In the lead-up to Finance Minister Enoch Godongwana’s budget announcement on February 21, South African experts are engaged in a heated debate over the possibility of increased fuel taxes. As the nation faces a challenging economic landscape, the Finance Minister aims to address the growing budget deficit and implement measures to stabilize public finances.
According to the Medium-Term Budget Policy Statement, South Africa’s main budget deficit has surged by R54.7 billion compared to the 2023 Budget estimates, projecting a deficit of 4.9% of GDP. Godongwana emphasized the need for economic reforms to spur higher growth while acknowledging the necessity of additional taxes to generate revenue. The National Treasury is seeking to raise R15 billion in extra taxes in 2024, sparking concerns among South African motorists.
In a pre-budget roundtable for the 2024 budget, Deloitte’s Billy Joubert expressed skepticism about the likelihood of tax rate hikes. Joubert argued that the proposed R15 billion constitutes only a small percentage of the total tax collected during the previous financial year, which saw the South African Revenue Service amass a total gross of R2,067.8 billion.
Joubert specifically highlighted the General Fuel Levy and Road Accident Fund Levy, noting that an increase in these levies is improbable. He suggested that the General Fuel Levy, currently at R3.95 (18% of the retail price), and the Road Accident Fund Levy, standing at R2.18 (approximately 10% of the current price), are unlikely to change due to the existing cost of living crisis. The government is keen on retaining funds in the pockets of consumers.
Even if an increase were to occur, Joubert predicted it would be minimal, considering the economic strain on citizens. However, not all analysts share this sentiment, with experts at Sage anticipating a fuel tax hike in the upcoming budget. Sage argued that, for the past two years, the government has maintained a consistent fuel levy to support individuals and businesses grappling with rising petrol and diesel prices. Nevertheless, Sage predicts a change in approach this year, expecting an increase in line with inflation.
The latest consumer price inflation (CPI) data revealed a decrease from 5.5% in November to 5.1% in December, with an average inflation rate of 6.0% in 2023. If a CPI-based hike materializes, motorists may face an additional burden of 27 to 37 cents per litre in taxes come April.
As the nation awaits the budget announcement on February 21, the uncertainty surrounding fuel taxes continues to be a topic of concern and speculation. The potential impact on the cost of living and the broader economy remains a focal point for South Africans, emphasizing the delicate balance the government must strike in addressing financial challenges while considering the well-being of its citizens. Stay tuned for the latest developments as South Africa navigates the intricacies of its fiscal policy.