The primary source of income for the RAF compensation scheme is a levy raised on fuel and diesel sold. The levy is expressed as a rate per liter of fuel sold and forms part of the general fuel tax regulated by government. The RAF is not involved in the collection of its fuel levy. The South African Revenue Service (“SARS”) administers the collection of the fuel levy and pays it to the RAF, in accordance with provisions of the Customs and Excise Act, 1964 (Act No. 91 of 1964) and the RAF Act.
Two variables determine the income of the RAF: the volume of petrol and diesel sold per annum and the rate of the levy. Government determines the appropriation made to the RAF. The setting and regulation of the fuel levy by government is mainly determined by macro-economic considerations. The RAF fuel levy can be viewed as a compulsory contribution to social security benefits which is used only for the specific purposes as provided for in legislation.
The RAF plays no part whatsoever in the collection of its fuel levy income. The RAF levy collection process is depicted in the figure below.
The RAF can obtain funding from four sources, outlined below:
Fuel levy income is a function of the fuel levy (per liter of fuel purchased) and the total fuel sales in South Africa. During the 2013 financial year the RAF levy was set at 96c per liter, which means that for every liter of diesel and petrol purchased in South Africa, 96 cents was collected by SARS on behalf of the RAF. The fuel levy per liter is set by National Treasury on a yearly basis, whereas total fuel sales are influenced by a number of macroeconomic factors. The RAF therefore has little control over its fuel levy income. Furthermore, there is a diesel rebate provided to certain sectors of the economy, granted on the basis of the level of off-road use by the diesel consumers in that sector. These fuel users (e.g. those people using diesel fuel for marine or agricultural applications) do not contribute to the Fund and hence cannot claim from the RAF;
Government grants, paid by National Treasury when there is a pressing need such as an acute cash shortage;
Loans, which are an allowed source of funding according to the RAF Act. This option has not been used to date; and
Investment income, acquired from invested funds that occasionally result when the RAF’s operational capacity prevents it from paying out all its funds.
The growth in the RAF Fuel Levy income arose primarily as a result of the 8 cents per litre fuel levy increase, from 72c/l (2011) to 80c/l (2012) to 96c/l (2013) to 1.04c/l (2014), effective from the beginning of the financial year. The volume of total petrol and diesel usage in the country increased by 3% to 21,1 mega litres for the period January to December 2011 (Jan to Dec 2010: 20,5 mega litres).
Sources: Statistics on "All Fuel Sales: Petrol and Diesel" - Road Traffic Management Corporation (“RTMC”);
Statistics on “Fuel Sales Volume SA: Petrol and Diesel” - Department of Energy (“DoE”);
“Sales of Major Petroleum Products in South Africa” - South African Petroleum Association (“SAPIA”)
At these levels, the RAF Fuel Levy represents 7% of the total fuel price at the pump, which averaged more than 1,045 cents per litre in Gauteng for the year under review