Reduce fuel levy to prevent a cost-of-living crisis, Mr President

Issued by Dr Dion George MP – DA Shadow Minister of Finance
31 Mar 2022 in News

South Africans face a cost-of-living crisis that could destroy the country as we know it. With petrol and food prices already high and set to skyrocket in the coming months, a poverty emergency is building in South Africa the likes of which we have never seen before. It will plunge millions more into hunger and risks massive social instability.

Government should immediately reduce the fuel levy for six months. This will bring down the petrol price by up to 20%, take pressure off rising food and transport prices and bring immediate relief to the poor.

The fuel levy is R3,93 per litre. Cutting it will bring the petrol price down from about R21 to as low as R17 per litre. Petrol is around R16-R17 a litre in Swaziland, Mozambique, Botswana, Tanzania, Namibia and Kenya, so it’s not an unreasonable price to aim for.

In this time of a looming humanitarian catastrophe, government needs to pull out all the stops to protect the value of social grants, which is fast eroding. About 18 million grant recipients in rural and township communities, and their families, rely on these monthly grants for survival. That means well over half the nation – well over 30 million people – are already struggling to make it through the month and now face steep rises to the cost of living.

Suspending the fuel levy will make people’s rands go a lot further. It is the most effective way for government to put out the flames of malnutrition and social unrest before they become a runaway fire.

Many , including government, may say we can’t afford to cut levies. After all, fuel levies contribute 6% to South Africa’s revenue. But the truth is, we can’t afford not to.

Grants are set to go up by 4.5% in April. But electricity and fuel prices are set to go up by more than double that in April. Electricity prices by 9.6%, and fuel prices by 11%. Food prices have increased by 5.7% in the past year, according to Statistics SA. This is before the strong upward pressure that global fuel and food price shocks will have on South African food, fuel and electricity prices.

These will all have a devastating impact on people’s ability to survive. Then we also need to consider the deadly effect that steeply rising fuel prices has on jobs and the economy. This week, Statistics SA announced the highest jobless rate ever recorded in South Africa, at almost half the working population – 46%.

Cutting the fuel levy will create fiscal pressure that can be alleviated in many ways. The root cause of our dire fiscal situation is bad policy, incompetence and corruption. There are much better ways to deal with these than taxing the poor.

South Africa can no longer delay tackling our problems at their root. We need to grow tax revenue and jobs by rapidly reforming our economy to be open and competitive. We need to make better use of tax revenue by appointing public officials on merit and jailing corrupt officials. The benefits would accrue rapidly.

There is no other way to attract the investment needed to right our dire financial situation. There is no other way to avoid a runaway fire.

Make no mistake: we can have lower fuel prices if President Ramaphosa and his cabinet put country before party. Surging global costs are aggravating factors, but this crisis is largely self-made and preventable.