8th November 2024

Is Fuel Relief a Mirage? Mantashe’s Promises Fall Flat Amid Rising Prices

12 Jan 2015, Nantong, Jiangsu Province, China --- A Chinese worker holds an oil nozzle at a gas station in Nantong city, east China's Jiangsu province, 12 January 2015. China's crude oil imports rose above 7 million barrels per day for the first time in December, reaching record levels as plunging international prices allowed the world's largest importer to fill strategic and commercial reserves. International crude prices are near six-year lows, revisiting levels last seen in the wake of the global financial crisis. While price controls over transport fuels limit the boost to the Chinese economy, the drop has presented an unusual opportunity for China to increase reserves of crude oil at relatively little cost. China imported 7.15 million bpd in December, bringing its full-year crude imports to a record 308 million tonnes up nearly 10 per cent on the year. Some of that additional demand reflects economic growth --- Image by © Imaginechina/Corbis

South Africa is once again reeling from a steep increase in fuel prices, despite assurances from Resources Minister Gwede Mantashe that a reduction to R14 per litre could be possible. These statements have raised expectations, but as the new fuel price hikes hit, South Africans are left questioning whether these promises were ever realistic. This article delves into the ongoing debate, exploring the economic implications and the unfulfilled expectations surrounding fuel relief.

For months, Mantashe has floated the idea of lowering fuel prices by up to 30%, largely by removing or reducing the levies and taxes that contribute R6.40 per litre to petrol prices. The levies in question include the general fuel levy (R3.96) and the Road Accident Fund (RAF) levy (R2.18). These charges, according to Mantashe, distort the price of fuel, making it artificially high. Yet, while the idea sounds appealing, it has hit significant opposition within government structures and among economists​ (BusinessTech) (MyBroadband).

Despite these proposals, petrol prices officially climbed in early October 2024, reaching R24.54 per litre—far above the R14 per litre reduction Mantashe suggested was possible​ (BusinessTech). This price hike comes as global oil prices remain elevated and the rand continues to weaken, compounding the financial strain on consumers.

Economists, such as Layton Beard from the Automobile Association and Rand Merchant Bank’s Chief Economist Isaah Mhlanga, argue that while reducing the fuel levy may offer temporary relief, the government would need to find other ways to recoup the roughly R150 billion in annual tax revenue these levies provide​ (BusinessTech). Cutting these taxes without alternative solutions could lead to greater financial instability, prompting even harsher economic measures in the future.

The issue is further complicated by a pattern South Africans are all too familiar with: minor price drops are often followed by significant hikes. For instance, the fuel price fluctuated drastically throughout 2023, offering brief reprieves that never lasted​ (MyBroadband) (The Citizen).

The notion of reducing fuel prices to R14 per litre is likely to remain a political fantasy, as the economic realities of South Africa’s tax system, rising global oil prices, and the weakening rand make such reductions unsustainable. South Africans, already frustrated by erratic fuel price patterns, are left to wonder whether the government’s focus on short-term promises rather than long-term solutions will ever result in meaningful relief.