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Government has given motorists a reprieve after extending a R1.50 temporary reduction in the fuel levy to the end of August.
The fuel levy reduction, which was initially introduced in April, was meant to end on May 31. If government had not acted, motorists would have had to pay almost R4 a litre more at the pumps from Wednesday.
South Africa, which imports its oil, has had to deal with the effects of Russia’s invasion of Ukraine, which has disrupted the global supplies of oil and other commodities.
On Monday, the EU agreed to ban up to 90% of oil supplies from Russia, further fuelling the surge in brent crude oil price to more than $122 (R1 900) per barrel.
READ: Petrol, diesel hikes announced for Wednesday
The Russia/Ukraine conflict also led to a tightening of the global monetary policy environment, affecting the exchange rate and the global oil prices, resulting in massive increases in fuel price.
In a joint statement on Tuesday, the ministers of finance and mineral resources and energy said: “Due to this significant monthly price increase, the minister of finance has today 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 June 1 2022 to July 6 2022 – and then a downward adjustment to the relief for the second month to 75c per litre from July 7 to August 2. The temporary relief will be withdrawn from August 3.”
Dawie Roodt, chief economist at Efficient Group, is not in favour of extending the fuel levy reduction.
“There are other taxes that are causing far more damage to the economy. Even though the fuel levy is bad, it’s better than others,” Roodt said.
“I understand where the politicians are coming from, they are trying to be populist here because this is a populist move. The main problem that we have in South Africa is the state just spending too much money. We have to cut down on state spending,” he said.
Government said that unlike the previous reduction, which was funded by a liquidation of a portion of the strategic crude oil reserves, the expected R4.5 billion loss from the extension will have an impact on the fiscal framework.
READ: Treasury extends general fuel levy cut
“The 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,” the government said.
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