Major auditing and consulting firm Deloitte believes that fuel taxes are likely to rise in South Africa in Finance Minister Enoch Godongwana’s upcoming Budget Speech, set to be held on 19 February 2025.
Since 2021, Godongwana has kept the General Fuel Levy (GFL) and Road Accident Fund (RAF) Levy static to reduce the burden these charges place on cash-strapped consumers.
The GFL is currently set at R3.84 per litre for diesel and R3.96 per litre for petrol, accounting for approximately 19% and 18% of the prices of these fuels, respectively.
Meanwhile, the RAF Levy is pegged at R2.18 per litre across the board, representing an average 10% share in local fuel rates.
National Treasury estimates that motorists were spared in excess of R4 billion in fuel taxes in the 2023/24 financial year alone through Godongwana’s decision to keep these levies unchanged.
Fuel tax fret
With market conditions improving significantly over the past year leading to reduced inflation and three consecutive interest rate cuts, it’s expected that fuel taxes may be in for an upward revision come the 19th of the month.
In the mid-term budget speech on 30 October 2024, Godongwana highlighted that government expected to take a R13.4-billion revenue hit from lower fuel levy collections as demand for the liquid gold dropped dramatically during the year.
A significant 1,333 million litres less fuel was consumed in 2024, which was chalked up to reduced load-shedding and a transition to alternative energy sources such as solar power.
“Net fuel levy collections contracted by 3.9% compared to the same period in 2023/24 as fuel demand fell sharply,” he said.
“Lower projected fuel levy collections are also affected by a large once-off diesel refund payment expected to be settled this year.”
Momohlwa Mohlola, an Associate Director from Deloitte’s Corporate Tax Sector, told BusinessTech that the lower levy collections and declining revenue are likely to be key motivators for raising the GFL and RAF Levy in 2025.
Likewise, he said that the Carbon Fuel Levy – which is included as an add-on to the GFL – is all but guaranteed to go up this month.
Minister Godongwana raised the Carbon Fuel Levy from 10c/litre to 11c/litre for petrol, and from 11c/litre to 14c/litre for diesel, in February 2024, and he could be eyeing a similar increase in 2025.
The increase in fuel taxes could spell disaster for South African consumers who are already expecting higher prices at the pumps in 2025.
The current spat between South Africa and the United States has put the local currency on the back foot, with new tariffs on imported steel and aluminium in the US expected to further damage the exchange rate given that South Africa is a major supplier of these materials to the world’s biggest economy.
Furthermore, global oil prices are set for a tumultuous time in 2025 largely owing the US President Donald Trump’s radical new policies, writes OilPrice.com.
The US has revived its “maximum pressure” campaign on Iran which aims to cut off Tehran’s crude sales entirely, a move that could eliminate up to 1.3 million barrels of oil per day from the global market.
Trump also aims to enforce stricter sanctions on Russia, which could further hamper oil supply and drive up prices in the near term.
The combination of these factors could lead to significant fuel price hikes in the South African market, as we already witnessed at the start of the year, which will have a knock-on effect on the cost of living in the country.
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