A breakdown of the fuel levy

By Jessie Taylor

Fuel prices affect nearly every aspect of the South African economy. From household transport costs and food prices to logistics, manufacturing and inflation, fluctuations at the petrol pump are felt across the country. While global oil prices and the rand-dollar exchange rate often dominate public discussion, taxes and levies also make up a significant share of the final fuel price motorists pay. Among these, the fuel levy remains one of the most important – and often misunderstood – components.

In recent months, the fuel levy has attracted renewed attention following the government’s decision to extend temporary fuel levy relief measures in response to surging global oil prices linked to instability in the Middle East. The intervention aims to cushion households and businesses from sharp increases in fuel costs while limiting broader inflationary pressure on the economy.

How fuel pricing works

At its simplest, the fuel levy is a tax charged on every litre of petrol and diesel sold in South Africa. The largest component is the General Fuel Levy (GFL), collected by National Treasury and contributing directly to government revenue. Unlike some taxes that are ringfenced for specific purposes, the General Fuel Levy is paid into the national fiscus and helps fund a wide range of public services and infrastructure programmes.

Alongside the General Fuel Levy is the Road Accident Fund (RAF) levy, which is specifically used to support the RAF. The RAF compensates people injured in road accidents and supports families affected by fatal crashes. Additional smaller charges also contribute to the final fuel price, including the carbon fuel levy, customs and excise duties, wholesale and retail margins, transport costs and slate levies.

As a result, the price motorists see at service stations is made up of multiple components. The Basic Fuel Price (BFP) reflects the international cost of purchasing refined fuel products, adjusted for freight, insurance and other import-related costs. South Africa imports a substantial portion of its refined fuel, making local prices highly sensitive to global oil markets and exchange rate movements. Taxes and levies are then added to the BFP, along with regulated margins and transport costs.

The fuel levy has historically been an important source of government revenue. In the 2026 Budget, Treasury initially announced increases to both the General Fuel Levy and the RAF levy. From April 2026, the General Fuel Levy was set to increase by 9 cents per litre for petrol and 8 cents per litre for diesel, while the RAF levy rose by 7 cents per litre for both fuels.

Fuel levy relief

However, escalating geopolitical tensions and supply disruptions in global oil markets led to a sharp surge in international fuel prices, placing significant pressure on South African consumers and businesses.

In response, the government introduced temporary relief measures to soften the impact of rising prices. Initially implemented in April 2026, the relief reduced the General Fuel Levy by R3 per litre on both petrol and diesel. This lowered the levy to approximately R1.10 per litre for petrol and 93 cents per litre for diesel during the relief period.

Before relief was applied, the April 2026 fuel levy component was set at 429 c/l for petrol and 416 c/l for diesel, while the RAF levy increased to 225 c/l. Under Treasury’s relief schedule, the General Fuel Levy is expected to return to R4.10/l for petrol and R3.93/l for diesel from July 2026.

As global oil prices continued to rise, the National Treasury announced an extension of the relief measures into May and June 2026. Under the revised arrangement, petrol levy relief of R3 per litre was extended until early June, while diesel received even greater temporary relief, effectively reducing the General Fuel Levy on diesel to zero during May 2026.

According to Treasury, the temporary relief measures are expected to cost the government approximately R17.2 billion in foregone revenue between April and June 2026. However, officials indicated that the intervention would be funded through higher-than-expected revenue collections and underspending elsewhere in the budget framework.

The decision to intervene reflects the broader economic importance of fuel pricing. Higher fuel costs contribute directly to inflation because transportation costs influence the prices of goods and services across the economy. Rising diesel prices, in particular, have a major impact on agriculture, freight transport and food production. By temporarily reducing fuel levies, the government hopes to ease pressure on consumers and help stabilise inflation expectations.

The fuel pricing system itself is also under review. The Department of Mineral and Petroleum Resources has initiated a broader examination of the fuel price formula to assess how fuel pricing can be made more efficient and responsive in future. Industry stakeholders have welcomed the review, arguing that greater transparency and more efficient fuel pricing could improve affordability and competitiveness in the long term.