Fuel prices have a ripple effect through the entire economy.
Image: RON AI
The 2025 Budget, passed by Parliament on April 2, delivered some painful punches to the average South African.
The incremental Value Added Tax (VAT) hike and the lack of inflationary adjustments to combat tax bracket creep, among other aspects, are expected to put household budgets under even more pressure from May 1.
But there were sighs of relief as the General Fuel Levy (GFL) and Road Accident Fund (RAF) levies have remained unchanged for the third year in a row, although the carbon tax was raised by three cents per litre.
These taxes have been a point of contention in the past, and with good reason. Even though the two main tax components, the GFL and RAF, haven’t been increased since 2022, together they deliver a significant sting to South African motorists every time they fill their tank.
In fact, when one factors in the transport costs of practically every item that we purchase, fuel taxes also impact on the basic cost of living in an indirect but significant way.
Consider that for each litre of petrol that you put into your tank, R6.21 is directed to fuel taxes.
Think of it this way: Every time you put 50 litres of fuel into your average-sized SUV, R310 goes straight to the government. And because the GFL is a generalised tax, it is not specifically directed to road maintenance or safety campaigns as one might imagine it would in an ideal world.
A litre of 95 Unleaded petrol currently costs R20.83 per litre at the coast, following April’s welcome decrease of 72 cents, while 93 Unleaded in the inland regions costs R21.51.
This means fuel taxes make up 30% of the petrol price at the coast and 29% of the inland cost.
As it stands, in 2025, the General Fuel Levy on petrol is R3.85, while the Road Accident Fund levy amounts to R2.18; the carbon tax takes a further 14 cents and customs and excise duties are listed at four cents.
Diesel attracts a GFL of R3.70 and carbon tax of 17 cents, bringing the total tax tally to R6.09.
When your litre of 95 Unleaded petrol docks in the harbour it costs just R10.24, as of April 2025. However, its journey to your tank involves the aforementioned R6.21 in taxes, as well as transportation costs of 87 cents, wholesale margin of 73.7 cents, secondary storage and distribution costs of 38 cents and 18.8 cents, and finally a retail margin of R3.00.
Breakdown of the price of 95 Unleaded petrol in Gauteng.
Image: Jason Woosey / IOL
Nonetheless, organisations such as the Automobile Association (AA) have repeatedly called for a review of South Africa’s fuel price structure. It says a comprehensive assessment of the fuel price formula is necessary to determine whether all components are properly calculated and still relevant.
During his opening of Parliament speech on July 18, following the formation of the Government of National Unity (GNU), President Cyril Ramaphosa promised that such a review was in the pipeline. However, nine months later there is no indication of when this review might take place.
Although prices have remained relatively stable in the past year, fuel still adds a significant cost factor to South African households, both through driving and commuting costs and indirectly through the transport of goods and services.
The poorest South Africans face the heaviest burden. A recent World Bank report reveals a sobering statistic, that low-income workers in South Africa spend 51% of their net income on transportation.
The AA said that while it welcomes the decision by the Minister of Finance Enoch Godongwana not to increase fuel levies in the 2025 Budget, it is important to recognise that existing fuel taxes still represent a significant financial burden for South African motorists and commuters.
“For the poorest members of our society, high fuel prices impact not just the cost of motorised mobility, but also the prices of everyday goods,” AA spokesperson Eleanor Mavimbela told IOL.
Fuel prices and food prices are interrelated.
Image: RON AI
“Fuel is a critical component of transportation costs of vital goods such as food. When fuel prices increase, the expense of transporting produce from farms to stores increases. More often than not, this cost is passed on to consumers,” Mavimbela added.
“Additionally, public transport operators, including taxis that are vital to our transport ecosystem, pass on these increases to passengers. This disproportionately affects low-income households, as transportation expenses already consume a large portion of their monthly incomes."
In fairness, there are many countries that have significantly higher fuel taxes than South Africa. Consider that the UK charges 52.95 pence per litre in taxes (R13) while the Netherlands slaps a 0.72 euro (R15.53) penalty on petrol.
In fact, of the 38 countries belonging to the Organisation for Economic Co-operation and Development (OECD), the average fuel tax as a percentage of the fuel price is 44%, versus South Africa's 30%.
However, as independent economist Elize Kruger points out, the fact that South Africa is highly dependent on road freight transport, more so than other developed economies, makes the fuel price impact on the final price of goods more significant and punitive.
“Given that food products are typically transported via road, transport cost is a major input to the final cost. For most transport companies, fuel cost comprises about 80% of variable cost or about 35-40% of total cost to move a product from point A to B,” Kruger told IOL.
Fuel price increases also cause significant headaches for the taxi industry and freight transport sectors, which often absorb the initial blow.
Ryno Saaiers, general secretary of the South African National Taxi Council (Santaco), said regular fuel price fluctuations leave taxi entrepreneurs exposed to market forces.
“Taxi associations, in serving their communities, don’t adjust their fares with each change in prices. We appreciate the fact that our passengers need to prepare for adjustments and are already spending a significant portion of their income on travelling,” Saaiers told IOL.
He explained that fuel prices are absorbed as far as possible, but adjustments are made when taxi operators start to feel the pinch in a significant way.
“On the other hand, taxi fares are not decreased when the fuel prices are reduced. This is the process of recovering losses made previously and building a reserve for the inevitable future increases in the cycle,” Saaiers added.
Yet, as painful as they are for the average South African, fuel taxes are important to South Africa from a fiscal perspective, and plugging that gap would be easier said than done.
Lara Hodes, an economist at Investec, said South Africa is fiscally constrained and needs to fund its significant expenditure requirements. For this reason, improving tax collection rates is essential.
According to Finance Minister Godongwana, “broadening the tax base and improving the administrative efficiency of the South African Revenue Service, allows us over time, to spread the tax burden more evenly and equitably”.
Until this happens through economic growth, those who find themselves within South Africa’s tax net will continue to face a heavy burden.
