In a welcome development for South African motorists, Finance Minister Enoch Godongwana has confirmed that there will be no increases in fuel taxes for 2025. This decision, revealed during his annual Budget Speech, aims to provide relief to consumers amid persistently high fuel prices and increasing transport costs.
Fuel Tax Remain Unchanged
The two primary taxes on fuel in South Africa—the General Fuel Levy (GFL) and the Road Accident Fund (RAF) Levy—will not see any adjustments for the 2025/26 financial year. The government’s decision to maintain these levies at current levels is expected to result in approximately R4 billion in tax relief.
“To cushion the impact of fuel-driven inflation, the general fuel levy has remained the same since 2022,” said Godongwana. “For 2025/26, the government has decided to keep it unchanged, alongside the RAF levy and the customs and excise levy.”
While these key levies remain steady, the Carbon Fuel Levy—an additional charge linked to the GFL—will increase by 3 cents per litre, bringing it to 14 cents per litre for petrol and 17 cents per litre for diesel. This adjustment aligns with the provisions of the Carbon Tax Act of 2019 and will take effect from 2 April 2025.
VAT Adjustments to Offset Revenue Shortfall
Before the budget announcement, industry analysts speculated that fuel tax increases might be used to counteract revenue losses following a postponed Budget Speech initially set for 19 February. The delay stemmed from disagreements over a proposed 2% increase in Value Added Tax (VAT).
Revenue from the GFL in the 2024/25 fiscal year amounted to approximately R84 billion, marking a significant decline from the R95 billion collected in the previous year. The Road Freight Association’s CEO, Gavin Kelly, noted that such a R10 billion shortfall presented a major challenge for the Treasury, prompting expectations of a notable increase in fuel levies. However, the government opted against this measure.
Instead, a VAT increase was confirmed. The VAT rate will rise by 0.5 percentage points in 2025/26, followed by another 0.5 percentage point increase in the subsequent year, ultimately bringing the rate to 16% by 2026/27.
Balancing Revenue Generation and Economic Stability
Godongwana acknowledged the pressures on government spending, particularly in essential sectors such as health, education, transport, and security. He highlighted that alternative tax adjustments, such as increasing corporate or personal income taxes, would be less effective in generating revenue and could negatively impact investment and job creation.
Taking on additional debt was also deemed impractical due to the high costs associated with borrowing, which could further strain the country’s credit rating and financial stability.
“A VAT increase, though not an easy decision, was the most viable option as it spreads the financial burden across the population while preventing deeper cuts in crucial public services,” he explained. “No Finance Minister is pleased to raise taxes, but this decision was necessary to address pressing budgetary needs.”
The decision to keep fuel levies steady comes as a significant relief for motorists, businesses, and the transport sector. However, the incremental VAT hike signals the government’s need to balance revenue collection with economic sustainability. While South Africans will benefit from stable fuel taxes, the overall cost of living may still be affected by other fiscal adjustments in the years ahead.
Related article: SA Motorists Brace for Possible Petrol Tax Hikes in Budget Speech 2025
