South African motorists woke up to some welcome relief at the pumps on Wednesday, with June marking the fourth consecutive month of fuel price cuts. But beneath the surface of these decreases lies a legal and constitutional row over how taxes are imposed – and by whom.
Just after midnight, the retail price of both grades of petrol dropped by 5c/litre, while diesel became 36.9c/litre cheaper. Illuminating paraffin was cut by 56c/litre. The price drop, announced by Mineral Resources and Energy Minister Gwede Mantashe, was attributed to a stronger rand and softer international oil prices.
But the decreases would have been even larger had it not been for the implementation of an increase in the general fuel levy – 16c/litre for petrol and 15c/litre for diesel – announced by Finance Minister Enoch Godongwana in his May Budget.
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That increase took effect on 4 June, despite a last-ditch legal effort by the Economic Freedom Fighters (EFF) to halt it.
EFF loses urgent court bid to block fuel levy hike
The High Court in Cape Town on Tuesday dismissed the EFF’s urgent application to suspend the levy hike, clearing the way for National Treasury’s new rates to be incorporated into June’s regulated fuel prices.
In court papers, the EFF argued that the fuel levy increase was unconstitutional and procedurally invalid because it was not introduced as a Money Bill and passed by Parliament, as required by section 77 of the Constitution. EFF MP Omphile Maotwe, in a founding affidavit, accused Godongwana of acting unilaterally and circumventing the democratic process.
“It is clear that the minister has no intention of following that legislative process in that he has to date done no more than make the announcement in his Budget speech and has not approached our legislature as required,” Maotwe wrote. She contended that only Parliament has the authority to impose or amend taxes, not an individual member of the executive.
Treasury: fuel levy is lawful, process followed
Godongwana hit back in his responding affidavit, describing the EFF’s application as both procedurally defective and legally unsound. He maintained that the increase was lawful, pointing out that the general fuel levy is imposed under existing legislation, not through a new Money Bill.
He also argued that the EFF had failed to join the Department of Mineral Resources and Energy, which is responsible for implementing fuel price adjustments – a flaw that rendered the application moot, in his view.
He further warned that halting the increase would leave Treasury with a R3.5-billion shortfall, forcing borrowing or cuts to public spending – outcomes that could hurt the poor more than the levy itself.
The fuel levy, he noted, had been frozen for three years and the modest hike only preserved its value in real terms.
VAT suspension casts a long shadow: ‘Part B’
The EFF’s legal application follows a recent victory in the same court over another tax hike – a controversial increase in VAT. In March, the High Court ratified a settlement between National Treasury and the Democratic Alliance (DA), suspending a 0.5-percentage point increase in VAT due to take effect on 1 May, as well as a further increase planned for 2026.
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The DA’s application was divided into two parts.
Part A sought interim relief to suspend the half-a-percentage-point VAT hike and return the fiscal framework to Parliament’s finance committees for reconsideration. It also asked the court to bar the South African Revenue Service from implementing the higher rate.
Part B challenged the constitutionality of section 7(4) of the VAT Act, which allows the finance minister to adjust VAT rates temporarily as part of the Budget process.
The DA has indicated that it will continue to pursue Part B. The aim is to have section 7(4) of the VAT Act declared unconstitutional.
In her affidavit, Maotwe said the EFF had instructed its attorneys to join Part B if the finance minister persists in asserting unilateral authority over tax matters.
“I contend that the suspension of the impugned decision pending Part B would promote the objects, spirit and purport of the Constitution,” Maotwe stated, warning that allowing the increase to proceed unchecked would “bring an end to the rippling illegality that has an impact on the collection of revenue and its spending which cannot be adequately reversed at a later stage”.
A legal battle with economic consequences
Although the EFF failed to stop the fuel levy from taking effect this week, the broader constitutional issues remain unresolved. If the courts ultimately side with the EFF and DA in Part B, it could invalidate the legal basis for multiple tax hikes introduced by the finance minister in recent years without parliamentary approval – with unpredictable fiscal consequences.
In a previous interview with Moonstone, Louis Botha, a tax and exchange control specialist at WTS Renmere, explained that if the DA succeeds with Part B of its legal challenge in the High Court, the finding of unconstitutionality would need to be confirmed by the Constitutional Court.
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“Assuming they’re successful overall, the finding would mainly affect the minister’s ability to fund the Budget through a tax increase.”
Botha said it is important to bear in mind that South Africa’s tax legislation currently provides for other taxes (not only VAT) to be increased in the same way, including income tax, estate duty, the skills development levy, securities transfer tax, unemployment insurance contributions, and the mining royalty.
“It would be prudent for National Treasury to consider addressing this when it tables the draft tax amendment legislation later this year.”
For now, however, motorists can breathe a temporary sigh of relief at slightly lower fuel prices – even as the constitutional and political stakes of South Africa’s tax regime continue to mount.
