The South African government is considering phasing out two of its main fuel levies in a move that could reduce the pump price of petrol by around 22%. The proposal, championed by Finance Minister Enoch Godongwana, aims to ease costs for households and businesses, but would trigger a significant reduction in state revenues.

The initiative envisages the gradual elimination of the general fuel levy and the contribution to the Road Accident Fund (RAF). The proposal comes against a backdrop of elevated prices: 95-octane petrol cost approximately $1.82 per litre inland and $1.77 per litre in coastal zones in October 2026, according to BusinessTech.

The two levies currently add around $0.38 per litre to the petrol price. Of that amount, approximately $0.25 per litre corresponds to the general fuel levy and $0.14 per litre to the RAF contribution. When the carbon tax of roughly $0.01 per litre is included, the total tax burden reaches $0.39 — equivalent to 21.6% of the inland petrol price.

Eliminating these charges would, however, have a substantial impact on public finances. According to Godongwana, the general fuel levy alone generates approximately $4.8 billion in annual state revenue. Removing it, together with the RAF levy, would require the government either to identify alternative revenue sources or to cut public expenditure.

The proposal therefore places the government before the challenge of balancing lower fuel costs against the need to protect public revenues. On one hand, households and freight transport companies would benefit from cheaper fuel. On the other, the Treasury would need to find ways to offset the revenue shortfall without placing additional strain on the public accounts.

In this context, Godongwana has also advocated the creation of a new insurance model to replace the existing RAF funding mechanism. Currently, road accident compensation is financed through a contribution embedded in the fuel price. Separating this mechanism from the fuel tax system would therefore be one of the central pillars of the proposed reform.

The government has meanwhile announced interim measures to reduce the fuel tax burden. Between 4 November and 1 December 2026, the general fuel levy will be cut by approximately $0.09 per litre of petrol, according to BusinessTech. From 1 December 2026 to 5 January 2027, the reduction will narrow to around $0.06 per litre, based on data published by the Automobile Association on 28 October.

For investors, the central question will be how the government intends to compensate for any permanent loss of tax revenue. Eliminating the levies without credible alternative financing measures could deepen pressure on South Africa’s already constrained fiscal capacity, making a robust and transparent fiscal adjustment plan essential to underpin the sustainability of public finances.