Fuel tax warning for South Africa
Experts at Deloitte believe fuel taxes will increase, adding another potential price pressure for cash-strapped South Africans.
Responding to questions from BusinessTech, Momohlwa Mohlola, an Associate Director from Deloitte’s Corporate Tax Sector, predicted that fuel levies could be increased at the 2025 Budget Speech.
The General Fuel Levy currently amounts to 18% of the retail price, while the Road Accident Fund (RAF) Levy is about 10%.
Finance Minister Enoch Godongwana kept the levies flat in the 2024 Budget.
The Minister noted that the government had to be mindful of the high cost of living and the impact that fuel has on food and transport costs.
He stated that this tax relief would put around R4 billion in the pocket of consumers.
On top of the expected increase in the levy, Deloitte’s experts said that the carbon fuel levy will increase during the 2025 Budget.
The carbon fuel levy is included as an add-on to the general fuel levy.
In the 2024 Budget, the carbon fuel levy increased to 11 cents per litre for petrol and 14 cents per litre for diesel.
With the latest fuel increase, the fuel levy contributes R3.96 per litre, while the RAF levy adds R2.18 per litre of 95 petrol.
This means that R6.14 is paid in taxes for every R22.41 spent on each litre of 95 petrol.
The increase in the fuel levy may be necessary for the government amidst a decline in revenues.
In the Medium Term Budget Policy Statement in October, Godongwana announced that South Africa is projected to fall short of its revenue collection target by R22.3 billion by the year-end.
The South African Revenue Service noted that the year-on-year contraction in fuel consumption has been a major issue for the financial year.
A significant 1,333 million litres less fuel was consumed during the period, attributed to reduced load shedding and a transition to alternative energy sources.
The reduction in fuel consumption directly impacted the Net Fuel Levy. This has seen a year-on-year contraction of 3.9% resulting in a shortfall of R7.2 billion.
More pain for consumers
The latest tax increase will likely cause more pain for households and consumers who were dealt another increase in fuel in February.
The Department of Petroleum and Mineral Resources said that January saw both the global price of petrol increase and the rand come in weaker relative to December.
This led to a price hike at the pumps, marking the fourth straight month of increases and the second increase for 2025.
Prices went up by 82 cents per litre for 93 and 95 petrol, respectively, and between R1.01 and R1.05 cents per litre for diesel.
However, the outlook is not great for March, with fuel price recoveries at the end of the first week of February pointing to more price pain on the way for motorists in March.
The early-month snapshot showed an under-recovery of between 55 and 66 cents per litre for petrol and between 32 and 41 cents per litre for diesel, mainly due to an under-recovery is the global oil price.
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