In a welcome move for South African motorists, Finance Minister Enoch Godongwana has confirmed that there will be no fuel tax hike in 2025. This announcement, made during his annual Budget Speech, provides much-needed relief to consumers already battling high fuel prices and rising transport costs.
While the decision to freeze fuel levies is good news, the government has introduced a VAT increase to address revenue shortfalls. This means that while motorists won’t pay more for fuel due to taxes, they may face higher costs on other everyday goods and services.
No Fuel Tax Hike: What This Means for Motorists
For the 2025/26 financial year, the government has opted to maintain fuel levies at current levels. The two major levies on fuel—the General Fuel Levy (GFL) and the Road Accident Fund (RAF) Levy—will remain unchanged.
By keeping these levies steady, the government expects to provide R4 billion in tax relief, easing financial pressure on motorists and businesses in the transport sector.
“To cushion the impact of fuel-driven inflation, the general fuel levy has remained the same since 2022,” said Minister Godongwana. “For 2025/26, the government has decided to keep it unchanged, alongside the RAF levy and the customs and excise levy.”
This means that any future fuel price fluctuations will depend on international oil prices, exchange rates, and market conditions, rather than tax hikes.
Small Increase in Carbon Fuel Levy
Although there is no fuel tax hike on the GFL or RAF Levy, there will be a slight increase in the Carbon Fuel Levy:
- Petrol: Increases by 3 cents per litre to 14 cents per litre
- Diesel: Increases by 3 cents per litre to 17 cents per litre
This adjustment is in line with the Carbon Tax Act of 2019 and will take effect from 2 April 2025. However, this is a minor adjustment compared to a full fuel tax hike, meaning motorists will still experience some relief.
Learn More: Rising Petrol Costs: Here’s How Much You’re Paying to Commute to Work in South Africa
No Fuel Tax Hike, But VAT Will Increase
Before the Budget Speech, many economists predicted that the government might increase fuel taxes to recover revenue losses. The delay in the Budget Speech, originally planned for 19 February, was due to debates over a proposed 2% VAT increase.
However, instead of a fuel tax increase, the government has chosen to increase VAT gradually:
- 2025/26: VAT will increase by 0.5 percentage points
- 2026/27: Another 0.5 percentage point increase
- By 2026/27, VAT will stand at 16% (up from the current 15%).
Why the Government Chose VAT Over a Fuel Tax Hike
The General Fuel Levy (GFL) generated R84 billion in the 2024/25 fiscal year, down from R95 billion in the previous year. This R10 billion shortfall put pressure on the Treasury to find new ways to generate revenue.
Economists expected a fuel tax hike to fill this gap, but the government instead chose a VAT increase. This decision helps distribute the financial burden more evenly across the population, instead of placing it mainly on motorists.
According to Gavin Kelly, CEO of the Road Freight Association:
“A VAT increase affects all consumers, but it does not target transport and logistics as heavily as a fuel tax increase would have. This will help keep transport costs more stable.”
Why No Fuel Tax Hike Is Good for South Africans
A fuel tax hike would have had direct and indirect effects on the economy. By avoiding an increase in fuel levies, the government has prevented:
- Higher transport costs for commuters and businesses
- Increased food prices due to expensive logistics
- More financial strain on consumers already struggling with inflation
Motorists and businesses in the transport sector can now operate without additional tax pressure, providing some stability in fuel prices.
How the VAT Increase Affects Consumers
While the no fuel tax hike is a relief, the VAT increase will still affect South Africans by making essential goods more expensive.
Items That Will Become More Expensive Due to VAT
- Groceries (non-exempt items)
- Clothing
- Electronics
- Household essentials
- Transport services
Consumers will need to adjust their budgets to account for the higher VAT rate in the coming years.
Public Reactions to No Fuel Tax Hike and VAT Increase
The government’s decision to freeze fuel levies while increasing VAT has received mixed reactions:
Positive Reactions
- Motorists and businesses welcome the decision to keep fuel levies unchanged.
- Transport companies believe this will help keep costs stable.
- Fuel prices will only change based on international factors, not government taxes.
Concerns Over VAT
- The VAT increase means everyday goods and services will cost more.
- Lower-income households will be hit hardest by the rising costs.
- Some worry that businesses may take advantage of the VAT hike to push prices up even further.
Despite these concerns, many believe that avoiding a fuel tax hike was the right decision.
Related: Sin Tax Increase: Alcohol and Cigarettes Just Got More Expensive in 2025!
Final Thoughts: A Mixed Outcome for South Africans
The no fuel tax hike decision is a win for motorists and transport businesses, as it prevents unnecessary increases in fuel costs. However, the incremental VAT hike signals rising living costs in the coming years.
South Africans will need to budget carefully to accommodate the higher VAT rate, while businesses may need to adjust pricing strategies to keep goods affordable.
For now, motorists can breathe easy, knowing that fuel tax relief will continue into 2025. But with higher VAT on the horizon, the cost of living is still set to increase in the coming years.
