South Africans will face higher fuel costs following Finance Minister Enoch Godongwana’s Budget Speech in Parliament on Wednesday, 21 May 2025, where he announced an inflation-linked increase to the General Fuel Levy.
Addressing Parliament, Minister Godongwana stated, “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.”
With this in mind, the Finance Minister confirmed that the 2025/26 fiscal year would feature only one new tax proposal. “It means from 4 June this year, the general fuel levy will increase by 16 cents per litre for petrol, and by 15 cents per litre for diesel,” said Minister Godongwana.
He highlighted that this is the first inflation-linked adjustment to the general fuel levy in three years, following a period of unchanged levies to ease the burden of high fuel price inflation on consumers.
Presenting the 2025 Budget Review, Godongwana noted that this measure alone will not address the fiscal deficit over the medium term.
“The 2026 Budget will therefore need to propose new tax measures, aimed at raising R20 billion. We have allocated an additional R7.5 billion over the medium-term expenditure framework (MTEF), to increase the effectiveness of the South African Revenue Service (SARS) in collecting more revenue. Part of this allocation will be used to increase collections from debts owed to the fiscus. SARS has indicated that this could raise between R20 billion to R50 billion in additional revenue per year,” the Minister said.
A portion of this allocation will also support SARS’s modernisation, targeting illicit trade in tobacco and other sectors to enhance revenue collection over the medium term.
“As SARS utilises this investment to raise additional revenue, which I believe can be at least R35 billion, the R20 billion to close the current revenue gap will not have to be raised through taxes,” Godongwana stressed, further urging all South Africans to honour their tax obligations and contribute to building a better and more equitable nation,” the Minister said.
Following the Minister’s announcement of the General Fuel Levy increase, the Automobile Association (AA) highlighted that it recognised the government’s fiscal challenges, but warned of immediate and significant impacts on consumers and the broader economy.
The AA noted that this levy increase arrives as South Africans contend with high food prices, elevated interest rates, rising electricity tariffs, and persistent unemployment. “Fuel is a critical input cost across all sectors of the economy; any increase inevitably drives up transport and operational costs, further intensifying inflation,” emphasised the Association, highlighting that lower-income households, which spend a larger share of their income on transport, will face disproportionate challenges.
The AA further explained that, starting in June, the combined cost of the General Fuel Levy and the Road Accident Fund (RAF) Levy will exceed R6.00 per litre in some regions, comprising over 30% of the pump price before accounting for base fuel costs, distribution margins, and retail mark-ups.
“While the AA recognises the need to address fiscal pressures, continuously turning to fuel levies to fill budget gaps is unsustainable—especially in the absence of transparency on how these funds are allocated and used,” said the AA.
In response, the AA reiterated its call for a thorough and transparent review of South Africa’s fuel pricing model, proposing:
- A forensic audit of revenue generated from the GFL and RAF Levy, including its allocation and expenditure
- Full transparency on the fuel price-setting formula published by the Department of Mineral Resources and Energy (DMRE)
- Engagement with civil society, labour, and the transport sector to identify fair and sustainable revenue models
- Exploration of alternative funding mechanisms that reduce reliance on fuel-based taxation.
Moreover, the AA stressed that, while the latest increase may seem modest, it reflects a broader pattern where motorists and transport-dependent industries bear the weight of fiscal policy shifts.
“South Africa must have a broader conversation about funding infrastructure, road safety, and public transport in a way that doesn’t unduly burden citizens. The AA stands ready to engage with government and all stakeholders to develop sustainable, transparent, and equitable solutions that support both economic growth and the citizens who drive it,” concluded the AA.
Reflecting on the above, the General Fuel Levy increase, effective from 4 June 2025, signals a shift in South Africa’s fiscal approach, ending a three-year pause intended to shield consumers from rising fuel prices. This adjustment, though presented as essential for funding public services and infrastructure, adds pressure on citizens already grappling with economic challenges, raising concerns about the long-term viability of relying on fuel levies to address fiscal gaps.
The Automobile Association’s push for a transparent review of the fuel pricing model highlights the urgent need for a wider discussion on equitable revenue strategies. As fuel costs drive inflation and disproportionately affect lower-income households, the government must explore alternative funding solutions and enhance accountability to ensure fiscal policies promote economic growth without unfairly burdening South Africans.
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