As markets operate on Tuesday morning, 28 October 2026, South African motorists and logistics operators face a pivotal fiscal debate following Finance Minister Enoch Godongwana’s recent proposal on 702 to eventually phase out the General Fuel Levy and the Road Accident Fund levy, a move strongly endorsed by the Automobile Association (AA).
The Bottom Line
- Phasing out the General Fuel Levy and Road Accident Fund levy would eliminate R6.54 per litre in combined taxes off petrol prices, addressing a substantial component of retail fuel costs.
- National Treasury faces a massive R80 billion annual revenue deficit should the General Fuel Levy be completely removed without alternative taxation measures.
- Short-term relief measures announced during the Medium-Term Budget Policy Statement provide temporary reductions between November 2026 and January 2027, but economists warn that long-term fiscal stability requires addressing wider structural spending.
Unpacking the R80 Billion Revenue Gap and Tax Burdens
Fuel prices in South Africa comprise a basic fuel price making up approximately 58% of the total at current inflated rates, while taxes make up the remaining 42%. The general fuel levy adds R4.16 for diesel and R4.29 for petrol, while the Road Accident Fund levy adds R2.25 per litre. Together, these taxes add a combined R6.41 to R6.54 to a litre of diesel and petrol, accounting for roughly 22% of the total price.
Data from Codera Analytics highlights that these levies have surged dramatically over the past decade, with the RAF Levy increasing by 500% and the General Fuel Levy climbing by 250% since 2008. Finance Minister Enoch Godongwana noted in his 702 interview that while phasing out the general fuel levy is a long-term goal, it brings in approximately R80 billion annually, creating a significant structural hurdle for state finances.
Short-Term Relief Versus Long-Term Fiscal Credibility
During the Medium-Term Budget Policy Statement, Godongwana announced temporary fuel relief measures to combat rising costs. From 4 November to 1 December 2026, the general fuel levy falls by R1.50 a litre for petrol and R3 for diesel. These reductions then shrink to R1 and R1.50 respectively before ending on 5 January 2027, utilizing R10 billion transferred from the Central Energy Fund.
However, Daily Maverick noted that this breathing room is not recovery, pointing out that millions of South Africans experience fuel inflation indirectly through minibus fares and food distribution costs. Economists caution that permanently absorbing high fuel prices through additional government borrowing or tax cuts risks driving up government bond yields and weakening the rand. Hannah Marais, Southern Africa chief economist at Deloitte Africa, told IOL that such relief requires additional borrowing or spending cuts at a time when preserving fiscal credibility remains paramount.
| Fuel Tax Component | Petrol Rate | Diesel Rate | Total Annual Impact (100-Vehicle Fleet) |
|---|---|---|---|
| General Fuel Levy (GFL) | R4.29 / litre | R4.16 / litre | Managed via corporate logistics |
| Road Accident Fund (RAF) Levy | R2.25 / litre | R2.25 / litre | Contributes to national insurance model |
| Combined Levies | R6.54 / litre | R6.41 / litre | Approx. R1.7 million per fleet annually |
Automobile Association Demands Basic Fuel Price Scrutiny
Beyond the tax levies, the Automobile Association argues that the government must scrutinize the basic fuel price formula, which reflects international market costs and shipping expenses. Bobby Ramagwede, CEO of the AA, emphasized that fuel taxes land on every commuter, business, and worker.
/file/authors/1647217044519108271.jpg "Photo: Daily Maverick")
Ramagwede further argued that South Africa’s core issue lies in expense management and budget allocation rather than revenue collection. The AA contends that the Road Accident Fund itself represents an unnecessary central burden, suggesting that South Africa should adopt compulsory third-party insurance models similar to those implemented in developed economies to address root causes like road behavior and infrastructure decay.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
