In a move set to significantly affect the aviation industry, the South African Civil Aviation Authority (SACAA) has put forth a proposal for a consecutive three-year escalation in the aviation fuel levy, slated to begin on April 1, 2024. This proposal, gazetted on Monday, November 27, encompasses amendments to the fuel levy determination schedule under the provisions of section 2(7) of the South African Civil Authority Levies Act, 1998 (Act No. 41 of 1998).
The SACAA’s proposition charts a course for a gradual increase in the fuel levy in conjunction with the Consumer Price Index (CPI) for three successive fiscal years starting from the fiscal year 2024-2025. The forecasted trajectory suggests a step-wise rise in the fuel levy tariff, as detailed in the table below:
| Year | CPI | Cents per litre |
|---|---|---|
| 2023/24 | 4.8% | 21.83 |
| 2024/25 | 4.7% | 22.88 |
| 2025/26 | 4.6% | 23.91 |
These incremental increases compound upon an already elevated levy that experienced an 8.5% surge in May 2023. This prior escalation secured approval from the Minister of Transport, endorsed by the Minister of Finance.
The rationale behind these amplified levies, as cited by the SACAA, is primarily to ensure compliance with the Standards and Recommended Practices (SARPs) outlined by the International Civil Aviation Organisation (ICAO). Despite a projected decline of 2.6% in fuel levy income for 2023/24 compared to the preceding year, the SACAA justifies these increments in light of the aviation industry gradually resuming standard operations, albeit with stagnant fuel volumes.
Highlighting the industry dynamics, the SACAA noted, “Commercial airline operations’ resurgence has led to a shift in freight volumes from dedicated cargo flights to the cargo holds of scheduled passenger flights, resulting in a diminished generation of fuel levies.”
The broader aviation sector, particularly general aviation and charter businesses, continues to grapple with severe repercussions, with a return to normalcy anticipated over the upcoming two financial years. Anticipating static fuel volumes over the Medium-Term Expenditure Framework (MTEF) budget period, the SACAA has earmarked the fuel levy rate for an increase in alignment with the CPI.
However, the recent hike in the fuel levy, sanctioned in May, prompted the Democratic Alliance (DA) to voice concerns regarding its consequences on airlines, charter services, and passengers. Criticizing the move, the DA articulated, “The amendment substantially raises the prevailing aviation fuel levy, now pegged at 20.83 cents per litre (as of May 2023), payable by consumers and wholesale distributors. This unequivocally escalates the operational costs for these enterprises, already grappling with formidable economic adversities, invariably burdening the passengers.”
Moreover, the DA accused the authorities of implementing the amendment and levy hike without adequate industry consultation, decrying the lack of transparency and engagement as a violation of the fundamental principles of public participation entrenched in the original Levies Act.
Adding to the challenges faced by the aviation domain, earlier this year in February, the Department of Transport introduced modifications to airport tariffs, encompassing elevated airport facility expenses encompassing parking, VAT, and passenger service fees.
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