In his third budget speech, Finance Minister Enoch Godongwana delivered news that’s set to hit South African motorists hard — the fuel levy is going up for the first time in three years. Speaking in Cape Town, Godongwana confirmed that the increase is the only new tax adjustment in this year’s fiscal plan, signaling a shift in government strategy amid tough economic conditions.
“It remains vital that we still take actions to increase revenue to protect and bolster frontline services, while expanding infrastructure investments to drive economic activity,” the minister stated.
As part of this strategy, Budget 3.0 proposes a fuel levy adjustment in line with inflation. Effective from 4 June 2025, the general fuel levy will rise by 16 cents per litre for petrol and 15 cents per litre for diesel.
A Turnaround from March’s Budget
This marks a clear policy reversal. During the mid-term budget review in March 2025, Godongwana opted not to increase the fuel levy, emphasizing the need to help South Africans shoulder the burden of rising living costs. However, following the cancellation of a proposed VAT hike, and with revenue forecasts declining by R61.9 billion over the next three years, the Treasury has turned to fuel to plug part of the fiscal gap.
Why the Increase Now?
The move aims to bolster national revenue as the government faces the dual challenges of sustaining economic growth and restoring public finances. The minister acknowledged that this single measure won’t fully resolve South Africa’s fiscal pressures, but said it was necessary given the current economic trajectory.
The revision of tax revenue estimates reflects a weaker-than-expected economic outlook and the scrapping of the VAT increase, leaving the government with limited options.
Understanding the Fuel Levy
The fuel levy is a charge included in the price of every litre of fuel sold. Roughly 18% of the pump price goes to this levy, with an additional 10% going to the Road Accident Fund (RAF levy). The levy has remained unchanged since 2022, a freeze that was intended to buffer the public from the inflationary pressures driven by global fuel price volatility.
Broader Economic Context
Godongwana emphasized that, while the levy hike is modest and inflation-linked, it forms part of a broader plan to protect essential public services and promote infrastructure development, which he believes are crucial for long-term economic growth.
As South Africans prepare for the impact of higher fuel prices starting in June, the announcement is likely to spark renewed debate around government commitments to fiscal discipline, economic growth, and cost-of-living relief.
Related Reading:
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- Cutting fuel levies: Government all talk, no action — OUTA
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