Big drop in fuel price on the cards

South African motorists are in line for massive fuel price cuts if the National Treasury’s long-term plan to permanently remove fuel levies is realised.

Together, the various levies, including the General Fuel Levy (GFL), Road Accident Fund (RAF) levy, and Slate levy, add more than R6,55 to every litre of petrol and diesel sold in South Africa.

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This provides around R80 billion in revenue for the state, adds R55 billion to the RAF’s coffers, and reimburses fuel importers and retailers for losses during periods of under-recovery.

However, Finance Minister Enoch Godongwana confirmed that the National Treasury plans to replace these levies with other revenue sources.

The minister mentioned that he is committed to a review of South Africa’s various fuel levies and advocates for their permanent removal.

Godongwana explained that the long-term plan is to remove levies on petrol, which requires Treasury to consider the two main levies — the RAF levy and the GFL.

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Since 2008, the General Fuel Levy has increased by 250%, while the Road Accident Fund levy has surged by 500% over the same period.

In his opening address to Parliament in July 2024, President Cyril Ramaphosa promised that the government of national unity (GNU) would review petrol prices to identify where costs could be reduced.

His proposal included evaluating the general fuel price formula and how it can be adapted to lower costs at the pump.

This formula is broadly made up of the Basic Fuel Price (BFP) and the levies and margins distributed to the government.

The BFP is determined by using the international product price of various fuel types and the rand-dollar exchange rate at the time.

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While the exchange rate plays a role in monthly petrol and diesel price fluctuations, the various levies and margins make up most of the final price.