EDITORIAL: Does fuel tax drop show Godongwana is finally listening?

It was the tax cut nobody saw coming. Last week, finance minister Enoch Godongwana announced that until the end of May, SA will reduce fuel taxes by R1.50 a litre.

It came out of left field precisely because our government, like most, has never met a tax it didn’t like. And once you’ve unleashed the genie, few states ever repeal taxes.

Yet Godongwana’s decision means the government will take a R6bn hit. This wasn’t an act of benevolence — the 35% rise in the oil price this year, largely due to Russia’s invasion of Ukraine, led to a clamour for the government to do something about fuel prices.

Until now, however, the ANC hasn’t shown much empathy for everyday South Africans. Out-of-touch municipalities routinely hike rates with scarcely a thought for the fact that these increases — which go to pay officials who largely aren’t worth a chair, let alone a salary — push many over the brink.

Does Godongwana’s cut indicate a break from this trend?

Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse, says it’s an indication that the finance minister is heeding Ramaphosa’s call to listen to civil society.

“The government has always just expected people to suck up new costs. But in February, when Godongwana didn’t hike fuel levies as they’d done for years, there was a sense that something had changed. Finally, they’re listening,” he says.

Still, not everyone thinks it’s a good idea. “It takes the edge off the oil price shock, but I think it’s unwise,” says Absa economist Mamokete Lijane. “Once you’ve removed this from the fuel levy, how will you put it back in two months? You’ve introduced a different conversation into the political economy.”

Lijane says the fuel price mechanism is actually one of the most efficient ways to transmit the oil price, and exchange rate, into the economy. And it allows people to change their behaviour, by driving less when prices are high.

“If you talk about rates, we could control that, but we don’t because it’s politically difficult. But we can’t control the oil price, so we may be doing something that’s unsustainable now,” says Lijane.

Still, this unexpected fillip came in an uncommonly fortunate week.

On Friday, ratings agency Moody’s shifted SA from a negative ratings watch (a precursor, usually, to any downgrade) to a stable outlook. SA remains two notches below investment grade but, just maybe, the bleeding has stopped.

“The government has shown it was able to reprioritise its spending while staying committed to fiscal consolidation, which Moody ’s expects will remain the case,” it said.

A large slice of this is luck, thanks to the R182bn tax windfall from high commodity prices. And no matter how you dice it, if you have an unemployment rate at 46.6% (including discouraged jobseekers), it’s anything but a stable outlook.

Nonetheless, if the government is finally listening, and its hitherto self-interested officials have found a vein of empathy, it’s a silver lining worth grabbing onto.