The fuel levy: A burden on the poor

The fuel levy may seem viable from an administrative view, however, there are issues that are often overlooked about the approach for road funding. The fuel levy is not a designated tax for roads. It is a tax collected like every other tax paid by consumers to generate revenue that will be allocated to social demands and other road infrastructure.

Increasing fuel levies to fund the Gauteng Freeway Improvement Project (GFIP) is not guaranteed.

A total of R53.2 billion is collected from fuel levies and vehicle license fees. R46 billion came from fuel levies and R7.2 billion came from vehicle license fees. The National Treasury allocated R56.3 billion to road transport.

This means that the National Treasury allocated more to road transport than is collected from the fuel levy and license fees. Dedicating fuel levies purely for road infrastructure implies an increase on levies to match the National Treasury allocations, excluding future expansions.

Moreover, the fuel levy is a regressive tax that impacts disproportionately on the poor. It discriminates against them in three ways:

  • The 2013 National Household Travel Survey found that 69% of South African households use taxis as transport and 20.2% buses. Any increases in the fuel levy will result in higher taxi and bus fares which poorer people won’t be able to afford. The bulk of buses and taxis make little use of the GFIP highways. As a result, an increase in the fuel levy means that people who are in public transport will pay more than those who use the GFIP. Thus, public transport is exempt from GFIP tolls
  • Many poor people travel great distances for the outskirts of the city to work. Their cost of travel is a much higher percentage of their income than it is for richer people, thus increase in levies will increase this burden.
  • Poorer people who own vehicles generally have older models. Older vehicles are less fuel efficient than modern ones. This means the cost in fuel consumption differs. Imposing a fuel levy of, say, R1.5 a litre would increase the cost of that journey to R112 for a modern vehicle and R186 for an older vehicle. This is an increase of R13 and R20 respectively.

Many people suggest that the rest of the county should contribute to tolls because Gauteng manufactures most of the goods being distributed across the country. However, in 2013 the Gauteng economy constituted 33.8% of the South African GDP.

In 2011 (the latest year for which data is available) the Gauteng share of South African total household income was 41%. Therefore, Gauteng citizens have little need to be subsidised by other people living in poorer parts of the country.