Not every part of the fuel price is beyond government’s control
Wednesday’s massive 99c fuel price increase – the biggest ever in the history of our country – will have calamitous implications for millions of economically distressed South Africans. We’ve become so accustomed to this news that it is easy for us to miss the true scale of these implications. For many it will seem like just another petrol price hike, followed by some more hand-wringing from government, more calls for South Africans to “tighten the belt” and then we must simply get on with life until the next wave hits us.
But the truth is, there is no more belt left to tighten for many families. And not only families – small businesses too. We often hear how poor families spend a disproportionate part of their household income – up to a fifth of it – on transport. Well, the same goes for many small enterprises. And when this input cost rises beyond a certain point, telling them to tighten the belt is not a helpful piece of advice. Often, all they can do is shut their doors and cut their losses, leaving their own families as well as those of their employees with no income at all.
While it claims to commiserate with struggling South Africans, our government could not possibly be more out of touch with the real-life challenges of our people. In a series of tweets following the fuel price hike, the government’s first piece of advice was to “consider replacing your vehicle with a more modern, high technology, fuel efficient product”. As many people pointed out to them, this was Mary Antoinette’s “let them eat cake” all over again.
But government’s biggest mistake is not its ill-considered petrol saving advice on Twitter. Its most glaring shortcoming is its unwillingness to take any responsibility for this situation, choosing instead to blame “outside forces” for a string of increases that has seen the inland price for 95 octane petrol climb from R13-76 in March this year to R17-08 on Wednesday. If you take a step back and look at our petrol price over the past decade, you get a true sense of just how badly poor South Africans have been affected. The same litre of petrol that now costs R17-08 would have set you back R7-01 in 2007.
I know full well that there are many factors that determine the fuel price, and that some of them are beyond the control of any government. The price you see at the pump includes the cost of crude oil, the cost of refining fuel from this oil, the cost of distributing this fuel to depots and stations, the margins added by filling stations and the two government taxes, the General Fuel Levy and the Road Accident Fund (RAF) Levy. I know that Brent crude oil has increased dramatically this year, and I know that our currency has tumbled sharply against the Dollar. I have a very realistic view of what can and can’t be done to rein in the fuel price.
But for government to now wash its hands of the effects of the plummeting Rand – said to be responsible for more than half of Wednesday’s increase – is more than a little disingenuous. Our currency has weakened by almost 30% since President Ramaphosa took over, and much of this has been in direct reaction to ANC policy. When the President made his late-night television announcement on Expropriation without Compensation in July, the Rand immediately plunged by 31c to the Dollar. Yes, the weakening of our currency is a factor in the rising fuel price, but it most certainly is not an external factor over which the ANC and President Ramaphosa have no control.
And while government might want to debate its culpability in the weakening of the Rand, there can be no debate whatsoever over the tax it levies on every litre of fuel. The combined government tax now accounts for almost a third of the price of a tank of petrol or diesel. And, when measured against rises in the other input costs, this is the portion of the fuel price that has increased more than any other – 165% over the past decade. The RAF levy alone increased by more than 300% during this time. Keep in mind that the corruption-plagued RAF’s debt (R29 billion) is fast approaching the total revenue (R37 billion) it received from the fuel levy this past financial year.
The General Fuel Levy isn’t a ring-fenced tax either. It simply gets dumped into the fiscus to try and help plug the ever-widening gap between our tax revenue and our expenditure. This is the reason for the extraordinary increases over the years. The ANC has no plan stop our economy from shrinking, it has no strategy to collect taxes more efficiently through SARS and, less than a year from the elections, it seems intent to carry on spending at its current rate. Which explains increases in the tax component of the fuel price, increases in VAT, increases in personal income tax plus a host of new “sin” taxes.
This is a full-blown tax war on the citizens of the country, and it is the poorest who will end up suffering the most. The AA estimates that this latest fuel price increase will extract a further R2.5 billion a month in transport costs from an economy that is already on its knees. This will be felt across every industry.
I know there is nothing we can do about the oil price, but there is plenty we could do immediately to reduce the tax on fuel. However, judging by the limited scope of the technical team set up by government to look into the fuel price (the fuel levy does not even make up part of this investigation), it would seem that the ANC has no intention to do so. They’d rather you just bought a new car and stop complaining.
There is even more we could, and must, do in the long run to ensure that our economy grows and our currency strengthens. But this would require a complete ideology and policy shift from an ANC government so firmly rooted in the past they cannot even imagine our future. And so it will fall to a new government to revive our economy, stabilise our currency and turn our country around. Only the DA can be this government.