Big fuel tax increases to hit motorists

Finance minister Tito Mboweni has announced an increase in fuel levies for South African motorists during his Budget 2020 speech.

In his budget speech on Wednesday (26 February), the minister said that the general fuel levy will be increased by 16 cents a litre for petrol and diesel.

The Road Accident Fund (RAF) levy will also increase by 9 cents a litre for petrol and diesel on 1 April 2020.

While the increases are largely in line with expectations leading up to the budget speech, further increases in the fuel levy will likely have inflationary effects and increase transportation costs.

The Road Accident Fund (RAF) is projected to become government’s largest contingent liability by 2021/22, despite receiving an ever-increasing share of combined fuel tax revenues.

Tax consultants at PwC warn that claims against the fund are growing significantly faster than the increases in the RAF fuel levy, with the effect that there has been insufficient growth to offset growth in liabilities.

In the Medium-Term Budget Policy Statement (MTBPS), it was stated that the liability of the RAF is expected to grow from R341 billion in the 2019/20 fiscal year to R605 billion in 2022/23 as a result of claims against the fund growing significantly faster than the increases in the RAF fuel levy.

By comparison, Eskom is currently the biggest liability to South Africa’s economy as of October 2019, with an estimated debt liability of R450 billion.

Read: South Africans should expect to pay a lot more in fuel levies and other taxes: economists