South African motorists should prepare for potential increases in petrol tax hikes, which are expected to be announced by Finance Minister Enoch Godongwana during his annual Budget Speech on 12 March 2025.
Budget Postponement and VAT Reversa
The budget, originally scheduled for 19 February but later postponed, initially indicated that there would be no adjustments to the General Fuel Levy (GFL) or the Road Accident Fund (RAF) Levy for 2025. This decision aligned with a relief strategy introduced in 2022. Instead, the plan at the time was to implement a 2% increase in Value Added Tax (VAT) to help bridge the government’s budget deficit.
However, widespread opposition from both the public and policymakers led to the postponement of the budget speech, forcing a reevaluation of the proposed tax adjustments. Given the strong resistance to a VAT hike, industry experts now speculate that fuel tax increases may be reconsidered as an alternative revenue stream.
Petrol Tax Hikes: What to Expect
According to Gavin Kelly, CEO of the Road Freight Association (RFA), authorities are likely to implement significant increases in fuel taxes to recover approximately R11 billion in lost revenue. Government revenue from the GFL fell sharply from R95 billion in the previous financial year to about R84 billion in 2024/25. Since fuel taxes are among the easiest to collect and are a crucial source of government income, they present a viable means to offset financial shortfalls.
During a recent interview with Newzroom Afrika, Kelly highlighted the likelihood of an increase in the GFL, stating: “Raising [the GFL] is one of the options on the table; the questions are, by how much and is Treasury going to try and raise that tax to fill a shortfall?”
Currently, the GFL stands at R3.96 per litre for petrol and R3.84 per litre for diesel, constituting around 19% of the current fuel price. Kelly warned that a substantial increase could have wide-reaching economic consequences.
“A large increase could be devastating,” he explained. “Even a 50-cent hike in the levy could significantly impact the economy, making fuel costs unbearable for many. Meanwhile, a smaller increase of around 10 cents would still have immediate effects on commuting and transportation costs.”
The Uncertain Fate of the RAF Levy
Less clear is what will happen with the RAF Levy. This levy is designated to support the Road Accident Fund, which provides compensation for individuals affected by road accidents in South Africa.
The RAF generated an estimated R48 billion in revenue in the 2023/24 financial year but has struggled with ongoing financial difficulties. The organization has criticized the government’s decision to leave the levy unchanged for three consecutive years.
RAF CEO Collins Letsoalo argues that inflation has effectively eroded the value of the R2.18 per litre levy, reducing it to an equivalent of R1.93. He has called on the government to resume annual adjustments to sustain the fund’s operations.
However, critics of the RAF have pushed for a structural overhaul of the system, asserting that better financial management would be a more effective solution than continually increasing the levy, which would further burden South African consumers.
With the VAT hike seemingly off the table, South African motorists may soon feel the pinch through higher fuel taxes. The final decision will be revealed during Minister Godongwana’s Budget Speech, and its implications could ripple across the economy. Whether through a GFL increase, an adjustment to the RAF Levy, or a combination of both, the government must strike a balance between revenue generation and economic stability.
Related article: How a 2% VAT Hike Could Impact Car Prices in South Africa
