The recent announcement by Finance Minister Enoch Godongwana of a 16 cents per litre increase in the fuel levy has elicited a wave of mixed reactions from South Africa’s automotive industry as it grapples with the ramifications of the fiscal move.
The Automobile Association (AA), a prominent voice within the sector, responded cautiously to the levy increase. While acknowledging the government’s fiscal constraints, the AA expressed concern over the immediate impact that this decision will have on consumers and the wider economy. “Fuel is a critical input cost across all sectors of the economy; any increase inevitably drives up transport and operational costs, further intensifying inflation,” the AA stated. They highlighted that lower-income households, which allocate a larger portion of their income to transport, stand to bear the brunt of this rise, further compounding the struggles already exacerbated by high food prices, elevated interest rates, increased electricity tariffs, and persistently high unemployment rates.
Gavin Kelly, CEO of the Road Freight Association (RFA), echoed these sentiments, emphasising that consumers will feel the pinch directly from the increased costs of transport. He remarked, “This means that Treasury is ‘finding’ R4 billion towards the R75bn shortfall from the previous iteration of the budget. However, this underscores that Treasury would rather tax citizens than cut the wasteful expenditure that has brought the country to where it is.
Kelly pointed out the accountability needed from the government, stating, “Government does not have money – it belongs to the taxpayers, and the time for accountability and responsibility has come. Unfortunately, from June, the cost of logistics – 85% of which is run by road freight – will become more expensive, meaning consumers will pay more.”
Meanwhile, the South African Petroleum Retailers Association (Sapra) expressed alarm at the trade-off that has arisen from the cancellation of a proposed VAT increase. Sapra’s national vice chairperson, Lebo Ramolahloane, stated, “Should the Budget be approved, this will be a blow to South African consumers and businesses.” The fuel levy increase undermines expectations of anticipated price cuts of approximately 23 cents for petrol and 50 cents for diesel that were projected by the Central Energy Fund (CEF). Ramolahloane added, “The 16/15c/l increase impacts the positive momentum that was being enjoyed from the previous three consecutive decreases.”
Tonny Molise, deputy president of the Truckers Association of South Africa (TASA), highlighted further challenges facing the sector. He noted that despite the seemingly minor increase, it poses significant pressure on small to medium-sized operators, who are already contending with high fuel prices, infrastructure challenges, and delayed payments from clients. “Fuel accounts for up to 40% of operating costs in our industry, and any increase, no matter how small, directly affects freight rates, operational budgets, and ultimately, the cost of goods transported across the country,” Molise explained. Preliminary estimates from internal assessments suggest that the R0.16 per litre rise could result in an average increase of approximately 3% to 4% in overall trucking costs.
As the automotive sector braces itself for a turbulent period ahead, industry stakeholders are calling for meaningful dialogue with the Ministry of Finance to explore long-term, sustainable solutions that could alleviate the burden imposed by such fiscal policies.