Fuel levy and RAF levy make up big part of price at the pump
In April the cost of a litre of fuel will be impacted by a 30 cents a litre increase in the Fuel Levy, announced by Finance Minister Pravin Gordhan during his budget speech in February.
This will move the Fuel Levy – a tax collected on every litre of fuel sold – from R2.55 to R2.85 a litre. The money collected through the Fuel Levy is administered by the National Treasury, and is treated as a general tax, not, as many people assume, road-related expenses.
For many, the fuel price is merely a number on a pump that they need to pay when filling their tank. But the cost of this essential commodity is much more than that; it is made up of many different costs that, together, constitute what is commonly referred to as the petrol price.
In South Africa this price is adjusted monthly based on a number of factors, mainly international petroleum prices, and the Rand/US Dollar exchange rate.
The Basic Fuel Price (BFP) is calculated based on costs associated with shipping petroleum products to South Africa from the Mediterranean area, Arab Gulf, and Singapore. These costs include insurance, storage, and wharfage (the cost to use harbour facilities when off-loading petroleum products into storage facilities).
In March 2016 these costs totalled R4.70 per litre for 93 unleaded petrol (inland).
Other costs associated with the petrol price include transport costs (from the harbour to other areas), customs and excise duties, the retail margins paid to fuel station owners, and secondary storage costs. Importantly, these other costs also include the Fuel Levy and the Road Accident Fund (RAF) Levy.
In March 2016, these other costs totalled R6.76 (for inland users) per litre for 93 unleaded petrol. Of this, R2.55 was allocated to the Fuel Levy, and R1.54 was allocated to the RAF Levy. The Fuel Levy goes directly to the National Treasury, while the RAF Levy goes to the RAF, and is used to care for victims of car crashes.
This means that for every litre of petrol costing R11.46, R4.09 (or almost 35 percent) is allocated to different government levies. In April this will increase to R4.39 per litre.
Using this formula, filling a 50 litre tank with 93 unleaded petrol inland, will cost you R573. Of this, R127.50 goes directly to the Fuel Levy with a further R77 going to the RAF Levy, giving a combined total of R204.50.
If the price of petrol remains unchanged at the end of April, and only the increase in the Fuel Levy is recorded, the cost of filling a 50 litre tank will increase to R588. Of this, the Fuel Levy will comprise R142.50, and RAF Levy will remain unchanged at R77, for a combined total of R219.50 generated from the two levies.
Should the Basic Fuel Price (BFP) increase in April, a calculation that still needs to be done, the price of a litre of petrol could increase more, or decrease, depending on the current factors.
The Automobile Association (AA) releases a prediction for the change in the fuel price in the middle of every month, and again at the end of the month ahead of the official announcement by government.