New tax on car licence disc renewals in South Africa

Transport Minister Barbara Creecy confirmed that her department is still exploring new options to generate revenue for the Road Accident Fund (RAF), including a new mandatory fee linked to car licence discs.

She said that it was necessary to expand the RAF’s revenue stream as motorists continue to move away from fossil fuels in South Africa.

In an interview with the Sunday World Podcast, Creecy stated that revenue collection was a top priority in the department’s plan to address core issues at the RAF.

The RAF, which exists to compensate victims of road-related accidents, is funded by the Road Accident Fund levy, a tax incorporated into the price of petrol and diesel.

The levy currently adds R2.25 to the cost of every litre of fuel and generates approximately R45 billion to R50 billion.

Despite this, the RAF is technically insolvent due to years of mismanagement and overreliance on expensive litigation to resolve claims.

Another concern, according to the Department of Transport (DoT), is the rise of hybrid and electric vehicles (EVs), which use little to no fuel.

EVs, in particular, do not rely on fossil fuels, meaning their owners do not pay fuel taxes and therefore do not contribute to the RAF.

The DoT said that this was a major threat to the RAF’s business model and that a new revenue source is needed to offset the adoption of EVs.

“We have to look at the fact that there’s a big shift to electric vehicles,” Creecy said.

“At the moment, the funding for the road accident fund comes from the fuel levy, but going forward into the future, more people may not be using fossil fuels.”

While EV owners do not pay the RAF levy, they are still able to claim from the RAF in the event of an accident.

“So how are they going to contribute to the fund? This is research that we’re doing,” the minister said.

Creecy’s proposed solution is to incorporate the REV levy into more vehicle-related services to ensure motorists pay, one way or another.

“We need to bring in amendments; until we bring in those amendments, there’s a limit to which there can be managerial solutions to some of the broader financial problems that the fund faces,” she said.

One of the suggestions is the introduction of a new levy on all foreign-registered cars entering South Africa.

However, the most controversial proposal is the implementation of a new mandatory fee on motor vehicle registrations and licence disc renewals.

It is currently unclear whether this fee will be applied to all motorists, regardless of their vehicle’s powertrain.

If it is applied to all motorists, individuals with combustion-engine cars will effectively be taxed twice, as they still pay the RAF levy, while EV owners will only need to pay the licence disc fee.

No increase to the RAF levy – for now

Earlier this month, it was revealed that the RAF wanted to raise the RAF levy from R2.25 to R3.00 per litre.

In its annual report for the 2025/26 period, the RAF noted that the levy has not kept up with inflation and that it is losing revenue as a result.

The RAF then proposed to hike the RAF levy by 75c per litre, equating to a 33% increase in one year.

However, Creecy said that she would not support this increase, given that motorists are already struggling with the high fuel prices brought on by the war in Iran.

“As long as I’m in this job, we will not apply to the National Treasury for an increase in the fuel levy,” she said in an interview with eNCA.

“What we have to do is sort out the mismanagement that has happened at the Road Accident Fund for a long time.”

She argued that the solution to fixing the RAF’s financial woes was to stop wasting money, rather than looking to the public to make up for its failings.

Despite these comments, Creecy’s department is still moving ahead with its plan to establish new revenue streams for the RAF.