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South Africa Proposes Fuel Subsidy Hold Amid Price Fears

Lebohang, a fuel attendant fills up a vehicle in Soweto, South Africa, Tuesday, May 31, 2022. (AP Photo/Themba Hadebe)

The South African government was expected to raise fuel prices to a record high before the proposal. The state blames the war in Ukraine for the global rise in fuel prices, but financial analysts say taxes are also responsible.

South Africa's government has announced a proposal to extend fuel subsidies for an additional two months, which were expected to expire late May.

“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,” the National Treasury said in a joint statement with the Department of Mineral Resources and Energy.

The Department of Mineral Resources and Energy said international crude oil prices, product inventory levels, and geopolitics are among the factors attributed to the increase in fuel prices.

“The minister of finance will guide us on the trends and what measures can possibly be put in place, maybe, to help us stay afloat on that matter,” said Minister in the Presidency Mondli Gungubele at a media briefing last week.

Economists are concerned that without the government-imposed levies, citizens would be paying around 13 rands per liter of petrol, even when factoring in the fallout from the conflict in eastern Europe. But soon they’ll have to fork over almost double that at 25 rands per liter.

According to the country’s Automobile Association, or AA, South Africans spend about 16 billion rands, almost 1 billion dollars, a month on petrol. Taxes are a third of this total.

AA representative Layton Beard says another fuel price increase will cause costs of “almost everything” they need, including food and transport, to spike as well.

“We need to do a review of the fuel price, calculations that go into every liter of fuel, to determine whether A, those calculations are correct, and, B, whether all the components [surcharges] on a liter of fuel still need to be there.”

President Cyril Ramaphosa’s administration is adamant it can’t afford to lose the 140 billion rands it gets in fuel taxes annually.

Beard says “careful thought” must be given to calls for the general fuel levy to be scrapped, as it alone amounts to 95 billion rands.

The government cut the fuel levy by 1.50 rand per in April and May to “relieve financial stress” but said it can’t afford to extend this for a long time.

Officials say the government is considering cutting some of the “smaller” levies attached to a liter of petrol and putting price caps on unleaded fuels.