Budget speech 2025 is here, as South African motorists get major fuel tax relief.
Motorists have received a significant break in the revised budget, with Finance Minister Enoch Godongwana sticking to his plan to freeze fuel levies and provide some joy. Presenting the updated budget on March 12, 2025, Godongwana confirmed that the general fuel levy (GFL) would remain unchanged, much to the relief of drivers across the country.
Fuel levy freeze provides R4 billion tax relief to motorists
In a bold move that defied economists’ predictions, Godongwana rejected the Treasury’s common approach of using fuel levies to cover a revenue shortfall. Instead, he chose to freeze the GFL and the Road Accident Fund (RAF) levy, providing a crucial R4 billion in tax relief to motorists. This decision helps soften the impact of the anticipated VAT hike that was originally expected to rise by two percentage points.
Godongwana said, “Freezing the GFL and RAF levy for another year will provide R4 billion in tax relief to motorists, helping to cushion the effects of the VAT hike.” This decision was a welcome relief for South African drivers, who were already feeling the pressure from rising living costs.
Though Godongwana has halted the VAT increase from 15% to 17% for 2025, the revised budget still includes a one percentage point increase spread over two years. The VAT will increase to 15.5% in 2025 and 16% in 2026. This slower increase aims to reduce the tax burden on South African consumers, while still addressing the government’s fiscal needs.
Fuel levies frozen, but carbon tax hikes still on the way
While the GFL and RAF levy remain frozen, not all fuel taxes are exempt from changes. Beginning April 2025, the carbon fuel levy will see an increase of 3 cents per litre (cpl). The carbon tax, a crucial element of South Africa’s climate change mitigation efforts, will rise from R190 to R236 per tonne of carbon dioxide equivalent starting January 2025.
According to the Treasury, “The carbon tax plays an integral role in South Africa’s climate change mitigation efforts.” From April 2, 2025, the carbon fuel levy will increase to 14cpl for petrol (up from 11cpl) and to 17cpl for diesel (up from 14cpl), as required under the Carbon Tax Act (2019).
Market conditions offer hope for petrol and diesel price cuts
Despite the looming carbon tax increase, the current market conditions show an over-recovery of between 85 and 98 cents per litre for petrol, and around 87 cents per litre for diesel. With the additional carbon tax hikes factored in, motorists may still enjoy a price reduction, with petrol prices potentially dropping by around 82cpl and diesel by 84cpl.
The overall adjustments to the fuel tax structure reflect the government’s balancing act between providing relief to South African drivers and addressing the nation’s climate goals. However, the freeze on the fuel levies remains the standout decision in Godongwana’s 2025 budget revision.
While South African motorists will see a major relief from rising fuel costs due to the fuel levy freeze, they should still expect some changes, particularly with the upcoming carbon tax hikes. Overall, Godongwana’s revised 2025 budget speech presents a mixed bag of good news and challenges, but for now, the freeze on fuel levies offers a much-needed break for struggling consumers.
Stay tuned with The South African as Budget speech 2025 is here.
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