Reduce the petrol price! Endorse the IRR’s solution to reduce costs.


The petrol price is higher than it has ever been. In July 2018, a litre of petrol cost over R16 in Gauteng and about R15.53 in coastal areas (the difference in price arising from the cost of transporting petrol from the coast to Gauteng).

One of the primary drivers of this increase is the large proportion in the price that goes to taxes.

How much of what we pay for petrol goes to tax? Of the R16 you will pay in Gauteng for a litre of petrol, only a small amount – about R7.96 – goes to the actual cost of fuel. About R2.76 goes to other miscellaneous costs, such as the cost of transport, and the margin for the retailers who sell the petrol. About a third of what we pay for petrol goes to taxes and levies. These are the fuel levy, which amounts to R3.37 a litre, and the Road Accident Fund (RAF), which gets R1.93 for every litre sold.

The tax that we pay on petrol has increased much faster than inflation. In 2008, a litre of petrol (in Gauteng) cost R7.16. Of that, 45c went to the RAF and R1.27 went to the fuel levy. The fuel levy and RAF contribution accounted for about a quarter of the cost of a litre of petrol. If the cost of a litre of petrol had increased at the rate of inflation it would cost about R12.50 today, an increase of about 80%. However, petrol is now 130% more expensive than it was in 2008.

Up until the 1970s, the fuel levy was ring fenced and only used for road maintenance. However, as the apartheid state began to feel the financial pinch, partly because of the Border War, this money began to be used for general government expenditure. This is still the case with the government continuing to use the fuel levy as a way to raise funds, as can be seen from how quickly the fuel levy has increased. For the 2017/18 tax year, the fuel levy was expected to bring in about R70-billion.

At the same time, the RAF receives over R30 billion from what we pay for petrol.

Much of what we pay for petrol, then, is really just more tax. But can these taxes be reduced? The answer is yes.

The first step the government can take is to reduce wastage. One of the biggest items in the budget today is the salary bill for public servants. If we reduced the government’s wage bill by 10% we would save R51 billion.

Corruption is another significant problem which further reduces what the government has available to spend. This must be tackled with vigour. Reducing corruption and other wasteful expenditure will go some way to reducing the drain on the fiscus. For the 2016/17 financial year, the auditor-general reported a whopping R45 billion in irregular expenditure by the government and state-owned enterprises (SOEs). And it is likely that irregular expenditure was even higher, as not all government entities submitted financial statements.

A further step that would relieve the burden on citizens would be to sell or partially privatise our expensive SOEs, such as Eskom and South African Airways (SAA). These organisations are simply a drain on our funds and we should not give them money. The government should not be in the business of owning airlines, but focus on running the country. Last year, SAA received a bailout of R10 billion and has asked for another R5 billion – taxpayers should not be keeping an airline afloat.

We could also save on what we pay for the RAF. The RAF is a badly run organisation; it posted a loss of R30 billion in 2017, yet was recently reported as spending R500 000 a month on renting 300 office chairs. We could abolish the RAF if legislation were introduced to compel all road users to have third-party motor vehicle insurance. This has been under consideration by the government for some time, but we should look to implementing it. Having all vehicles insured would mean we could get rid of the wasteful RAF.

Finally, the country’s economy has to grow much quicker. A country with a strong, growing economy would increase tax revenue, and create more jobs.. This would not only increase the government’s revenue but reduce its commitments at the same time.

How can the government grow the economy?

For a start, red tape that stifles businesses must be cut, and economic activity encouraged. At the same time, damaging policies such as black economic empowerment (BEE) need to be scrapped and replaced with empowerment policies which directly address continuing disadvantage that race-based measures have failed to overcome. Empowerment focused on disadvantage rather than race would still overwhelmingly benefit black people, but would offer the hope of real empowerment for poor people, not the faux empowerment which only benefits insiders and the connected.

Cadre deployment should be stopped immediately. The most capable people must be put in charge of important levers in the state, no matter their political affiliation or race. Those who suffer the most from a weak state are the poor and they will benefit the most from a capable state.

It is possible to reduce the price we pay for petrol, and the steps are simple. We need to reduce corruption and wastage in the government, and build an economy that grows and benefits all South Africans.

Take a stand and add your name below and support the IRR in fighting for a government that does not waste your tax money. Help us pressure the government, and the minister of energy in particular, to act in your interest and reduce these costs.

 



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