<\/p>\n
There may be hopes and calls for government to reintroduce fuel price relief by reducing levies for a few months amid record diesel and petrol prices, but this may be problematic and send the wrong message at a time National Treasury is trying to get SA into a stronger fiscal position.<\/p>\n
That\u2019s the general sentiment expressed by economists from CitiBank and PSG Financial Services, speaking to Moneyweb this week, ahead of Finance Minister Enoch Godongwana tabling the 2026 Medium-Term Budget Policy Statement (MTBPS) on Wednesday.<\/p>\n
Read:
SA\u2019s fiscal anchor: Are we about to move from talk to action?
MTBPS 2026: Fiscal discipline in challenging times<\/p>\n
With Treasury already having given three months\u2019 worth of fuel levy relief earlier this year \u2013 in the wake of the Middle East conflict sparking a global spiral of oil prices \u2013 the move has already \u2018cost\u2019 the fiscus R17.2 billion in forgone revenue.<\/p>\n
\u201cThere may be space to reduce the fuel levy for a couple of months, but it will come at a cost,\u201d warns Gina Schoeman of Citi.<\/p>\n
\u201cBut we don\u2019t want to create a habit or expectation of such a move [whenever fuel prices spike],\u201d she says.<\/p>\n
\u201cThere is no doubt consumers will be feeling the pinch, but a larger part of SA\u2019s high fuel prices is also linked to refining margins, due to the lack of oil refinery capacity in the country [and the need to import refined fuel],\u201d adds Schoeman.<\/p>\n
She highlights an investor note Citi put out last week ahead of the MTBPS that the SA government is likely to see a windfall in tax takings of up to R80 billion by the end of this fiscal year.<\/p>\n
\u201cWe think it is possible, but it is also not prudent to \u2018bank\u2019 that now due to uncertainty in global markets \u2026<\/p>\n
\u201cNational Treasury is likely to be more cautious in their tax overrun estimates in the MTBPS, probably around R40 billion to R50 billion,\u201d says Schoeman.<\/p>\n
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She adds that this may offer room for interim fuel relief to be announced on Wednesday, but Treasury will be cognisant and committed to fiscal consolidation first.<\/p>\n
In a separate note earlier this month, Johann Els, chief economist at PSG Financial Services, said there is \u201cuncertainty around the potential for further fuel levy relief\u201d and cited the allocation by government from April to June.<\/p>\n
Read\/listen:
South Africa on path to investment-grade rating, Investec says
MTBPS 2026: R50bn tax windfall bolsters SA\u2019s upgrade prospects
SA: Investment grade within two years?<\/p>\n
\u201cThere is certainly room in the tax windfall for some form of fuel price relief in the 2026 MTBPS, but arguing against it is that they have already spent R17 billion earlier this year,\u201d he told Moneyweb on Monday in response to queries.<\/p>\n
\u201cYou will also have to weigh this against potentially fixing the fiscal position \u2013 getting SA a lower budget deficit and easing the debt-to-GDP ratio quicker, which can get us quicker ratings upgrades, than spending it all,\u201d adds Els.<\/p>\n
\u201cThe potential benefits of credit ratings upgrades is far bigger for the greater economy than just for those consumers who spend money on petrol.<\/p>\n
\u201cThere are arguments for both sides around fuel levy relief or not, but I tend to [believe] they may err on the side of caution and not give any fuel price relief.\u201d<\/p>\n
On Monday, President Cyril Ramaphosa hinted at possible fuel price relief coming in the mid-term budget speech.<\/p>\n
Several political parties, unions and other organisations \u2013 including ActionSA, Cosatu and the AA \u2013 have called for the fuel levy to at least temporarily be reduced again to help cushion the blow on consumers and businesses, especially ahead of the festive season.<\/p>\n
Read:
Record fuel prices undermine South Africans\u2019 freedom to move
SA\u2019s fuel import bill surges to highest level since 1994
More panic buying looms as record fuel prices set to kick in<\/p>\n
While the DA earlier this year pushed for the interim fuel levy relief, this time it is calling for a more sustainable longer-term solution for lower fuel costs for motorists.<\/p>\n
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\u201cOur view is that one of the primary issues to address is to reduce the Road Accident Fund [RAF] levy, alongside urgent reform of the RAF, which offers a practical way forward,\u201d the DA\u2019s Kingsley Wakelin tells Moneyweb.<\/p>\n
\u201cMotorists should not continue carrying the burden of a system without government addressing its underlying financial and operational problems,\u201d he adds.<\/p>\n
\u201cAs far as the RAF is concerned, we all agree that we need better financial management, faster and fairer claims processing, stronger action against fraud, and accountability for how the fund uses its money.<\/p>\n
\u201cIt is important that if we want to reduce any levy, that the reduction must be properly costed and designed to protect legitimate claimants while delivering real relief to motorists. As the DA we want a solution that is affordable, sustainable and backed by meaningful reform \u2013 not another temporary measure that leaves the underlying problem unresolved,\u201d says Wakelin.<\/p>\n
\u201cWhen we supported the previous fuel levy reduction, our understanding was that the pressure on fuel prices was largely temporary and that temporary relief was an appropriate response.<\/p>\n
\u201cHowever, with the ongoing war in the Middle East and the uncertainty it creates for global oil prices and fuel supply, we need to reassess whether temporary fuel levy reductions remain the most sustainable solution.\u201d<\/p>\n
Listen to Jeremy Maggs speaking to Nedbank senior economist Isaac Matshego on Moneyweb@Midday about expectations from the upcoming MTBPS 2026:\u00a0\u00a0<\/p>\n<\/p>\n
You can also listen to this podcast on iono.fm\u00a0here.<\/p>\n
* Matshego\u2019s interview begins around 17:21min mark\u00a0<\/p>\n
#Reintroducing #fuel #levy #relief #cost #Treasury<\/p>\n","protected":false},"excerpt":{"rendered":"
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