Bad news for petrol prices in South Africa

Finance Minister Enoch Godogwana has announced an inflation-based increase to fuel taxes in the country, ending a three-year freeze.

Presenting the third budget for the country this year, the minister noted that fuel levies have been unchanged since 2022.

In the first and second budgets published earlier in the year, the idea was to keep the freeze in place to give consumers some relief from VAT hikes contained in those frameworks.

This would have provided approximately R4 billion in “relief” to motorists to make up for higher VAT.

However, with the VAT hikes now gone, other tax measures are needed to cover the shortfall.

To replace a portion of the lost revenue from the withdrawal of the VAT rate increases, government proposes an inflationary increase in the general fuel levy for petrol and diesel to R4.01c/l and R3.85c/l, respectively, effective from 4 June 2025.

This translates to a 16 cents and 15 cents per litre increase for the general fuel levy for petrol and diesel, respectively.

The Road Accident Fund levy will not be changed and will remain at R2.18, while the carbon fuel tax levy will keep the same 3 cents per litre increase seen in previous budgets.

The combined tax increase is thus 18/19 cents per litre, taking total taxes to R6.37 for petrol (30% of total price) and R6.24 for diesel (33% of total price).

Petrol price cuts still on the cards for June

The increases to the fuel levies were not unexpected, with several economists and analysts predicting the hike.

This was the case even before the original budget, with the three-year reprieve an unusual move when fuel taxes are often considered one of the easier levers to pull.

That said, the increase will have a negative impact on consumers and industries alike, who will have to pay over more taxes for every litre of fuel purchased.

With the increased fuel levies expected to come into effect from 4 June, if the budget is approved, motorists can expected this to undercut the current overrecovery in prices.

The latest data from the Central Energy Fund shows that petrol and diesel prices are in line for a 23 and 50 cents per litre cut in June.

With the planned increase to fuel levies of 18 cents for diesel and 19 cents for petrol, this would still amount the a cut of 32 cents and 4 cents per litre, respectively.