This marks the second consecutive fuel levy hike, following three years without increases.
Finance Minister Enoch Godongwana has announced an increase in the fuel levy – a move that was anticipated by many analysts.
Delivering the 2026 budget speech on Wednesday in Cape Town, Godongwana said the fuel levy hike will be in line with inflation.
This is the second consecutive fuel levy hike, following three years without increases. The decision is expected to add further pressure on already-burdened households.
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Fuel levy hike
Before delivering the unwelcoming news, he noted that increases to certain taxes are unavoidable.
The minister said the general fuel levy will increase by 9 cents to R4.10 per litre for petrol and 8 cents to R3.93 per litre for diesel. This will take effect from 1 April 2026.
Fuel levy is a tax charged on every litre of fuel sold, with a portion going to the government and another to the Road Accident Fund (RAF levy) to compensate victims of motor vehicle accidents.
The levy amounts to 18% of the retail price, while the RAF levy is about 10%. “The RAF fuel levy is expected to increase by 7 cents to R2.25 per litre,” he said. Customs and excise levies remain unchanged.
Why increase the fuel levy?
Increasing the fuel levy stems from the government’s commitment to increase revenue to protect and bolster frontline services.
Since 2022, Godongwana has maintained that he will not hike the fuel levy to help South Africans cope with the high cost of living. However, he has made a U-turn after scrapping the value-added tax (VAT) increase last year.
The increase, including other taxes, is expected to help in revenue collection. “The strong revenue collection this year, and the overall resilience of tax administration, reflect an efficient and agile tax administration, continually improving through targeted compliance initiatives,” said Godongwana.
Revenue collection
Revenue collection funds government services such as healthcare, education, social grants, infrastructure, and public safety, while also supporting economic development and maintaining the country’s financial stability.
Godongwana said for the financial year 2025/2026, the government expects to collect R21.3 billion more in tax than it originally estimated in last year’s budget.
“Higher-than-expected net VAT, corporate income tax and dividends tax collections improved the in-year outlook,” he added. “The improving fiscal position allows us enough room to withdraw the proposed tax increases, without putting fiscal sustainability or economic activity at risk.”
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Tax collections from importers
According to the Estimates of National Expenditure document, strong growth in collections from fuel importers drove overall fuel levy collections.
“Collections recovered in 2025/26 following a sharp drop in demand in the previous year, reflecting reduced diesel usage as a result of improved electricity supply,” reads the document.
The document noted that from 2015 to 2025, taxes as a percentage of the pump price averaged 33.4% for petrol, and 35.7% for diesel.
“The tax burden for petrol peaked in 2015/2016 at 40.9%, and for diesel in 2020/21 at 45%. From 2022/23, the tax burden for petrol and diesel has remained below 35% due to higher fuel prices and because fuel levies were not increased for three years.”
Carbon tax
Godongwana announced that the carbon fuel levy will increase to 19c per litre for petrol and 23c/litre for diesel from 1 April 2026, as required under the Carbon Tax Act (2019).
Treasury noted that the carbon tax plays an integral role in South Africa’s climate change mitigation efforts. It increased from R236 to R308 per tonne of carbon dioxide equivalent from 1 January 2026.
“The combined increase in fuel levies from the general fuel levy, the carbon fuel levy and the RAF levy is in line with expected inflation,” reads the document.
“The carbon tax cost recovery quantum for the liquid fuels sector will be increased from 0.99c per litre to 1.29c/litre from 1 January 2026 to align with the increase of the headline carbon tax rate.”
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