Road Freight Association (RFA) CEO Gavin Kelly believes that Treasury will hike fuel levies during the next tabling of the nation’s annual Budget Speech, scheduled for 12 March 2025.
Treasury has kept fuel tax hikes at bay since 2022 owing to the rising cost of living in the country in the aftermath of the Covid-19 pandemic.
It estimates that the relief measures has spared motorists some R4 billion a year.
It planned to continue this tax freeze for the coming financial year, a leaked version of the now-postponed Budget Speech showed, with lost income to be derived from a 2% VAT hike instead.
However, staunch pushback from the public and from inside government saw the annual budget going back to the drawing board, with all the policies that would have been implemented in the first speech being declared null and void.
With experts being convinced that the VAT hike will no longer come to fruition, all attention has turned to where government now plans to plug its budgetary shortfalls.
One of the ways it intends to do so, the RFA’s Kelly believes, will be through hiking the General Fuel Levy (GFL) for the first time since 2021.
Stable revenue source
Government collected R84 billion from the GFL in the 2024/25 financial year, a significant drop from the approximately R95 billion the charge brought in the year prior.
The levy is one of the state’s biggest revenue sources with the money it generates being earmarked for vital public services, indicating that it’s a priority to keep it stable.
“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,” said Kelly in a Newzroom Afrika interview.
“A R10-billion shortfall in something stable like the fuel levy is a huge knock on Treasury, so I think we’re going to see an increase.”
Due to the stability of the GFL, it’s rather easy for Treasury to work out how much it would have to hike the tax to make up the deficit.
Kelly thus said that to make up approximately R10 billion, “we’re going to see a good increase” in the GFL.
“In good, I mean a large increase, because VAT is really just not an option,” he said.
At present, the GFL is pegged at R3.96 per litre for petrol and R3.84 per litre for diesel, accounting for an average of 19% of the prices at the pumps this March.
Any increases, Kelly warned, will undoubtedly have a knock-on effect on the economy as a whole, and authorities must therefore be careful when making this decision.
“Whenever you raise prices upstream, there’s a trickle through, so if we raise, for example, the fuel levy by 50 cents, that could kill the economy totally, it would just become too expensive,” said Kelly.
“And, if we raise the fuel levy by about 10 cents, it’s going have an implication immediately on things like commuter prices, so we’ve got to be very careful; very, very careful what we do.”
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