Opposition mounts against fuel levy hike
Effective from June 4, the General Fuel Levy (GFL) will be increased by 16 cents per litre for petrol and 15 centre per litre for diesel. The AA has warned that despite it not being increased in the past three years, this will be a bitter pill to swallow for cash strapped South Africans.
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Finance Minister Enoch Godongwana announced the hike as the sole new tax measure in the 2025/26 fiscal year, attributing it to inflationary pressures. He emphasised that the adjustment is necessary to address fiscal challenges, especially after the government scrapped a proposed VAT increase earlier this year. Since the South African government's decision to increase the GFL, widespread concern has arisen among motorists, industry stakeholders, and opposition parties.
The Automobile Association (AA) has expressed strong opposition to the levy increase, warning of its immediate and far-reaching 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,' the AA stated.
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The AA further highlighted that with the new adjustments, the combined cost of the GFL and the Road Accident Fund (RAF) Levy will exceed R6 per litre in some areas, accounting for more than 30% of the total pump price before adding the base fuel cost, distribution margins, and retail markups. At the highest level of opposition, political parties have also voiced concerns. Members of Parliament from various parties argued that the fuel levy increase is a regressive tax that disproportionately affects lower-income households. They accused the National Treasury of replacing the scrapped VAT hike with the fuel levy increase without considering alternative revenue proposals, such as wealth taxes.
In response to the backlash, the National Treasury clarified that the fuel levy increase is in line with expected inflation of around 4% and is not intended to replace the VAT increase. Chris Axelson, the acting head of tax and financial sector policy at the Treasury, stated that the fuel levy adjustment is expected to generate approximately R4b, significantly less than the R75b anticipated from the proposed VAT hike.
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Despite the levy increase, motorists may experience a slight reprieve in June fuel prices due to favourable market conditions. Data from the Central Energy Fund indicates an over-recovery of 19 cents per litre for petrol and 48 cents per litre for diesel, which could offset the impact of the levy hike.
Related: Fuel Price Reprieve All But Confirmed for June 2025
The AA continues to call for a comprehensive and transparent review of South Africa's fuel pricing model, including a forensic audit of revenue generated from the GFL and RAF Levy, full transparency on the fuel price-setting formula, and exploration of alternative funding mechanisms that reduce reliance on fuel-based taxation.
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The post SA Minister of Finance Plans General Fuel Levy Increase – AA Warns Against It appeared first on CAR Magazine.
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