Diesel is one of the four main input costs for grain farmers, and the entire grain supply chain is affected by fuel price increases. The drastic increase in the price of fuel in April therefore came as an unpleasant shock to farmers.

The two main factors that determine the fuel price are the international crude oil price and the rand/dollar exchange rate. In addition, taxes and levies are charged on fuel. These were also increased.

Let’s look at the fuel taxes and levies in more detail:

A large part of the price of fuel in South Africa is accounted for by the General Fuel Levy (the GFL) and the contribution to the Road Accident Fund (RAF). These levies were adjusted on 7 April after the latest budget speech by minister Tito Mboweni.

• Tax on petrol now amounts to R3,93 per litre and R3,79 per litre on diesel.
• The contribution to the road accident fund currently stands at R2,07 per litre for petrol as well as diesel.
• There are also a few other minor levies charged on fuel, including: customs and excise duties at 4 cent per litre, a management fee of 10 cent per litre and other levies of 1 cent per litre.

The total cost of taxes and levies in one form or another therefore amounts to R6,15 per litre for petrol. That makes up roughly 36% of the fuel price.

The wholesale margin on diesel is 77 cent per litre, while storage and distribution costs add another 43 cent per litre. As is the case in maize trading, a location differential also applies to diesel. In Gauteng this location differential comes to 65 cent per litre.

These costs add up to R7,86 per litre. Added to the base price of diesel of R6,93 per litre, this comes to a total wholesale price of R14,77 per litre.

That is cause for reflection …

Written by Ampie Rossouw – Senior grain trader.