Finance minister Enoch Godongwana's latest budget proposes inflationary increases to petrol and diesel prices to help fill the gap from his rejected VAT hike proposal and ease the main budget deficit, which now stands at 4.5% of GDP.
He tabled a budget on Wednesday for a historic third time in a calendar year. This was due to the last-minute postponement of the first budget in February due to a proposal for two VAT hikes, and a legal challenge to the budget table in March, which proposed a single VAT hike.
Tabling the budget on Wednesday afternoon, Godongwana said South Africa was in a “difficult environment” where it remained vital to take action to increase revenue, protect frontline services and expand infrastructure investments.
“This budget proposes an inflation-linked increase to the general fuel levy. For the 2025/26 fiscal year, this is the only new tax proposal I am announcing. This is the first fuel levy increase in three years. It means that from the fourth of June this year, the general fuel levy will increase by 16 cents per litre for petrol, and by 15 cents per litre for diesel.”
He said this tax measure alone would not close the fiscal gap over the medium-term.
The budget overview said the general fuel levy had remained unchanged for the past three years to provide consumers with relief from high fuel price inflation.
Oil prices have steadied in recent months as has the global inflation outlook since 2022.
“To replace a portion of the lost revenue from the withdrawal of the VAT rate increases, government proposes an inflationary increase in the general fuel levy for petrol and diesel to R4.01 per litre and R3.85 litre, respectively, effective from 4 June 2025.”
The minister said after the VAT increase and expanded zero-rating interventions proposed in the March iteration of his budget were withdrawn, he would propose to raise R18bn in revenue in the 2025/26 financial year and provide R1bn in relief in 2026/27.
When Godongwana was originally meant to table the budget in February, parliament postponed the joint sitting at the last minute as his VAT hike proposal faced intense resistance at a cabinet level.
In March, the minister managed to table a budget, but the handling of the fiscal framework and revenue proposals by parliament’s standing committee on finance prompted the DA and the EFF to challenge these processes in court. The proposal to hike VAT was then withdrawn.
He said he would target R20bn in tax measures in the 2026 budget as more changes to improve the budget process are implemented over time. He said no changes were introduced to personal income tax, transfer duties, and excise duties since the March iteration of the budget.
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