Petrol price pain for South Africa with new tax increases

Finance Minister Enoch Godongwana has announced plans to increase the General Fuel Levy for the first time in three years to make up for the reversal of the planned VAT hike. 

Godongwana revealed this in his third Budget, presented to Parliament on 21 May, which outlined the poor financial health of the country. 

Compared to estimates made in March, the National Treasury has revised down tax revenue projections by R61.9 billion over the next three years. 

This reflects the reversal of the VAT increase and the much weaker economic outlook for the country, Godongwana said. 

“In this difficult environment, it remains vital that we still take actions to increase revenue to protect and bolster frontline services, while expanding infrastructure investments to drive economic activity,” he said. 

“To this end, the Budget proposes an inflation-linked increase to the General Fuel Levy. For the 2025/26 fiscal year, this is the only new tax proposal I am announcing.” 

This will be the first fuel levy increase in three years, with the government opting to keep the levy flat to ease the financial pressure on households. 

“It means from the fourth of June this year, the General Fuel Levy will increase by 16 cents per litre for petrol and by 15 cents per litre for diesel,” Godongwana said. 

This will make the General Fuel Levy R4.01 per litre for petrol at the pump and R3.85 per litre for diesel. As a result, taxes will make up 29.9% of the price of petrol and 33% of the price of diesel at the pump. 

As such, the tax increase will translate directly into higher prices at the pumps for South African motorists.

This increase will still not be enough to close the fiscal gap over the medium term, with next year’s Budget set to propose new tax measures to raise R20 billion. 

Raising the fuel levy is very attractive to the government as it is relatively easy to administer and targets a broad base. 

However, this increase will contradict President Cyril Ramaphosa’s stated plan to review administered prices, including the fuel price formula, to identify areas where prices can be reduced.

The increase to the General Fuel Levy can be seen in the table below from the full Budget Review.