The Department of Mineral Resources and Energy announced a hike in both petrol and diesel prices, effective from Wednesday, 1 March 2023. Image Credit: SANews

The SA government has offered a much-needed short-term reprieve to South African motorists by extending the temporary reduction in the general fuel levy of R1.50 per litre.

The reduction, which began on 6 April, was meant to end on 31 May. It has brought some relief to households from rising fuel prices following the Russian attack on Ukraine.

On Tuesday, the departments of Finance and Mineral Resources and Energy said relief was to be funded by liquidation of a portion of the strategic crude oil reserves.

“Since this announcement, the continuation of the Russia/Ukraine conflict, supply chain bottle-necks and a tightening of global monetary policy have led to further unfavourable changes in the two key drivers of the regulated petrol price, the exchange rate and the global oil price,” the departments said.

“These events have led to even larger increases in fuel prices compared to a few months ago when the temporary fuel levy relief was introduced. The withdrawal of the temporary relief in the general fuel levy on 31 March 2022, as per the original announcement, would contribute to an increase in petrol prices of close to R4 per litre, and push prices of 95 octane unleaded petrol (ULP) to above R25 per litre, an increase of just under 20 percent next month.”

The departments said due to this significant monthly price increase, Finance Minister Enoch Godongwana on Tuesday 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.

“This will take the form of a continuation of the relief of R1.50 per litre for the first month, from 1 June 2022 to 6 July 2022, and then a downward adjustment to the relief for the second month to 75c per litre from 7 July 2022 to 2 August 2022,” they said.

They added that the temporary relief would be withdrawn from 3 August 2022.

The departments said the revenue foregone from the extension of the relief was estimated at R4.5 billion.

“Unlike 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 temporary reduction in the general fuel levy was expected to only smoothen the impact of persistently higher fuel prices on consumers and businesses, as the economy would need to adjust to the new reality.

They added: “As announced on 31 March 2022, government will also take further measures to help reduce fuel prices in a more sustainable manner. From 1 June 2022, the DMRE will remove the demand side management levy of 10c per litre that has been applied to inland 95 ULP.”

After a review and consultation by the DMRE, it is proposed that the basic fuel price also be decreased by 3c per litre in the coming months. –