Good news for petrol prices in South Africa comes with a big catch

South Africa’s now ‘cancelled’ 2025 budget contained good news for motorists, with the National Treasury proposing another year with no fuel levy hikes.

However, the tabling of the budget was called off on Wednesday (19 February) to give the cabinet more time to find consensus on adjustments, which means this may very likely not be the case when it is presented next.

The new budget is now scheduled for 12 March 2025.

According to a Budget 2025 information sheet published by the South African Revenue Service (SARS), the budget did not change the general fuel levy or road accident (RAF) levy.

A leaked version of Finance Minister Enoch Godongwana’s speech stated that the government was “extending fuel levy relief for another year, saving consumers around R4 billion”.

However, this relief came at the cost of the real big hitter among the tax proposals: a hike in VAT to 17%.

Godongwana was set announce expanded spending on social grants, relief for motorists, bigger budgets for healthcare and education and further investments in rail.

These benefits explicitly carried the trade-off of a higher VAT rate to raise R58 billion in additional funding.

This proposal was identified as the main point of contention among the tax changes, leading to the cancellation of the sitting and the need for further discussions among the cabinet.

Following the cancellation of the budget speech, Godongwana made it clear that, while he welcomed the debate and cabinet’s involvement in setting the budget, changes can not come without trade-offs.

He said that if the cabinet decides to cut revenue sources in one area, that gap must be filled in another.

This means that the fuel and RAF levy breaks may not carry through to whatever version of the budget comes next.

Speaking on the ‘cancelled’ budget being spread among journalists and economists, the Treasury acknowledged that this is a problem but “cannot pretend” that it isn’t available.

However, until the final 2025 budget is tabled, none of the proposals in the leaks, documents and other resources can be considered official.

Easy money

The fuel and RAF levies have not been adjusted since April 2022.

Despite this apparent ‘relief’, fuel prices are still sitting at extremely high levels—far above R20 per litre for petrol and heading in that direction for diesel—driving costs for consumers and businesses.

Ahead of the budget, several economists flagged the general fuel levy and the RAF levy as an easy revenue source for the National Treasury to tap into.

Thanks to access to revenue from other sources, the Treasury has avoided hiking these taxes and others over the past few years.

This includes a commodities boom, which fuelled exports, and a significant withdrawal from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA).

In 2025, the Treasury no longer has this benefit and has been looking for ways to fill a revenue shortfall in the budget and to finance its spending plans.

Fuel taxes are seen as easy to administer and generate significant revenue for the state.

They are relatively broad-based and also seen as less harmful to economic growth than other taxes, such as corporate income tax and personal income tax.

However, a major impact of an increase in the GFL is that it will result in higher petrol prices at the pump.

Combined with the Road Accident Fund Levy and other levies, taxes make up just under 30% of the price of fuel.

This drives up the costs for consumers and businesses, pushing up inflation and hitting the price of almost everything along the value chain.

Godongwana’s leaked speech addressed this, with the plan to drive relief in this spot while raising additional revenue through the VAT hike instead.