Petrol price pain in South Africa with tax hikes on the cards

South African motorists are set to feel the pain of rising petrol and diesel prices this year, with increases to the taxes levied on fuel sales likely in the 2026/27 Budget. 

This will follow an increase in the General Fuel Levy (GFL) announced in 2025 to make up for the expected revenue loss after the National Treasury’s value-added tax (VAT) hike was scrapped. 

The increase in fuel taxes is likely to undo some of the relief motorists have experienced in recent months, as a strong rand and falling oil prices have driven petrol and diesel prices significantly lower. 

PwC’s tax experts explained that increases to the GFL and Road Accident Fund (RAF) levy are likely in Finance Minister Enoch Godongwana’s upcoming Budget Speech on 25 February.

The experts said the government will likely use the currently low fuel prices as an opportunity to raise taxes without putting household finances under significantly more pressure. 

This was included in PwC’s predictions for the upcoming Budget Speech, with the firm sharing largely positive news regarding the direction of the government’s finances. 

The National Treasury’s policy of fiscal consolidation appears to be bearing fruit, with spending being kept under control while revenue grows strongly amid increased compliance. 

This process is very painful for the government and South Africans, effectively resulting in higher taxes for the same level of service or less as the state’s finances are stabilised. 

The National Treasury has been unable to significantly increase tax rates in South Africa, with it facing stiff political opposition when attempting to increase VAT in 2025. 

It has largely had to resort to bracket creep, above-inflation increases in sin taxes, and limited increases to medical aid tax credits to raise additional revenue. 

However, in 2025, the Finance Minister managed to impose an inflationary increase in the GFL – the first since 2021. 

Increases were avoided for three successive financial years because of high fuel prices in the aftermath of the Russian invasion of Ukraine. 

With fuel prices at multi-year lows, the government now has the opportunity to raise taxes without significantly increasing the financial strain on households. 

“It is expected that the National Treasury will once again propose an inflationary increase in the GFL in the 2026 Budget,” PwC’s tax experts said. 

The RAF levy has not been increased in the past three financial years to support households and the economy. 

“In light of fuel prices currently sitting at four-year lows, the government may take the opportunity to increase the RAF levy in line with inflation,” the experts said. 

“This will ease the burden on the RAF, which is running at a deficit on an annual basis and is technically insolvent.” 

Petrol tax pain

While the government has held off on raising fuel taxes in South Africa, the historic increases have significantly raised the prices of petrol and diesel. 

These increases, combined with a weaker rand, have driven South Africa’s fuel prices higher over the past five years, despite oil prices remaining relatively flat. 

This is despite several government promises to review how fuel prices are determined in South Africa, with Minister Gwede Mantashe even saying petrol and diesel should cost only R14 per litre. 

However, there has been relatively little discussion of the role of significant increases in fuel taxes as a major driver of higher petrol and diesel prices.

Were these taxes removed, the price of petrol could fall to around R14 per litre, and diesel would drop to below R13 per litre.

South Africa’s petrol price is made up of two main elements – the Basic Fuel Price and various administered components that include taxes levied on the sale of fuel. 

The Basic Fuel Price is a combination of international oil prices and the rand-dollar exchange rate, with this effectively representing the cost of purchasing oil and importing it into South Africa. 

Over the past five years, the Basic Fuel Price has increased slightly due to the combination of a rising oil price and a weakening rand. 

However, the full rise of petrol and diesel prices over the past five years cannot be explained by the Basic Fuel Price alone. Oil prices have only risen by 5.61% over the past five years, while the rand has weakened by 3.41% against the US dollar. 

These factors have been compounded by rising taxes levied on fuel, which have significantly outstripped inflation over the past decade.

Data from the National Treasury shows that, after the latest increase in 2025, South African motorists pay R6.37 in tax for every litre of 93 octane petrol and R6.24 per litre of diesel. 

In other words, nearly a third of the price of fuel in South Africa is made up by taxes. This makes it an incredibly lucrative source of revenue for the state. 

As a result, these taxes have been seen as a means to plug fiscal holes over the past decade, rather than being focused on their initial intention. 

The GFL, for example, is intended to fund the maintenance and enhancement of South Africa’s road network. 

However, now that the tax brings in close to R100 billion for the state, it has become a vital revenue stream alongside personal and corporate income taxes and VAT. 

This also means that it is highly unlikely that the state will reduce this tax to make fuel cheaper in South Africa, as it will significantly impact its revenue.