Minister Creecy Rejects RAF Fuel Levy Increase: No 33.3% Hike

• Minister of Transport Barbara Creecy has rejected the Road Accident Fund's (RAF) proposal to increase the fuel levy by 33.3% to R3 per litre.
• The RAF's proposal was outlined in its 2025/26 annual report, despite a recent 7c per litre increase in the levy earlier this year.
• The Department of Transport is exploring alternative funding models for the RAF, including a hybrid approach, third-party vehicle insurance, and contributions from electric vehicles.
• The Organisation Undoing Tax Abuse (Outa) opposes moving away from the current fuel levy, citing its efficiency, and criticizes the reintroduction of third-party insurance as impractical.
• The RAF remains severely undercapitalised, with liabilities exceeding assets by R439.5 billion, indicating the current compensation system is unsustainable.

The government is actively seeking alternative revenue streams to move away from the current reliance on a single funding source.

A significant proposal by the financially struggling Road Accident Fund (RAF) to increase its fuel levy by 33.3% to R3 per litre has been definitively rejected by Minister of Transport Barbara Creecy. Speaking on Tuesday in a Radio 702 interview, Minister Creecy stated unequivocally that such an increase would not occur during her tenure, clarifying that she would not initiate the necessary request to the National Treasury.

The RAF's suggestion for this substantial hike was outlined in its 2025/26 annual report, which was presented to Parliament just last week. This comes after the levy saw its first increase since the 2021/22 financial year, rising by 7 cents per litre from R2.18 to R2.25 in the budget earlier this year. However, according to Collen Msibi, Minister Creecy's spokesperson, the RAF cannot directly submit such proposals to the National Treasury; instead, it must channel them through the Department of Transport (DoT), requiring prior alignment with the Minister of Transport, who acts as the fund's shareholder. This crucial alignment is currently absent.

The rejection of the levy increase is set against a backdrop of ongoing discussions within the government regarding a complete overhaul of the RAF's funding structure. Deputy Minister of Transport Mkhuleko Hlengwa indicated earlier this month to Moneyweb that a new model is under consideration, which could see the existing fuel levy either reduced or entirely eliminated. The government is actively seeking alternative revenue streams to move away from the current reliance on a single funding source.

Deputy Minister Hlengwa expressed his preference for a hybrid funding model, where the fuel levy would be reduced rather than completely abolished. Among the alternative mechanisms being explored is the potential reintroduction of third-party vehicle insurance, an idea that Minister Creecy has also previously mentioned. The Department of Transport is currently engaged in research and financial modeling to evaluate these options. A key consideration in this process is how electric vehicles (EVs), which do not consume fossil fuels, would contribute to the RAF scheme, given that all road accident victims are potentially covered by the fund.

The shift towards new funding mechanisms presents several practical and financial challenges. Minister Creecy highlighted the complexities of transitioning from a system where contributions are made incrementally through fuel purchases to one where a lump sum might be required, for instance, during vehicle license renewals. She described such a change as a "big whack" for motorists, underscoring the significant practical issues that need careful consideration.

Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse (Outa), has voiced strong criticism against proposals to abandon the current RAF levy. Duvenage argues that the existing levy is highly efficient and incurs no administrative costs, advocating instead for efforts to improve the RAF's operational efficiency. He vehemently opposes the reintroduction of third-party vehicle insurance, labeling it as "the most stupid idea." He points to its past failure, attributing it to individuals opting not to purchase the required disc and instead taking risks. Duvenage estimates that such insurance could cost around R1,500 annually, payable at vehicle license renewal, which he believes would be unaffordable for many South Africans.

The urgency surrounding the RAF's funding model is underscored by its precarious financial health. The fund's 2025/26 annual report reveals a severe state of undercapitalisation, with liabilities significantly outweighing assets. The report indicates that liabilities exceeded assets by R439.5 billion, a substantial increase from R293.8 billion reported in the 2024/25 financial year.

Furthermore, the RAF's solvency ratio stands at a mere 0.03:1, compared to a current ratio of 0.23:1. These figures, as stated in the report, vividly illustrate the unsustainability of the current compensation system, highlighting the critical need for a viable and long-term financial solution for the fund.

Lawyers advising on road accident claims or vehicle compliance should note that the proposed RAF levy increase to R3/litre is currently off the table. However, they must monitor ongoing discussions about new RAF funding models, such as the potential reintroduction of third-party insurance or contributions from electric vehicles, as these could lead to significant legislative changes impacting claim procedures, liability, and client obligations in the future.

Source: Original reporting via Moneyweb