According to Dawie Roodt, chief economist of the Efficient Group, motorists should expect a hike in the fuel levy this year. In addition, this year could see a higher oil price and a possibly weaker Rand. Finance Minister Pravin Gordhan will announce any change to the fuel levy in his Budget Speech at the end of February.
“It will reduce consumers spending, add to inflation, higher interest rates, lower growth, more unemployment, and so on. The severity will depend on how steep the increase is,” said Roodt.
To help stave off the impact of a fuel levy increase Roodt advised that consumers budget, as well as plan for unexpected expenses.
With regards to the fuel price outlook for 2017, Roodt said: “It depends on oil price, rand exchange rate and changes in tax. I expect a relatively stable Rand (except if Zuma does something stupid again), a higher oil price and an increase in the fuel levy. If I am right petrol will go up a lot during the first few months but then stabilise.”
Roodt supports an increase in the fuel levy, however, this is provided that other taxes, such as Personal Income Tax and Corporate Income Tax are cut.
2016’s Fuel levy
In the 2016 Budget Speech, Gordhan announced a 30 cents per litre increase to the fuel levy, this coupled with several fuel price increases around the same time as it was implemented in April 2016, saw consumers suffering steep increases in the middle of the year.
With the 30 c/l increase, the fuel levy in 2016 was R2.85 per litre. The Automobile Association of South Africa (AA) noted: “The money collected through the Fuel Levy is administered by the National Treasury, and is treated as a general tax, not, as many people assume, only for road-related expenses.”
Any increase higher than 15 cents per litre will see consumers paying more than R3 per litre towards the fuel levy in 2017. For consumers already struggling to make ends meet, an increase in the fuel levy, as predicted, could make 2017 a tough year.
For tips on how to handle your finances in 2017, click here.
