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The Citizen
14 hours ago
- Business
- The Citizen
Fuel levy hike about to hit: Will you survive the squeeze?
General levy for petrol and diesel will be increased to R4.01 per litre and R3.85 per litre, respectively. Tough times are ahead for South Africans, as the fuel levy increase takes effect on Wednesday, 4 June. Many would believe that the fuel levy hike will impact only those who own cars; however, it will affect everyone, as businesses may need to increase the prices of products and services to offset the costs incurred by the hike. Finance Minister Enoch Godongwana announced the increase in his third budget speech in May. General levy for petrol and diesel will be increased to R4.01 per litre and R3.85 per litre, respectively. However, the EFF has approached the Western Cape High Court in an attempt to interdict this increase. This is the first time in three years that the minister announced the increase. In previous budget speeches, he had reserved the right to increase the fuel levy, as he did not want to burden South Africans who were already struggling to cope with the high cost of living. ALSO READ: VAT reversal overshadowed by fuel levy hike Why increase the fuel levy? Godongwana's decision to increase the fuel levy comes after his decision to increase the Value Added Tax (VAT) was met with criticism and was sent back to the drawing board to find an alternative that would not significantly harm consumers' wallets. VAT was supposed to increase by 0.5% this year and by another 0.5% next year. This meant that everyone would be directly impacted, as every product and service was set to increase in price. However, the government would be able to collect the necessary revenue. When it comes to the fuel levy hike, not everyone is directly impacted. However, everyone will be squeezed sooner or later. The Treasury estimates that it will generate an additional less than R4 billion, which is significantly lower than the revenue estimated from the now-withdrawn VAT increase. How will the fuel levy hike impact consumers? Professor Bonke Dumisa, an independent economic analyst, told The Citizen that if the EFF's court challenge fails, the fuel levy hike will result in inflationary pressures. 'The logistics sector will pass on the increased fuel prices to the end-users, which in turn will have the same negative effects as the implementation of the earlier proposed 2% VAT increase or the later proposed 0.5% VAT increase this tax year and another 0.5% VAT increase next tax year.' Fuel levy is a tax charged on every litre of fuel sold, with a portion going to the government and another to the Road Accident Fund (RAF levy) to compensate victims of motor vehicle accidents. It amounts to 18% of the retail price, while the RAF levy is about 10%. ALSO READ: Godongwana punished taxpayers in Budget 3.0 despite calls not to Is the increase really bad? Professor Waldo Krugell, an economist at the Faculty of Economic and Management Sciences at the North-West University (NWU), told The Citizen the impact of the fuel levy hike will not be that bad. 'It appears that the impact will be mitigated by a lower basic fuel price. The relatively low crude oil price and a stronger rand-dollar exchange rate are helping to keep the pump price stable and maybe even a bit lower again this month.' Based on current over-recovery trends, consumers should consider themselves lucky if petrol sees a marginal decrease of 3 cents per litre in June. There is even the possibility that the fuel levy increase could result in a small hike in petrol prices if the rand weakens or global oil prices rise further this week. Legal battle The EFF previously successfully opposed the VAT increase in court, and it is hoping for the same result in the court case. In the paper filed, the party outlined that the fuel levy increase will harm the poorest in South Africa and undermine economic growth. 'We took this action after repeated efforts to caution the minister and appeal to his conscience failed. We wrote to the Minister, urging him to consider the impact of this increase on the poor and working-class people of South Africa, especially during a time when the cost-of-living crisis is deepening. 'We also reminded him that, just like the VAT increase, raising the fuel levy without introducing a proper Money Bill is unlawful and undermines parliamentary oversight,' the EFF said. NOW READ: Budget 3.0: Fuel levy replaced VAT hike but is it the better option?
The South African
15 hours ago
- Business
- The South African
Fuel price June 2025: Breakdown of what you're paying for
The fuel price for June 2025 has caught the attention of drivers in South Africa. New figures show a small decrease in both petrol and diesel prices, even though the general fuel levy has increased. The Department of Mineral Resources and Energy adjusts fuel prices monthly. They base these changes on factors such as the global price of crude oil, the Rand/US Dollar exchange rate, and taxes set by the National Treasury. Starting Wednesday, 4 June 2025, drivers can expect some relief at the pump, though not as much as they hoped. According to BusinessTech , data from the Central Energy Fund (CEF) shows that petrol prices are expected to drop by about 4 cents per litre, while diesel may fall by up to 37 cents per litre. This price drop is due to a stronger rand and lower global oil prices, which have reduced fuel import costs. However, this relief is partly balanced out by an increase in the general fuel levy, which is now R4.01 per litre for petrol and R3.85 for diesel, starting from 4 June 2025. Overall, this means a slight decrease in prices, which is good news for consumers who are dealing with ongoing economic challenges. In June 2025, the average fuel prices in South Africa are expected to be as follows: Petrol 93 (Inland): About R23.93 per litre Petrol 95 (Coastal): About R23.21 per litre Diesel 0.05% (Inland): Around R21.77 per litre Diesel 0.005% (Coastal): Around R21.55 per litre Fuel prices change for several reasons: International Crude Oil Prices : When global oil prices drop, South Africa can buy fuel at a lower cost. : When global oil prices drop, South Africa can buy fuel at a lower cost. Rand/Dollar Exchange Rate : A stronger rand can lower the cost of imported fuel. : A stronger rand can lower the cost of imported fuel. Taxes and Levies : This includes the fuel levy, Road Accident Fund (RAF) levy, and customs/import duties. : This includes the fuel levy, Road Accident Fund (RAF) levy, and customs/import duties. Distribution and Retail Margins: Costs related to transporting and selling fuel around the country. A significant portion of the cost of petrol and diesel is made up of government taxes and charges, which can be more than a third of the total price. The decrease in prices might seem small, but it can add up. For example: Filling a 50-litre petrol tank now costs about R2 less than in May. Diesel users, especially in transport and agriculture, will benefit more from the bigger decrease per litre. However, changes in global oil prices and the local currency may mean these savings do not last long. Even with lower prices, fuel is still a major expense. Here are some practical steps to save fuel: Drive smoothly to avoid sudden braking or fast acceleration. Turn off your engine when you are waiting for a long time. Use public transport or share rides when you can. Check your tyre pressure; underinflated tyres waste fuel. Plan your routes ahead of time to avoid traffic and reduce drive time. Let us know by leaving a comment below or send a WhatsApp to 060 011 021 1. Subscribe to The South African website's newsletters and follow us on WhatsApp, Facebook, X, and Bluesky for the latest news.
IOL News
27-05-2025
- Business
- IOL News
EFF slams 4% fuel levy hike, warns of economic inequality
Finance Minister, Enoch Godongwana faces pressure as political parties wants him to relook the proposed fuel levy. Image: Armand Hough / Independent Newspapers Economic Freedom Fighters (EFF) have formally challenged the proposed 4% fuel levy increase announced by Finance Minister Enoch Godongwana in Budget 3.0, raising constitutional and legislative concerns over its validity. In a strongly worded letter addressed to the Minister, the EFF firmly rejected the proposal, citing its disproportionate impact on the poor and working-class communities. The party has also written to National Assembly Speaker Thoko Didiza and the Chairperson of the Parliamentary Standing Committee on Finance, calling for an urgent inquiry into the legality and socioeconomic implications of the proposed levy. The proposed increase — the first since the 2021/22 fiscal year — would raise the fuel levy by 16 cents per litre for petrol and 15 cents for diesel, pushing the rate from R3.85 to R4.01 per litre. According to the National Treasury, the hike is expected to generate R23 billion over the next three years, offering modest fiscal relief following the abandonment of a VAT increase that would have yielded R75 billion. The EFF contended that the fuel levy, as a flat consumption tax, is inherently regressive and exacerbated economic inequality. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad Loading According to the National Treasury, if all this goes well, it will generate R23 billion over three years — a far cry from the R75 billion that would've come from the scrapped VAT hike, but still a meaningful boost in a tight fiscal climate. The EFF argued that this will impact on the costs of transporting goods and services, which leads to increases in costs of food. 'In a society where over 18.2 million people are recipients of social grants, and nearly 45% of the population lives below the upper-bound poverty line, the increase in the fuel levy will have an immediate and cascading effect on the cost of living. 'Unlike income taxes, the fuel levy is a consumption-based tax. It is not linked to income or wealth, and therefore applies uniformly across all income groups, regardless of ability to pay,' the party said in a statement. 'The impact is particularly severe in areas where household expenditure on transport and food exceeds 50% of income—a situation affecting the vast majority of social grant recipients and informal workers.' Meanwhile, members of parliament (MPs) have raised concerns over the National Treasury's decision to increase the fuel levy, arguing that its economic impact may be significantly more severe than a hike in value-added tax (VAT). IOL Politics
Daily Maverick
26-05-2025
- Business
- Daily Maverick
The fuel levy increase vs VAT hike explained
While South Africans breathed a sigh of relief at the passing of the 2025 National Budget – and the relegation of the proposed VAT increase – one announcement of note was an increase in the fuel levy. While far less politically contentious than a VAT hike, debate has emerged over whether the fuel levy increase is, in fact, a 'stealth VAT'. It's a shift that raises valid questions about regressivity, affordability, and who will bear the brunt of the cost. When the levee breaks The National Treasury had aimed to raise R75-billion over three years by increasing VAT by 0.5% and then another 0.5% next year. But following political backlash and a likely legal pushback, the proposal was withdrawn. The fiscal gap, however, remained and needed plugging. advertisement Don't want to see this? Remove ads In his revised May 2025 budget speech, Finance Minister Enoch Godongwana announced that the shortfall would instead be offset by expenditure controls and new revenue measures, including a 16c/litre increase on petrol and 15c/litre on diesel, effective 5 June 2025. This marks the first fuel levy increase since 2021/22, bringing the total to R4.01 per litre – up from R3.85. Treasury projects that the change will raise R23-billion over three years, far less than the R75-billion expected from the shelved VAT plan, but still material given the constrained fiscal outlook. Read more: 'We tread water for another year' — this fiscal offering is a stopgap, not a solution Who suffers? 'Well, it is pretty much the same,' economist Dawie Roodt told Daily Maverick when comparing the VAT proposal to the fuel levy increase. 'The only difference is the quantum – the effect area will be less, simply because the rate of increase is less.' VAT applies broadly to goods and services (excluding zero-rated essentials), while the fuel levy targets a narrower tax base, but its economic reach is wide – transport, logistics, manufacturing and food pricing are all exposed – which means that costing goes up across the value and supply chains – and even if it is the case that this increase is more distributed than a VAT hike, its impacts are still disproportional. advertisement Don't want to see this? Remove ads According to the Pietermaritzburg Economic Justice & Dignity Group, which carries out monthly research on basic household costs, a minimum-wage worker commuting by taxi can spend more than a third of their monthly income on transport. Here, even a marginal fuel price increase imposes disproportionate burdens on low-income earners. As The Outlier reported in its weekly newsletter issued on Friday, 23 March 2025: 'While the 16c increase is just another charge for some of us, it will likely impact poorer communities more. When the fuel price rises, it hits South Africa's working class the hardest.' These costs also pass through to food prices and consumer goods. 'Fuel costs increase the price of most other goods and services as they push up transport costs across the board,' the publication said. A revenue hole that still needs to be filled Taking into account that the fuel levy will raise an estimated R4-billion in 2025/26, there is still quite a gap. 'Certainly not comparable,' Roodt notes. 'These two cannot be compared in terms of quantum, but in terms of the effect on the poor, that is pretty much the same.' To close the gap, the Treasury is counting on SARS to ramp up compliance and enforcement – targeting an additional R20- to R50-billion in revenue annually. These gains remain aspirational, however, and are not yet factored into formal projections, both in terms of revenue or timeline, with much still depending on SARS Commissioner Edward Kieswetter. advertisement Don't want to see this? Remove ads advertisement Don't want to see this? Remove ads An inflation signal? Perhaps not For now, headline petrol prices are expected to drop in June, thanks to a decline in the basic fuel price. That may temporarily mask the effect of the levy increase, but longer-term pressures persist. 'Hardly any inflationary pressures will be expected from this,' Roodt argues, 'because petrol prices are coming down in any event.' April CPI data shows inflation edged up from 2.7% in March to 2.8%, with key contributors being food, beverages, housing and services. Read more: SA consumer inflation ticks up in April but remains below 3.0% While the direct inflationary impact of the levy may be limited, the pass-through effects to goods and public transport fares are likely to show over a longer horizon. Is there a better way? It can be said that a fuel levy increase, much like a VAT increase, is regressive and disproportionately affects the most vulnerable. Roodt is unequivocal: 'South Africa's total tax regime is dramatically progressive already,' he says. 'There's nothing else that can be done to make it more progressive, basically.' A detailed look at the May 2025 Budget shows that indirect taxes – including VAT, fuel levies and excise duties – account for more than 45% of gross tax revenue, compared with 39.9% from personal income tax. VAT alone contributes more than R480-billion, and domestic goods and services taxes collectively represent a third of all state income. advertisement Don't want to see this? Remove ads advertisement Don't want to see this? Remove ads In other words, while the tax code may be progressive in theory, its impact is mixed in practice – and regressive taxes still carry weight in the government's pocket – but the fuel levy, unlike income tax, charges the same amount per litre regardless of the earner's bracket. This doesn't negate additional strain on middle and low-income households, but rather illustrates the increasingly narrow options available to the Treasury in an almost zero-growth environment, saddled by debt. A tax by another name? Ultimately, the decision to withdraw the VAT hike and instead raise the fuel levy was as much political as it was fiscal. VAT increases require legislation and expose divisions in Parliament. The fuel levy, by contrast, can be adjusted via the Budget process – no legislative amendment required. Whether this amounts to a 'stealth tax' or a strategic compromise depends largely on your own perspective, but as fuel-dependent households, which includes everyone within our borders in one form or another, absorb yet another marginal increase, it is clear that we are all still paying – just not through VAT. DM
The Citizen
26-05-2025
- Business
- The Citizen
Fuel levy pain: Brace for possibility of petrol price hike in June
The first fuel levy increase in three years will come into effect in June. Here's how it will affect petrol and diesel prices. The projected decrease in petrol and diesel prices for June has been slimmed down by Treasury's hike in the fuel price levy. Picture: iStock South African motorists will feel the impact of the fuel levy increase at the pumps when the official price changes for petrol and diesel kicks in on Wednesday, 4 June. Budget 3.0's inflation-based general fuel levy (GFL) hike will see petrol prices increase by 16 cents to R4.01, while diesel tax will rise by 15 cents to R3.85. Based on current over-recovery trends, consumers should consider themselves lucky if petrol sees a marginal decrease of 3 cents per litre in June. There is even the possibility that the fuel levy increase could result in a small hike in petrol prices if the rand weakens or global oil prices rise further this week. June fuel price: Expected changes in petrol, diesel and paraffin According to the latest data released by the Central Energy Fund (CEF), over-recoveries of 19 cents per litre are on the cards for petrol prices and 48 cents per litre for diesel. Petrol 93: Decrease of 20 cents per litre. Decrease of 20 cents per litre. Petrol 95: Decrease of 19 cents per litre. Decrease of 19 cents per litre. Diesel 0.05% (wholesale): Decrease of 48 cents per litre, Decrease of 48 cents per litre, Diesel 0.005% (wholesale): Decrease of 49 cents per litre. Decrease of 49 cents per litre. Illuminating paraffin: Decrease of 52 cents per litre. When factoring in the 15 cents and 16 cents per litre of the GFL increase for diesel and petrol, the respective decreases are slimmed down to 33 cents and 3 cents. Petrol 93: Decrease of 4 cents per litre. Decrease of 4 cents per litre. Petrol 95: Decrease of 3 cents per litre. Decrease of 3 cents per litre. Diesel 0.05% (wholesale): Decrease of 33 cents per litre. Decrease of 33 cents per litre. Diesel 0.005% (wholesale): Decrease of 34 cents per litre. Fuel price explainer The fuel levy increase raises the total tax on petrol to R6.37, factoring in the R2.18 Road Accident Fund (RAF) levy, which remains unchanged, as well as the 14 cent carbon tax penalty and four cent customs and excise duties. Current petrol and diesel prices Following May's fuel price decreases, a litre of 93 unleaded petrol costs R21.29 per litre, while 95 unleaded costs R21.40. The wholesale price of 0.05% diesel stands at R18.93 per litre and 0.005% at R18.91. Why is Treasury hiking the fuel levy? Finance Minister Enoch Godongwa announced in his third Budget Speech last week that the only new tax proposal would be an inflation-based increase in the GFL for the 2025/26 fiscal year. Any increase in international fuel prices or a weakening in the rand-dollar exchange rate could cause the 5c to melt away over the next week. The revised 2025 budget is the minister's third official attempt to balance the country's finances since February's contested speech. ALSO READ: VAT reversal overshadowed by fuel levy hike R61.9 billion shortfall While the previously announced 1% Value Added Tax (VAT) hike falls away following pressure from within the ranks of the government of national unity (GNU), Treasury now has an additional R61.9 billion shortfall to fund over the next three years. Frank Blackmore, lead economist at KPMG South Africa, said the proposed fuel tax hike represents an inflationary increase of 4% in the fuel price, which is larger than the proposed VAT increases. READ NOW: Budget 3.0: Fuel levy replaced VAT hike but is it the better option?
