The increase in fuel levies announced in the national budget on Wednesday worsens SA’s already “disproportionately high pump prices”, BMI Research said in an economic note on Friday morning.
Finance Minister Pravin Gordhan said in his budget speech the general fuel levy would increase by 30c/l and the Road Accident Fund (RAF) levy by 9c/l, raising the total tax on petrol to R3.15/l and on diesel to R3/l.
BMI said South Africans generally had few alternative travel options, so fuel consumption was unlikely to drop. But a bigger slice of people’s salaries going to paying for petrol meant other areas of the economy would suffer.
South Africans already spent a disproportionate share of their total income on fuel — about 3.6% in the fourth quarter of 2016, BMI said.
“This figure will rise further following several price increases from December 2016 into 2017, which has seen an increase of 79c/l for petrol and 60c/l for diesel. Assuming an average daily income of approximately R210, it now takes consumers around 6.5% of daily wages to purchase 1l of 95 octane petrol. Given our forecast for low household income levels to persist, and inflationary pressures to begin to squeeze disposable incomes, it is unlikely that retail demand growth will accelerate significantly. In relative terms, the cost of fuel in SA remains prohibitively high and so consumption will remain constrained,” the report said.
Credit: Business Day