The South African government has extended its intervention on the general tax on fuel prices until the beginning of August.
The Treasury and Department of Energy initially announced a temporary General Fuel Tax reduction of R1.50 per liter between April and May 2022 to provide limited short-term relief to households from rising prices fuel following Russia’s attack on Ukraine.
The aid was to be financed by the liquidation of part of the strategic crude oil reserves.
“Since that announcement, the continuation of the Russian-Ukrainian conflict, supply chain bottlenecks and a tightening of global monetary policy have led to further adverse developments in the two main drivers of the regulated price of gasoline, the exchange rate and the world oil price,” the Treasury said.
These events have resulted in even larger increases in fuel prices compared to a few months ago when the temporary fuel tax relief was introduced, he said.
“The withdrawal of temporary General Fuel Tax relief on March 31, 2022, as originally announced, would contribute to an increase in petrol prices of almost R4 per litre, and push up fuel prices. 95 octane (ULP) unleaded gasoline above R25 per literan increase of just under 20% next month,” the Treasury said.
– Department of Mineral Resources and Energy (@DMRE_ZA) May 30, 2022
Due to this significant monthly price increase, Finance Minister Enoch Godongwana submitted a letter to the Speaker of the National Assembly, requesting the tabling of a two-month proposal for the extension of the general tax reduction on the fuels.
This will take the form of continued relief from Rand 1.50 per liter for the first month, June 1, 2022 to July 6, 2022.
It will be followed by a downward adjustment of the relief for the second month at 75 cents per liter from July 7, 2022 to August 2, 2022.
The shortfall due to the extension of the relief is estimated at R4.5 billion, the Treasury said.
“Contrary to 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. The government remains committed to the fiscal framework outlined in the 2022 budget.
“The proposed temporary fuel charge reduction will be accommodated within the current fiscal framework in a manner consistent with the fiscal strategy outlined in the budget. Any changes, if necessary, will be announced at the time of the 2022 medium-term fiscal policy statement.”
The temporary reduction in the general fuel tax will only lessen the impact of persistently rising fuel prices on consumers and businesses as the economy will have to adjust to this new reality, the Treasury said. .
Other changes include:
- From June 1, 2022, the Ministry of Mineral Resources and Energy will remove the demand management tax from 10c per liter that has been applied inland ULP 95.
- After review and consultation by the DMRE, it is proposed that the base fuel price also be reduced by 3c per liter In the coming months.
- The government intends to continue consultations and proposals for remove the price cap on 93 ULPs, which will partially liberalize the market and introduce more competition to lower prices at the pump.
- A regulatory accounting system reviewwhich includes the retail margin, the wholesale margin and the secondary storage and distribution margins, will be supplemented by the DMRE to assess the potential for lower margins in the medium term.
The official gasoline price for June 2022 will be released later on Tuesday, the Treasury said.
Read: Rising fuel prices will hit properties in South Africa – and keep people out of the office: FNB