Petrol price tax increases in South Africa worse than you think

Automotive groups are warning that the announced 15 and 16 cents per litre increase to fuel taxes in South Africa will bring immediate pain to motorists and continue to hit consumers hard further down the road.

The immediate impact on motorists will be felt when buying fuel at the pumps, and the longer-term impact will come from rising prices all along the supply chain, exacerbating the cost-of-living crisis in South Africa.

Finance Minister Enoch Godongwana announced the inflation-based tax hikes in his third budget, tabled on Wednesday (21 May).

National Treasury noted that the increase, which only applies to the General Fuel Levy, is the first in three years, and is necessary to cover the funding gap created by getting rid of VAT increases.

The move will see the general fuel levy for petrol and diesel increase to R4.01c/l and R3.85c/l, respectively, effective from 4 June 2025.

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).

According to the Automobile Association, while it understands the need for the increase, given South Africa’s financial constraints, it will come with consequences.

“This levy adjustment comes at a time when South Africans are already contending with high food prices, elevated interest rates, increased electricity tariffs and persistently high unemployment,” it said.

“Fuel is a critical input cost across all sectors of the economy; any increase inevitably drives up transport and operational costs, further intensifying inflation.”

It added that lower-income households, which spend a greater share of their income on transport, will be disproportionately affected by this rise.

Road Freight Association (RFA) chief executive, Gavin Kelly, said the tax move was a bad idea and would damage the country in the long run.

Kelly said that the higher taxes will make freight and transport costs even higher, noting that 85% of logistics is carried by road freight.

Transporters in the country can no longer absorb increased costs without destabilising their businesses, so the additional costs will have to be pushed to consumers, he said.

“Transport will become more expensive, consumers will pay more, and the old adage that government can keep increasing taxes and levies to fund its uncontrolled spending remains true,” he said.

Cost of living crisis

Kelly said that while Treasury says it is ‘finding’ R4 billion towards the R75 billion shortfall from the previous iteration of the budget, it shows that the government would still rather tax citizens than cut wasteful spending.

“The consumer will pay more, transport through South Africa will become more expensive, global supply chains will re-evaluate their routes, and you and I will dig deeper into our pockets for goods and services.”

“This is not a good decision, neither in the medium nor long term,” Kelly said. Other reactions to the budget held similar views.

Business groups, the property sector and economists from South African banking institutions flagged the fuel levy hike as a problem for the cost of living in the country, particularly for the poor.

While the intended target for the hike is ostensbily South Africa’s middle class, commentators noted that it’s the country’s poor—users of public transport—who are likely to suffer the most.

Business Leadership South Africa also said that the tax is only expected to bring in an additional R3.5 billion, down from the R4 billion given ‘back’ to motorists in previous budgets.

“It will hit low-income households the hardest and strain consumer spending,” BLSA said.