Licensing Loopholes or Double Taxation? The Reality of SA’s Proposed New Car Tax

Minister of Transport Barbara Creecy has confirmed that the government is actively reviewing the funding framework of the Road Accident Fund (RAF). At the heart of this review is a highly controversial proposal: a mandatory, additional "vehicle owner contributory scheme" attached directly to your annual licence disc renewals and initial vehicle registrations.

But is this a logical transition for a changing automotive landscape, or simply another case of double taxation on an already struggling middle class?

Why the government is looking beyond the pump

Historically, the Road Accident Fund has been kept afloat almost entirely by the RAF Fuel Levy—a statutory tax built into the price of every single litre of petrol and diesel sold in South Africa. Currently, a massive 22.2% of the money you spend per litre at the petrol station goes directly into the RAF.

The rise of New Energy Vehicles (NEVs) and hybrid vehicles has thrown a massive wrench into this decades-old funding model. Because NEVs either don't use petrol or diesel or use significantly less than an internal combustion engine (ICE), their owners aren't at the local filling station as much, or at all, anymore. Yet, they still utilise the same national road infrastructure as internal combustion engine (ICE) vehicles.

The Department of Transport is positioning this new vehicle-linked fee as a "transitional levy" designed to ensure that all road users—including EV owners—contribute their share to the accident fund.

The mismatch

South Africa is one of the few countries in the world where additional taxes are proposed on those looking to switch to NEVs, while many places in Europe and Asia financially incentivise these vehicles with discounts or tax breaks. Currently, electric vehicles account for less than 1% of the total cars on South African roads. Punishing the entire motoring public with a blanket tax to address a "revenue leak" caused by less than 1% of the fleet feels less like strategic planning and more like a desperate cash grab. As a journalist, I've been concerned about this for years. The amount of money the government generates from fuel taxation is so enormous that NEV.

The burden of double taxation

If this proposed car tax were designed to replace the highly unpopular fuel levy, motorists might actually find some merit in the discussion. A flat annual registration fee is far easier to track and could offer relief at the pumps, where fuel taxes and levies currently add over R8.20 to every litre of fuel you buy.

Unfortunately, that is not what is on the table.

Minister Creecy has consistently described the proposal as an additional vehicle owner contributory scheme. If passed, South African motorists will be forced to pay twice:

1. At the pump: Paying the standard RAF fuel levy every time they fill up their ICE vehicles.

2. At the licensing department, paying a new mandatory fee to keep their cars legally registered on the road.

Current Fuel Tax Reality in South Africa:
┌────────────────────────────────────────────────────────┐
│  Approx. 1/3 of the retail fuel price consists of       │
│  government taxes and levies (including the RAF levy).  │
└────────────────────────────────────────────────────────┘

Mismanagement vs motorist funding

Opposition parties and motorist advocacy groups have quickly rallied against the proposal. The central argument is simple: the RAF's financial woes are not a result of motorists paying too little, but rather a consequence of decades of documented corruption, administrative fraud, and severe financial mismanagement.

Critics argue that asking hardworking South Africans to bail out a technically insolvent state entity with a secondary tax is fundamentally unfair—especially during an ongoing cost-of-living crisis where fuel, inflation, and interest rates have already stretched household budgets to their absolute limits. Every extra Rand added to administrative vehicle fees is money taken directly off the table for groceries, school fees, and domestic savings.

What lies ahead?

The Department of Transport is currently conducting a structured review of the RAF funding framework. While any preferred model must still undergo extensive policy, legislative, and public-stakeholder processes before becoming law, the fact that a licence-linked tax is being seriously considered should put every South African motorist on high alert.

As the automotive landscape shifts toward green energy, funding models must inevitably evolve. However, hitting the pockets of everyday commuters to prop up a broken system is a road we've travelled far too many times.