Godongwana’s good news for petrol prices in South Africa 

South African motorists are set for future relief at the petrol and diesel pumps as the National Treasury has left the General Fuel Levy (GFL) unchanged. 

This means the fuel levy has remained unchanged since 2022 to help alleviate financial pressure on South African households. 

By leaving the fuel tax unchanged, the government collected R13.4 billion less in fuel taxes in the past financial year compared to what was expected at the time of the Budget Speech last year. 

National Treasury forecasted revenue from fuel taxes of R95.8 billion for the 2024/25 financial year. It collected only R82.4 billion by the end of February.

Demand declined due to a sharp fall in diesel usage as load-shedding’s end in March has reduced the need for fuel to run expensive generators.

What makes the fuel tax even more attractive for the Finance Minister is the fact that it is relatively easy to administer, generates significant revenue, and is relatively broad-based. 

Old Mutual chief economist Johann Els also said that an increase to the fuel levy is less harmful to economic growth than other taxes, such as corporate income tax and personal income tax.

By leaving the fuel levy unchanged for another year, the government estimates it could save South Africans R4 billion.

This is part of the National Treasury’s plan to alleviate financial pressure on South African households, in part to soften the blow of a VAT increase of half a percentage point to 15.5%. 

“The government is very aware of the cost-of-living pressures faced by households, including high food and fuel prices and rising electricity and transportation costs,” Finance Minister Enoch Godongwana said. 

That is why the government announced three concrete steps to protect vulnerable households –

• Providing social grant increases that are above inflation
• Expanding the basket of VAT zero-rated food items to include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry and other animals 
• Not increasing the fuel levy for another year

This is in line with repeated promises made by President Cyril Ramaphosa regarding the Government of National Unity’s (GNU) plans to tackle poverty and the high cost of living. 

“An effective, integrated, and comprehensive poverty alleviation strategy is necessary to protect and support society’s most vulnerable,” he said at the Opening of Parliament last year.

He said that at a time when many companies were making large profits, millions of South Africans were suffering because of rising prices.

To address this issue, the Government of National Unity will look to expand the basket of essential food items exempt from VAT.

It will also “undertake a comprehensive review of administered prices, including the fuel price formula, to identify areas where prices can be reduced”.

How the formula will be changed to reduce petrol, diesel, and paraffin prices is unclear.

Minister of Mineral Resources and Petroleum Resources Gwede Mantashe has tried to shed some light on how the petrol price formula can be adjusted to reduce costs. 

He said late last year that his department is in discussions with the National Treasury to bring down the price of fuel in South Africa through changes to the levies charged at the pump. 

“The price of fuel is part of the cost of living. When the fuel price goes up, the cost of living in South Africa increases. This is not good for society,” he said.

“The state must intervene to bring energy prices down in the interest of the South African community.” 

 The discussions include whether it is wise to include the fuel levy and road accident fund levy in the price of petrol and diesel.

Taxes and levies account for R6.18 of the price of a litre of petrol and R6.06 of the price of a litre of diesel.

These are only the taxes levied by the National Treasury, which include the General Fuel Levy (GFL), Road Accident Fund (RAF) Levy, and a carbon tax.