Good news for South African motorists about petrol prices

Finance Minister Enoch Godongwana announced that there will be no increases to the general fuel levy for the 2024/25 financial year.

This will result in tax relief of around R4 billion to South African motorists, who have been hard hit by fuel price increases over the last year.

The latest announcement was a surprise. There were no fuel levy increases in the last two budgets, and many economists predicted it would change this year.

The general fuel levy is the fourth largest revenue item in the government’s budget and has become an increasingly important source of revenue in the last decade. It contributes around R90 billion in tax revenues. 

PwC explained that because of this, the government was not in a position to continue to provide relief from this tax due to its deteriorating fiscal position and lacklustre revenue growth. 

The RAF Levy is in a similar situation, with no increases in 2022 and 2023 to support households and the economy. 

Levies charged on petrol and diesel at the pump make up a significant portion of the fuel price in South Africa, meaning that an increase in these levies will increase the price at the pump. 

Taxes and levies comprise 28% of fuel prices in South Africa, with only 53% to 55% being determined by fuel importing costs. 

Thus, fuel prices in South Africa are much higher than expected and even higher than what citizens in neighbouring countries pay for imported fuel from South Africa.  

There are four main components:

• General Fuel Levy 
• Road Accident Fund (RAF) Levy
• Basic fuel price
• Wholesale and retail margins

The basic fuel price is the largest component at 53% to 55%, which, according to the AA, equates to roughly R12.78 per litre, depending on the grade of petrol. 

This is the price determined by the cost of importing oil from international producers, including additional costs such as insurance, storage, and transport. The oil price and the USD/ZAR exchange rate heavily influence the basic fuel price. 

Wholesale and retail margins make up roughly 15% of the fuel price, costing R3.49 per litre. This is influenced by the costs of transporting fuel within South Africa, storing it, and pumping it. 

The two levies on fuel make up a significant 28% of the fuel price, meaning that government-imposed levies cost South Africans R6.51 per litre of petrol. 

17% is due to the General Fuel Levy, which equates to R3.96 per litre. This levy goes directly to the National Treasury and can be used for any purpose the government considers fit. 

The fuel levy is an easy tax to increase and simple to implement. For this reason, many experts expected an increase in 2024/2025 to plug the growing deficit.

However, Godongwana said they are mindful of the already high cost of living and the impact fuel prices have on food and transport costs.

“We are proposing no increases to the general fuel levy for 2024/25. This will result in tax relief of around R4 billion. This is money back in the pockets of consumers,” he said.

Although it will not result in price decreases, it will prevent an immediate increase in petrol and diesel prices.