carries with it a surcharge for the Road Accident Fund (RAF) – which would only be required if that litre was being used by a car on a road. Or a tractor. But it isn’t. It’s literally being used to keep the lights on.
Flooding the government’s coffers
“The government makes a pretty penny on every litre of diesel they buy. And offers no form of rebate on those purchases,” Financial Mail reported earlier this year. “This combination of record fuel prices and the unavoidable surge in demand for diesel has helped shore up government coffers.”
The two main taxes paid on every litre of fuel are the General Fuel Levy (GFL) and the RAF levy. These “remain significant contributors to the overall prices of fuel,” says the Automobile Association (AA). The FM calculated that 37% of every litre of diesel comes through these two levies. “That means 37% of the price of every litre of diesel bought ends up in government coffers, including the chronically mismanaged RAF,” it wrote.
“The National Treasury’s Budget Review for 2022 provides a grim perspective of the hit South Africans have taken. Back in 2005, the fuel levy generated R19.2bn for the South African Revenue Service (Sars). That figure increased at a reasonable pace until 2015 when it reached R48.4bn. It rose to R90bn in 2022 and is forecast to hit R100bn in 2025.”
Compare that with the R500 billion expected from VAT and the R286 billion from corporate income tax. Let’s not forget that the RAF has been a cash cow for unscrupulous lawyers and other scoundrels for ages. It has been close to bankruptcy, if not already, many times.
(Inadvertently) funding the RAF
Last year, the AA warned that the “government must act quickly to deal more effectively with the fuel price in South Africa”. The state should find ways to “mitigate against rising fuel costs which are negatively impacting on all consumers in the country”. The obvious way to do so is to review the current fuel pricing model – which is a polite way of saying: scrap the unnecessary levies.
“South Africa’s fuel price is… more expensive than in neighbouring countries to which South Africa exports,” says the AA, which analysed the levies in May.
Every time you run your diesel generator – especially if you are Pick n Pay, Woolworths, Shoprite Checkers or your local Spar – you are paying for the upkeep of roads and filling up the insurance pool for accidents. All to keep your vegetables from going off.
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It only makes sense if you are in the ruling party, which has destroyed so many other forms of taxable income – like electricity, which municipalities get a vast majority of income from by adding a surcharge to these fees. This is supposedly to maintain the municipalities’ own electricity infrastructure – but clearly, that isn’t being done.
Worse still, the constant turning off and on of sub-stations is causing great damage to them. They were designed to be turned on once and left running for years. Not turned on and off several times a day.
“Our economy is closely linked to the fuel price; it is a major input cost in the manufacturing, retailing and agricultural sectors,” the AA said last February after that budget speech. “We have noted before that a review of the current structure of the fuel price, as well as an audit of all the elements which comprise the fuel price, should be done sooner rather than later.”
On the day this was written, South Africa was expecting eleven hours of load shedding. The sound of diesel generators has become the new unofficial anthem of South Africa.