2024 Budget: Fuel Levies Unchanged, Carbon Tax Up
In a concerted effort to address the economic pressures faced by South Africans, Finance Minister Enoch Godongwana has strategically navigated through the 2024 Budget by leaving the fuel levies unchanged while slightly adjusting the carbon tax. This approach underscores the government's acute awareness of the high cost of living and the cascading impact of fuel prices on essential sectors such as food and transportation.
During his much-anticipated Budget Speech, Godongwana announced that there would be no increases to the General Fuel Levy (GFL) and the Road Accident Fund (RAF) levy for the financial year 2024/25, maintaining them at R6.13 per litre for both petrol and diesel. This decision translates to an estimated tax relief of around R4 billion, effectively putting money back into consumers' pockets at a time when financial relief is sorely needed.
In 2022, amidst significant fuel price increases, the government temporarily reduced the GFL by R1.50 per litre between April and July to alleviate the consumer burden. Although these rates reverted to their original levels in August of the same year, they have since remained stable, providing a measure of predictability in an otherwise volatile economic landscape.
However, to further the country's environmental commitments, the carbon fuel levy will see a minor increase, from 10 cents to 11 cents per litre for petrol and 11 cents to 14 cents for diesel, starting April 3, 2024. Additionally, the Finance Minister indicated plans to release a discussion paper later in the year to solicit public input on the second phase of the carbon tax. This move aligns with global trends towards more sustainable and eco-friendly policies.
Despite these adjustments, South Africans are bracing for a significant surge in fuel prices in March 2024, driven by rising international product prices and a weak Rand. Mid-month data from the Central Energy Fund, analyzed by the Automobile Association (AA), signals a potential climb in fuel prices to exceed R24 per litre for both grades of petrol, nudging close to the record high of R25 per litre witnessed last year.
Godongwana's delicate balancing act in the 2024 Budget—holding steady on fuel levies while making a nominal increase in the carbon tax—reflects a nuanced response to the complex interplay of economic, environmental, and social factors impacting South Africans today. The government's decision to forego additional revenue from fuel levies to ease the cost of living demonstrates a prioritization of immediate consumer relief over fiscal gains amidst concerns over fuel prices' broader economic implications.