Government weighs levy cut as RAF’s finances come under review

The Road Accident Fund (RAF) levy on fuel could be reduced or scrapped under a new funding model being considered for the financially distressed fund.

Deputy transport minister Mkhuleko Hlengwa said he favoured a hybrid model in which the levy is cut but not removed entirely, with other revenue streams brought in.

He said the levy adds R2.27 a litre to the pump price, and that the department needed to look at third-party insurance and private-sector participation.

Speaking at the launch of Transport Month, Hlengwa said a lower fuel price was a key consideration in the government's medium-term development plan, and that the RAF levy was one area under review.

He added that relying on the pump levy as the fund's only source of income was neither viable nor sustainable. Other options include requiring foreign visitors to carry travel insurance, and the department hopes to appoint a new permanent RAF board by the end of the year.

No decision has been taken. Transport minister Barbara Creecy said in a written parliamentary reply in July that the department and the RAF had begun a structured review of the funding framework, guided by a business case.

The evaluation was due to conclude in the 2026/27 financial year, after which the preferred model would go through policy, legislative and stakeholder processes. Hlengwa told parliament in May that the growing use of electric, hybrid and gas-powered vehicles would inevitably erode fuel levy revenue, the fund's main source of income, Roy Cokayne has reported for Sowetan.

Hlengwa said the department also intended to introduce the Road Accident Benefit Scheme Bill this year, which would provide defined, no-fault benefits.

The department's director general, Mathabatha Mokonyama, told parliament's standing committee on public accounts in February that the fund was technically bankrupt and kept going only by the guarantee that the fuel levy provides.

Outa chief executive Wayne Duvenage does not believe moving away from the levy is the solution. He said government had deliberately shifted to a user-pays system so that everyone who drives on the road contributes.

The review does not affect the general fuel levy, a separate tax. Treasury restored it to R4.10 a litre for petrol and R3.93 for diesel from 1 July, after a temporary cut of up to R3 a litre between April and June that cost about R17.2bn in forgone revenue.

Principal source: Moneyweb. Additional sources: IOL, Sowetan & BusinessTech.