R6.54 a litre in fuel levies: AA backs calls for change

Cape Town – The Automobile Association (AA) has backed calls to phase out South Africa’s general fuel levy and Road Accident Fund (RAF) levy, arguing that removing the taxes could significantly reduce motorists’ fuel costs.

The call follows Finance Minister Enoch Godongwana’s remarks in an interview on 702 that South Africa needs to “find a way of phasing out” the two levies, according to BusinessTech.

The two levies currently add approximately R6.54 to the price of a litre of petrol, representing about 22% of the pump price. The equivalent combined amount for diesel is R6.41, according to the report.

AA chief executive Bobby Ramagwede described the proposed phase-out as a “long overdue and welcome call”, highlighting the burden fuel taxes place on commuters, workers and businesses.

“Fuel taxes land on everyone who moves: the commuter in a taxi, the business running a fleet, and the worker who pays to get to the job that pays for the journey,” Ramagwede said, according to the report.

However, the AA cautioned that removing the levies alone would not address all the factors driving fuel prices higher. It called for a public review of the basic fuel price formula, which reflects international fuel costs and shipping expenses.

“The government should remove the levies the minister has named, and review the basic fuel price formula in public,” Ramagwede said.

The proposal comes as South African motorists face record fuel costs. In October, inland 95-octane petrol rose above R30 a litre following a R3.33 increase.

The wider impact of fuel prices has also drawn attention from government and business, as higher transport costs feed into the prices of goods and services. Reporting by Reuters noted that the government had introduced temporary fuel levy reductions as part of a R10-billion relief package.

Under the measures announced by Godongwana, the petrol levy will be reduced by R1.50 a litre and the diesel levy by R3 a litre from 4 November to 1 December 2026. Smaller reductions will remain in place until 5 January 2027.

However, permanently scrapping the general fuel levy would leave government with an estimated R80-billion revenue shortfall, Godongwana has warned, raising questions about how the lost income would be replaced.

Ramagwede argued that the challenge lies partly in government spending rather than revenue collection.

“Our fiscus is porous. That needs to be fixed if we want interventions like this one to succeed,” he said.

The AA also questioned the sustainability of the RAF’s current funding model, arguing that improved road-user behaviour, infrastructure and vehicle safety could reduce accident-related costs.

Any permanent reduction in fuel taxes would therefore require government to balance lower costs for motorists against the need to fund public services and road-accident compensation.

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