Gov’t opposed to scrapping of fuel levies to cushion consumers

• Minister Moagi explains five govt levies on fuel and customs duty
• Says there is no levy on paraffin because paraffin is used mainly by the poor

Minister of Minerals and Energy, Lefoko Moagi, told Parliament this past week that all the levies imposed on petroleum products are important and therefore cannot be scrapped. He was responding to questions from the MP for Nkange, Nevah Tshabang, who wanted to establish the number of levies imposed on petroleum products such as petrol, diesel and paraffin.

In addition, Tshabang wanted to know the percentage of these levies on the actual fuel prices and what would be the retail petrol prices minus these levies. According to Minister Moagi, there are five government levies and customs duties imposed on petrol and diesel. There is the Fuel Levy which is charged at 112 thebe on petrol per litre, the Road Fund Levy which is 90 thebe per litre, the Motor Vehicle Accident (MVA) Fund which 9.5 thebe per litre, the National Petroleum Fund (NPF) at 13.5 thebe per litre and the Security of Supply Margins charged at 17.5 thebe per litre of petrol.

Then there is Custom Duty which is paid at the rate of four South African Cents per litre for the SACU region, which comes up to 3.078 thebe, which is for petrol prices only. “Essentially all the levies for petrol come to P2.45 and for diesel P2.40,” said the minister. “Government took a decision not to impose levies and duties on illuminating paraffin because the product is believed to be used mainly by low to zero income groups.”

For background, Moagi said the fuel levies was introduced in July 2002 following the introduction of Value Added Tax (VAT) on sales of goods and services. “Petroleum products were VAT zero-rated and the fuel levy was introduced in lieu of VAT,” Minister Moagi explained The fuel levy, which is 112 thebe for petrol and 107 thebe for diesel, is collected and remitted into the Government Consolidated Fund through Botswana Unified Revenue Service (BURS) and is collected at the port of entry.

The Road Fund Levy is collected on the final sale of the product to end users by product suppliers and later remitted to the Road Fund Account, which is currently held with the Bank of Botswana (BoB). According to Minister Moagi, the purpose of this Fund is to cater for the cost of maintenance of roads across the country. At the time of its major review in 2010, it was based on an estimated annual budget of P900 million, which was established on an approximation of annual consumption of 100 million litres per month, translating to 90 thebe per litre currently.

The MVA Fund Levy, which is administered by the Ministry of Transport and Public Works, was introduced to take care of victims of road traffic accidents and is extended to both motorists and member of the public. The levy is also collected on final sale of the product to end users and is deposited into the MVA Fund, which is currently under the control of the Ministry of Finance. “In terms of the NPF Levy, it is collected on the final sale of the product to end consumers by product suppliers and then remitted to the NPF account, which is currently held as a below-the account-bank with the Bank of Botswana.” Said Moagi.

The purpose of the NPF is, among other things, to stabilise the retail pump prices for petroleum products which are currently reviewed on monthly basis and adjusted on a need basis, the minister explained. “The Fund also covers the cost of engineering for the construction of government bulk strategic reserves as well as paying for associated costs of insurance of the storage installations of strategic stocks.” The Security of Supply Margin which was introduced in July 2017, exists to raise revenue required for Botswana Oil (BOL) to undertake its projects aimed at securing the supply of petroleum products.

According to Minister Moagi, the objective was to raise over P1 billion for strategic initiatives that were considered for implementation. The Customs Duty is collected on procurement of fuel products from suppliers in South Africa based on SACU agreements. It is collected at source and remitted to the South African Revenue Service (SARS), which in turn is responsible for sharing of the all the revenue raised by SACU member states according to the volume of the products exported from South Africa.

The duty currently stands at four South African Cents, translating to just over three thebe per litre which was for the month of June. Regarding the percentage of these levies to actual fuel prices, Moagi said the levies currently constitute 13.3 percent and 12.8 percent for petrol and diesel respectively. He added that the determination of the actual retail prices for all petroleum fuel products without these levies should be made by considering prevailing unit under-recoveries for each product.

“Based on the end of June pricing slate, the under recoveries for petrol 93, 95, diesel and paraffin, were 107, P110 million, P154 million P152 million.” “Therefore, these under recoveries have been added to the current gazetted retail pump prices to arrive at the market of these products, and if taken out, the retail, prices will be P14.71, P15.01 and P15.55 for petrol 93, 95 and diesel respectively.” Reacting to the minister’s answers, Tshabang said fuel prices have soared and are affecting consumers. With five levies, he wondered why government does not consider to temporarily reduce some of them, giving example of the NPF, Road Accident Fund and the MVA Fund.